
<PAGE>


                                                                EXHIBIT 10(40)


                          AGREEMENT AND PLAN OF MERGER


     Agreement and Plan of Merger, dated as of February 16, 1996, by and 
among Vernitron Corporation, a Delaware corporation ("Parent"), PA 
Acquisition Corporation, a Delaware corporation and wholly owned subsidiary 
of Parent (the Purchaser"), and Precision Aerotech, Inc., a Delaware 
corporation (the Company).

     The Boards of Directors of Parent, the Purchaser and the Company have 
approved the acquisition of the Company by the Purchaser and, in furtherance 
of such acquisition, the purchase, immediately prior to the Effective Time of 
the Merger (as such terms are defined herein), of all shares of common stock, 
$.01 par value per share (the "Shares"), of the Company owned by Foothill 
Capital Corporation ("Foothill") and Teachers Insurance and Annuity 
Association of America ("TIAA") pursuant to a Shareholders Agreement between 
Parent, Purchaser, Foothill and TIAA entered into concurrently herewith (the 
"Shareholders Agreement").  The Boards of Directors of Parent, the Purchaser 
and the Company have each determined that it is advisable, immediately 
following the purchase of such Shares, to merge the Purchaser with and into 
the Company pursuant to this Agreement with the result that the Company shall 
become an indirect wholly owned subsidiary of Parent.

     Accordingly, in consideration of the mutual covenants and agreements set 
forth herein, Parent, the Purchaser and the Company hereby agree as follows:

                               1.  THE MERGER

     1.1. MERGER.

          1.1.1.    Upon the terms and subject to the conditions hereof, the 
Purchaser will be merged with and into the Company (the "Merger") in 
accordance with the applicable provisions of the General Corporation Law of 
the State of Delaware (the "GCL") as soon as practicable following the 
satisfaction or waiver of the conditions set forth in Section 4 hereof.  The 
Company and the Purchaser are sometimes hereinafter referred to as the 
"Constituent Corporations."

          1.1.2.    The Company shall be the surviving corporation in the 
Merger (sometimes hereinafter referred to as the Surviving Corporation") and 
shall continue its existence under the laws of the State of Delaware. The 
separate existence of the Purchaser shall cease. The Certificate of 
Incorporation and the Bylaws of the Purchaser in effect upon consummation of 
the Merger shall be the Certificate of Incorporation and Bylaws of the 
Surviving Corporation, provided that Article First of the Certificate of 
Incorporation of the Surviving Corporation shall be amended to read in its 
entirety as follows: "FIRST: The name of the Corporation is Precision 
Aerotech, Inc.  The directors of the Purchaser upon consummation of the 
Merger shall be the directors of the


<PAGE>


Surviving Corporation. Upon the consummation of the Merger, all the property, 
real, personal and mixed, and franchises of each of the Constituent 
Corporations, and all debts due on whatever account to each of them, 
including subscriptions for stock and other choses in action belonging to 
each of them, shall be taken and deemed to be transferred to and vested in 
the Surviving Corporation without further act or deed. The Surviving 
Corporation shall thenceforth be responsible for all the liabilities and 
obligations of each of the Constituent Corporations, with the effect set 
forth in the GCL.

          1.1.3.    At the Effective Time (as hereinafter defined), by virtue 
of the Merger and without any action on the part of the holder thereof, (a) 
each then outstanding Share not owned by Parent, the Purchaser, or any other 
direct or indirect subsidiary or affiliate of Parent (other than those Shares 
held in the treasury of the Company or Dissenting Shares (as hereinafter 
defined)) shall be converted into a right to receive in cash an amount per 
Share equal to $5.00 (the "Merger Price"), without interest, (b) each then 
outstanding Share owned by Parent, the Purchaser, or any other direct or 
indirect subsidiary or affiliate of Parent and Shares held in the treasury of 
the Company shall be cancelled, and (c) the shares of the Purchaser shall 
become the shares of common stock of the Surviving Corporation.

     1.2. SHAREHOLDERS' MEETING OF THE COMPANY. If necessary, the Company 
will take all action in accordance with applicable law and its Certificate of 
Incorporation and By-Laws to convene a meeting of its shareholders promptly 
after the execution hereof to consider and vote upon the approval of the 
Merger, if such shareholder approval for the Merger is required by applicable 
law. At any such meeting all of the Shares then owned by Parent, the 
Purchaser or any other direct or indirect subsidiary of Parent will be voted 
in favor of the Merger. The Board of Directors of the Company, subject to its 
fiduciary duties under applicable law, will recommend that the Company's 
shareholders approve the Merger and take all lawful action to solicit such 
approval if such vote is required or sought.

     1.3. CONSUMMATION OF THE MERGER. The closing of the Merger (the 
"Closing") shall take place (a) at the offices of Vernitron Corporation, 645 
Madison Avenue, New York, New York, 10022, at 9:00 A.M., local time, on the 
later of (i) the day of (and immediately following) the receipt of approval 
of the Merger by the Company's shareholders if such approval is required, or 
(ii) the day on which (and immediately following such time as) the last of 
the conditions set forth in Section 4 is fulfilled or waived, or (b) at such 
other time and place and on such other date as the Purchaser and the Company 
shall agree. As soon as practicable after the Closing, the parties hereto 
will cause the Merger to be consummated by the filing with the Secretary of 
State of Delaware of a certificate of merger in such form as required by and 
executed in accordance with the relevant provisions of the GCL. The time the 
Merger becomes effective in accordance with applicable law shall hereinafter 
be referred to as the "Effective Time."

     1.4. DISSENTERS' RIGHTS.  Shares that have not been voted for adoption 
of the Merger and with respect to which appraisal shall have been properly 
demanded in accordance with Section 262 of the GCL ("Dissenting Shares") 
shall not be converted into the right to receive the Merger Price per Share 
in cash at or after the Effective Time unless and until the holder of such 
Shares withdraws his or her demand for such appraisal (in accordance with 
Section 262(k) of the


                                      2


<PAGE>


GCL) or becomes ineligible for such appraisal. If a holder of Dissenting 
Shares shall withdraw (in accordance with Section 262(k) of the GCL) his or 
her demand for such appraisal or shall become ineligible for such appraisal, 
then, as of the Effective Time or the occurrence of such event, whichever 
last occurs, such holder's Dissenting Shares shall cease to be Dissenting 
Shares and shall be converted into and represent the right to receive the 
Merger Price. The Company shall give Parent (i) prompt notice of any written 
demands for appraisal, withdrawals of demands for appraisal and any other 
instruments served pursuant to Section 262 of the GCL received by the Company 
and (ii) the opportunity to direct all negotiations and proceedings with 
respect to demands for appraisal under Section 262. The Company will not 
voluntarily make any payment with respect to any demands for appraisal and 
will not, except with the prior written consent of Parent, settle or offer to 
settle any such demands.

     1.5. PAYMENT FOR SHARES.  The Purchaser shall act as Paying Agent 
hereunder (the "Paying Agent"). As soon as practicable after the Effective 
Time, the Paying Agent shall mail to each record holder, as of the Effective 
Time, of an outstanding certificate or certificates which immediately prior 
to the Effective Time represented Shares (the "Certificates"), a form letter 
of transmittal (which shall specify that delivery shall be effected, and risk 
of loss and title to the Certificates shall pass, only upon proper delivery 
of the Certificates to the Paying Agent) and instructions for use in 
effecting the surrender of the Certificates for payment therefor. Each holder 
of a Certificate or Certificates shall be entitled to receive, upon surrender 
to the Paying Agent of the Certificate or Certificates for cancellation, 
together with such letter of transmittal duly executed, and subject to any 
required withholding of taxes, the aggregate amount of cash into which the 
Shares previously represented by such Certificate or Certificates shall have 
been converted in the Merger. Until surrendered to the Paying Agent, each 
Certificate (other than Dissenting Shares, Shares held in the treasury of the 
Company and Shares owned by Parent, the Purchaser or any other direct or 
indirect subsidiary of Parent) shall be deemed for all corporate purposes to 
evidence only the right to receive upon such surrender the aggregate amount 
of cash into which the Shares represented thereby shall have been converted, 
subject to any required withholding of taxes. No interest shall accrue or be 
paid on the cash payable upon the surrender of the Certificate or 
Certificates. If payment is to be made to a person other than the person in 
whose name the Certificate surrendered is registered, it shall be a condition 
of payment that the Certificate so surrendered shall be properly endorsed or 
otherwise in proper form for transfer and that the person requesting such 
payment shall pay any transfer or other taxes required by reason of the 
payment to a person other than the registered holder of the Certificate 
surrendered or establish to the satisfaction of the Surviving Corporation 
that such tax has been paid or is not applicable.  Notwithstanding the 
foregoing, neither the Paying Agent nor any party hereto shall be liable to a 
holder of Shares for any cash or interest thereon delivered to a public 
official pursuant to applicable abandoned property laws.

     1.6. CLOSING OF THE COMPANY'S TRANSFER BOOKS.  At the Effective Time, 
the stock transfer books of the Company shall be closed and no transfer of 
Shares shall thereafter be made. If, after the Effective Time, Certificates 
formerly representing Shares are presented to the Surviving Corporation, they 
shall be cancelled and exchanged for cash as provided in Section 1.5, subject 
to applicable law in the case of Dissenting Shares.



                                      3


<PAGE>


                     2.  REPRESENTATIONS AND WARRANTIES

     2.1. REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER. Parent 
and the Purchaser hereby jointly and severally represent and warrant to the 
Company that:

          2.1.1.    CORPORATE ORGANIZATION.  Parent and the Purchaser are 
corporations duly organized, validly existing and in good standing under the 
laws of the State of Delaware and have the requisite corporate power to carry 
on their respective businesses as they are now being conducted. Parent 
directly owns all of the issued and outstanding capital stock of the 
Purchaser.

          2.1.2.    AUTHORITY.  Each of Parent and the Purchaser has the 
requisite corporate power to enter into this Agreement and carry out its 
obligations hereunder. The execution and delivery of this Agreement and the 
consummation of the transactions contemplated hereby have been duly 
authorized by all necessary corporate action on the part of Parent and the 
Purchaser. This Agreement has been duly executed and delivered by Parent and 
the Purchaser and is a valid and binding obligation of each of them, 
enforceable against each of Parent and the Purchaser in accordance with its 
terms, except to the extent that enforceability (i) may be limited by 
bankruptcy, insolvency, moratorium or other similar laws affecting or 
relating to the enforcement of creditors' rights generally and (ii) is 
subject to general principles of equity.

          2.1.3.    PROXY STATEMENT.  None of the information supplied by 
Parent or the Purchaser for inclusion in the Proxy Statement (as defined in 
Section 2.2.11) mailed in connection with any required meeting of the 
Company's shareholders described in Section 1.2 (or the taking of action in 
lieu thereof) or in any amendments thereof or supplements thereto will, at 
the time of the meeting of shareholders to be held in connection with the 
Merger (or the taking of such action), contain any untrue statement of a 
material fact or omit to state any material fact necessary in order to make 
the statements therein, in light of the circumstances under which they were 
made, not misleading.

          2.1.4.    CONSENTS.  No consent, approval or authorization of, 
declaration to, or filing with, any governmental agency or regulatory 
authority on the part of Parent or the Purchaser which has not been made or 
received is required in connection with the execution or delivery by Parent 
and the Purchaser of this Agreement and the consummation of the transactions 
contemplated hereby other than (i) the filing of a Certificate of Merger with 
the Secretary of State of Delaware in accordance with the GCL, (ii) filings 
with the Securities and Exchange Commission and any applicable national 
securities exchange or NASDAQ, (iii) any applicable filings under state 
securities, "Blue Sky" or anti-takeover laws, and (iv) filings, 
authorizations, consents or approvals relating to matters which, if not 
obtained or made, will not, in the aggregate, have a material adverse effect 
on the business, financial condition, results of operations, properties, 
assets or liabilities of Parent and its subsidiaries, taken as a whole.

     2.2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.  The Company hereby 
represents and warrants to Parent and the Purchaser that, except as set forth 
in the Company's referenced Schedules attached hereto:


                                      4


<PAGE>


          2.2.1.    CORPORATE ORGANIZATION.  The Company is a corporation 
duly incorporated, validly existing and in good standing under the laws of 
the State of Delaware. All subsidiaries (the "Subsidiaries") of the Company 
are corporations duly incorporated, validly existing and in good standing 
under the laws of their respective jurisdictions of incorporation.  The only 
Subsidiaries are Speedring, Inc., a Delaware corporation, Speedring Systems, 
Inc., a Delaware corporation, and L&S Aerotech, Inc., a Kansas corporation, 
each of which is wholly owned by the Company.  The Company and the 
Subsidiaries do not own, directly or indirectly, any interest in any business 
entity other than the Subsidiaries.  Each of the Company and the Subsidiaries 
have the requisite corporate power to own, operate and lease all property 
that they purport to own, operate or lease and to conduct their respective 
businesses as they are currently being conducted, and are duly qualified as 
foreign corporations to do business in the respective jurisdictions where the 
character of their properties owned or leased by them or the nature of their 
activities makes such qualification necessary, except to the extent that lack 
of such qualification would not have a material adverse effect on the 
financial condition, results of operations, business, properties, assets or 
liabilities (the Business Condition") of the Company and the Subsidiaries 
taken as a whole. The Company owns the entire equity interest in each of the 
Subsidiaries and all of the outstanding shares of capital stock of each 
Subsidiary are validly issued, fully paid and nonassessable and are owned by 
the Company free and clear of all liens, claims or encumbrances. There are no 
existing subscriptions, options, warrants, rights, convertible securities or 
other agreements or commitments of any character relating to the issued or 
unissued capital stock or other securities (including stock appreciation 
rights and other phantom securities) of any of the Subsidiaries obligating 
any Subsidiary to issue any securities. No person other than the Company or 
any of the Subsidiaries has any preemptive, stock purchase or other rights to 
acquire any shares of capital stock or other securities (including stock 
appreciation rights and other phantom securities) of any Subsidiary of the 
Company.

          2.2.2.    CAPITALIZATION.  The authorized capital stock of the 
Company consists of 15,000,000 Shares. As of the date hereof, 789,520 Shares 
are issued and outstanding, all of which are validly issued, fully paid and 
nonassessable. Foothill and TIAA are the record owners of 532,744 and 217,044 
Shares, respectively.   There are outstanding employee stock options to 
purchase an aggregate of 1,032 Shares under the Company's Stock Option Plan 
(the "Option Plan"), and no Shares are reserved for issuance under the Option 
Plan.  Except as set forth above, there are no shares of capital stock of the 
Company issued or outstanding and there are no outstanding subscriptions, 
options, warrants, rights, convertible securities or other agreements or 
commitments of any character relating to the issued or unissued capital stock 
or other securities (including stock appreciation rights and other phantom 
securities) of the Company obligating the Company to issue any securities 
(including stock appreciation rights and other phantom securities).

          2.2.3.    AUTHORITY.  The Company has the requisite corporate power 
to enter into this Agreement and to carry out its obligations hereunder. The 
execution and delivery of this Agreement and the consummation of the 
transactions contemplated hereby have been duly authorized by all necessary 
corporate action on the part of the Company, subject only, to the extent 
required, to approval by the shareholders of the Company as provided in 
Section 1.2.  This


                                      5


<PAGE>


Agreement has been duly executed and delivered by, and is a valid and binding 
obligation of, the Company, enforceable against the Company in accordance 
with its terms, except to the extent that enforceability (i) may be limited 
by bankruptcy, insolvency, moratorium or other similar laws affecting or 
relating to the enforcement of creditors' rights generally and (ii) is 
subject to general principles of equity.

          2.2.4.    CONSENTS; NO VIOLATION.  The execution, delivery and 
performance of this Agreement and the consummation of the transactions 
contemplated hereby will not constitute, with or without the passage of time, 
a breach, violation or default, create a lien, impose a penalty, or give rise 
to any right of termination, modification, cancellation, prepayment or 
acceleration, under (i) the Certificate of Incorporation or the By-Laws of 
the Company or (ii) any law, rule or regulation or any judgment, decree, 
order, governmental permit or license, or any agreement, indenture or 
instrument of the Company or any of the Subsidiaries or to which the Company 
or any of the Subsidiaries or any of their properties is subject, except in 
the case of clause (ii) above for breaches, violations, defaults, liens, 
penalties or rights of termination, modification, cancellation, prepayment or 
acceleration which, singly or in the aggregate, would not have a material 
adverse effect on the Business Condition of the Company and its Subsidiaries 
taken as a whole, but not in any event with respect to Significant Contracts 
(as such term is defined below) except as set forth in Schedule 2.2.4. 
hereto.  Except for compliance with the Exchange Act, the securities laws of 
the various states, and the filing of a certificate of merger with respect to 
the Merger in accordance with the GCL, the acquisition of Shares by Purchaser 
pursuant to the Shareholders Agreement and the consummation of the Merger and 
the other transactions contemplated hereby will not (x) require the consent, 
approval, authorization or permit of, or filing with or notification to, any 
other party to any of the above, (y) affect the validity or effectiveness of 
any of the above or (z) require the consent, approval, authorization or 
permit of, or filing with or notification to, any governmental authority, 
except in the case of clauses (x), (y) and (z) for any failure to obtain any 
such required consent, approval, authorization or permit or to make any such 
filing which, singly or in the aggregate, would not have a material adverse 
effect on the Business Condition of the Company and its Subsidiaries taken as 
a whole, but not in any event with respect to Significant Contracts (except 
as set forth in Schedule 2.2.4 hereto).

          2.2.5.    SEC REPORTS; FINANCIAL STATEMENTS.  The Company has 
heretofore filed all reports, statements and schedules with the Commission 
required to be filed pursuant to the Exchange Act or other federal securities 
laws since January 1, 1993 (the "SEC Reports") and has delivered to Parent 
copies of all SEC Reports. The SEC Reports did not (as of their respective 
filing dates) contain any untrue statement of a material fact or omit to 
state a material fact required to be stated therein or necessary in order to 
make the statements made therein, in light of the circumstances under which 
they were made, not misleading. The audited and unaudited consolidated 
financial statements of the Company included in the SEC Reports have been 
prepared in accordance with generally accepted accounting principles applied 
on a consistent basis (except as stated in such financial statements) and 
fairly present the financial position of the Company and its consolidated 
Subsidiaries as of the dates thereof and the results of their operations and 
changes in financial position for the periods then ended, subject, in the 
case of the unaudited financial statements, to normal year-end audit 
adjustments which shall not be materially adverse to the Company and the 
Subsidiaries taken as a whole.



                                      6


<PAGE>


          2.2.6.    ABSENCE OF CERTAIN CHANGES.  Except as disclosed in 
Schedule 2.2.6. hereto, since April 30, 1995, the Company and the 
Subsidiaries have operated their respective businesses in the ordinary course 
and there has not been (i) any material adverse change in the Business 
Condition of the Company and the Subsidiaries taken as a whole; (ii) any 
damage, destruction or loss, whether covered by insurance or not, materially 
and adversely affecting the properties or businesses of the Company and the 
Subsidiaries taken as a whole, (iii) any declaration, setting aside or 
payment of any dividend (whether in cash, stock or property) with respect to 
the capital stock of the Company, and no dividend is accrued or otherwise 
payable, (iv) any entry by any of them into an employment, severance, 
termination, consulting, bonus, benefits or other similar agreement or policy 
(other than the agreement, dated the date hereof, between the Company and 
Richard Detweiler) (collectively "Employee Arrangements") or (other than 
normal increases in the ordinary course of the Company's business that are 
consistent with past practices and that, in the aggregate, have not resulted 
in a material increase in benefits, compensation or severance expense to the 
Company) any increase in the compensation payable or to become payable by the 
Company to its directors, officers or employees or any increase in any bonus, 
insurance, pension or other employee benefit plan, payment or arrangement 
made to, for or with any such directors, officers or employees: (v) any entry 
by any of them into any transaction (or commitment to enter into any 
transaction) material to the Company and the Subsidiaries taken as a whole 
(including, without limitation, any borrowing, capital expenditure in excess 
of $2,150,000 in the aggregate, sale of assets or issuance of capital stock 
or other securities of the Company); (vi) any change by the Company in 
accounting principles, policies or methods except to the extent required by a 
change in generally accepted accounting principles; (vii) any labor dispute, 
litigation or governmental investigation; or (viii) any amendments or changes 
in the charters or by-laws of the Company or any of the Subsidiaries.  
Schedule 2.2.6. hereto sets forth a true and complete list of all Employee 
Arrangements.

          2.2.7.    LIABILITIES.  Except as and to the extent reflected, 
reserved against or otherwise disclosed in the Company's consolidated balance 
sheet at October 31, 1995 (including the notes thereto), or as otherwise 
disclosed in writing to the Parent pursuant to this Agreement, to the best of 
the Company's knowledge, neither the Company nor any of the Subsidiaries has 
any liabilities or obligations of any kind, whether accrued, absolute, 
asserted or unasserted, contingent or otherwise, whether or not such 
liabilities would have been required to be disclosed on a balance sheet 
prepared in accordance with generally accepted accounting principles 
consistently applied, except for liabilities not exceeding $100,000 in the 
aggregate.  The accounts receivable reflected on the Company's consolidated 
balance sheet at October 31, 1995 or thereafter created by the Company on or 
prior to the Effective Time arose and will arise from bona fide transactions 
in the ordinary course of business and will have been collected in full or be 
fully collectible at their face amounts (less any applicable reserves 
reflected on the October 31, 1995 balance sheet or thereafter established on 
a basis consistent with the reserves reflected on the October 31, 1995 
balance sheet) within 60 days after the Effective Time.  The inventories 
acquired on or prior to the Effective Time will be recorded in accordance 
with generally accepted accounting principles consistently applied. The 
quantity of inventories on hand on the Effective Time will be of a type and 
at levels customary for that time of year and sufficient to meet the 
Company's then existing backlog of orders in the ordinary course of business.


                                      7


<PAGE>


          2.2.8.    COMPLIANCE WITH LAWS; NO VIOLATIONS; LEGAL PROCEEDINGS.  
The businesses of the Company and its Subsidiaries have been conducted in 
material compliance with all applicable Laws (as hereinafter defined), and 
neither the Company nor any of the Subsidiaries is in default, and no event 
has occurred which would constitute a default, under any contract, lease or 
agreement to which the Company or any of the Subsidiaries is a party or by 
which it is bound, except for violations and defaults which either singly or 
in the aggregate do not and will not have a material adverse effect on the 
Business Condition of the Company and the Subsidiaries taken as a whole, but, 
in any event, not with respect to the Significant Contracts except as set 
forth in Schedule 2.2.15 hereto.  The term "Laws" means all laws of any 
federal, state, local or foreign government (and all agencies and 
instrumentalities thereof), including, but not limited to, all rules, 
regulations, codes, plans, injunctions, judgments, orders, decrees and other 
rulings, and all environmental and occupational safety and health and other 
laws relating to the workplace.  Except as set forth in the Schedule 2.2.8(a) 
hereto, and subject to Section 2.2.15 hereof, there is no suit, action, 
proceeding or governmental investigation pending or, to the knowledge of the 
Company, threatened, nor is there any basis therefor, against or affecting 
the Company or any of its Subsidiaries which, if adversely determined, might 
individually or in the aggregate materially and adversely affect the Business 
Condition of the Company and its Subsidiaries taken as a whole, nor is there 
any judgment, decree, injunction, rule or order of any court, governmental 
department, commission, agency, instrumentality or arbitrator outstanding 
against the Company or any of the Subsidiaries.  The Company and its 
Subsidiaries have all permits, licenses and franchises from governmental 
agencies required to conduct their businesses now being conducted, except for 
such permits, licenses and franchises, the absence of which would not, in the 
aggregate, have a material adverse effect on the Business Condition of the 
Company and its Subsidiaries taken as a whole.

          2.2.9.     APPROVALS; PRINCIPAL SHAREHOLDERS AGREEMENTS.  The Board 
of Directors of the Company has expressly approved in advance the acquisition 
of Shares pursuant to this Agreement and the Shareholders Agreement, and the 
Merger, in accordance with any applicable provision of the Company's 
Certificate of Incorporation and By-Laws, Section 203 of the GCL and any 
applicable state take-over statute.  No provision of the Certificate of 
Incorporation, By-Laws or other instrument applicable to the Company requires 
a vote of the Company's shareholders in excess of a majority of the 
outstanding shares entitled to vote thereon or of any particular shareholder 
of the Company in order to approve the acquisition of Shares pursuant to this 
Agreement or Shareholders Agreement or the Merger in accordance with the 
terms of this Agreement, including without limitation, any agreement between 
the Company and/or any of its Subsidiaries, on the one hand, and Foothill, 
TIAA and/or any of their affiliates on the other hand (collectively, the 
"Principal Shareholders Agreements").  The Company has delivered to Parent 
true and complete copies of the Principal Shareholders Agreements.  None of 
the Principal Shareholders Agreements has been amended or modified, or any 
waiver granted in respect thereof, since April 30, 1995 or in anticipation of 
the consummation of the transactions contemplated hereby.  


                                      8


<PAGE>


          2.2.10.    FINDERS.  Neither the Company nor any of the 
Subsidiaries has paid or become obligated to pay any fee or commission to any 
broker, finder or intermediary in connection with the transactions 
contemplated hereby.

          2.2.11.    PROXY STATEMENT.  (a)  The letter to stockholders, 
notice of meeting, proxy statement and form of proxy, or the information 
statement, as the case may be, to be distributed to stockholders in 
connection with the Merger (including any supplements thereto), or any 
schedules required to be filed with the Commission in connection therewith 
are collectively referred to herein as the "Proxy Statement."

               (b)  If a Proxy Statement is required for the consummation of 
the Merger under applicable law, the Proxy Statement will comply in all 
material respects with the Exchange Act, and the rules and regulations 
thereunder, and will not, at the date of the filing of the Proxy Statement 
with the Commission and at the time of the taking of action by written 
consent in lieu of a meeting of shareholders or at a meeting of shareholders 
of the Company to be taken or held in connection with the Merger, as the case 
may be, contain any untrue statement of a material fact or omit to state any 
material fact required to be stated therein or necessary in order to make the 
statements therein, in light of the circumstances under which they were made, 
not misleading, except that no representation is made by the Company with 
respect to information supplied in writing by Parent or any affiliate of 
Parent specifically for inclusion in the Proxy Statement.

          2.2.12.    EMPLOYEE ARRANGEMENTS; BENEFIT PLANS.  (a) Except as 
disclosed in Schedule 2.2.12(a), there are no bonus, profit sharing, 
severance, termination, stock option, pension, retirement, deferred 
compensation, employment or other employee benefit plans, agreements, trusts, 
plans, funds or other arrangements for the benefit or welfare of any 
director, officer or employee to which the Company or any of the Subsidiaries 
is a party or adopted by the Company or any of the Subsidiaries or to which 
any of them is subject. Except for the Bonus and Severance Payment Agreement 
and the Employment Agreement, dated the date hereof, between Richard 
Detweiler and the Company, there are no plans, agreements, understandings or 
arrangements which would give any person any rights to receive any payment 
from the Company or any of the Subsidiaries upon the acquisition of Shares by 
any person or group (including pursuant to the Shareholders Agreement or 
Merger), the commencement of any tender or exchange offer for or proposal to 
acquire Shares, any change in the membership of the Company's board of 
directors, or any other change in control event with respect to the Company. 
The Company has previously delivered to Parent true and correct copies of all 
such plans, arrangements, trusts, funds, understandings or other arrangements 
set forth in Schedule 2.2.12(a).  

               (b) The Company and each Subsidiary has complied with and 
performed all contractual obligations and all obligations under applicable 
Laws required to be performed by it under or with respect to any of the 
Company Benefit Plans (as defined below) or any related trust agreement or 
insurance contract, other than where the failure to so comply or perform does 
not have, nor is reasonably likely to have, a material adverse effect on the 
Company.  All contributions and other payments required to be made by the 
Company and its Subsidiaries to any Company Benefit Plan have been made, and 
all accruals required to be made under any Company


                                      9


<PAGE>


Benefit Plan have been made.  There is no claim, dispute, grievance, charge, 
complaint, restraining or injunctive order, litigation or proceeding pending, 
or, to the best knowledge of the Company and its Subsidiaries, threatened or 
anticipated (other than routine claims for benefits) against or relating to 
any Company Benefit Plan or against the assets of any Company Benefit Plan, 
which is reasonably likely to have a material adverse effect on the Company 
and its Subsidiaries taken as a whole.  Neither the Company nor any of its 
Subsidiaries has communicated generally to employees or specifically to any 
employee regarding any future increase of benefit levels (or future creations 
of new benefits) with respect to any Company Benefit Plan beyond those 
reflected in the Company Benefit Plans, which benefit increases or creations, 
either individually or in the aggregate, will have or are reasonably likely 
to have, a material adverse effect on the Company and its Subsidiaries taken 
as a whole.  Neither the Company nor any of its Subsidiaries presently 
sponsors, maintains, contributes to, nor is the Company or its Subsidiaries 
required to contribute to, nor has the Company or any of its Subsidiaries 
ever sponsored, maintained, contributed to, or been required to contribute 
to, any employee pension benefit plan within the meaning of section 3(2) of 
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), 
other than as set forth in Schedule 2.2.12(b) hereto, and except for any such 
pension benefit plan which has been terminated, is fully funded and with 
respect to which none of the Company, Subsidiaries, Parent or Purchaser has 
or will have any liability.

               With respect to each Company Benefit Plan subject to Title IV 
of ERISA, (i) no termination of any Company Benefit Plan has occurred 
pursuant to which all liabilities have not been satisfied in full, and no 
event has occurred and no condition exists that could reasonably be expected 
to result in the Company or any Subsidiary incurring a liability under Title 
IV of ERISA or could constitute grounds for terminating any Pension Plan; 
(ii) each such Company Benefit Plan which is subject to Part 3 of Subtitle B 
of Title I of ERISA or Section 412 of the Code, has been maintained in 
compliance with the minimum funding standards of ERISA and the Code and no 
such Company Benefit Plan has incurred any "accumulated funding deficiency," 
as defined in Section 412 of the Code and Section 302 of ERISA, whether or 
not waived; (iii) neither the Company or any Subsidiary has sought or 
received a waiver of its funding requirements with respect to any Company 
Benefit Plan and all contributions payable with respect to each Pension Plan 
have been timely made; (iv) no reportable event, within the meaning of 
Section 4043 of ERISA (with respect to which notice to the Pension Benefit 
Guaranty Corporation has not been waived), and no event described in Section 
4062 or 4063 of ERISA, has occurred with respect to any Company Benefit Plan; 
and (v) the aggregate accumulated benefit obligations of each Company Benefit 
Plan subject to Title IV of ERISA (as of the date of the most recent 
actuarial valuation prepared for such Company Benefit Plan) do not exceed the 
fair market value of the assets of such Company Benefit Plan (as of the date 
of such valuation).

               Neither the Company nor any of its Subsidiaries has incurred, 
nor has any event occurred which has imposed or is reasonably likely to 
impose upon the Company or any of its Subsidiaries, any withdrawal liability 
(complete or partial within the meanings of sections 4203 or 4205 or ERISA, 
respectively) in respect of any multiemployer plan (within the meaning of 
section 3(37) or 4001(a)(3) of ERISA) (a "Multiemployer Plan"), which 
withdrawal liability has not been satisfied or discharged in full or which, 
either individually or in the aggregate, will cause,


                                     10


<PAGE>


or is reasonably likely to cause, a material adverse effect on the Company 
and its Subsidiaries taken as a whole.

               Except as set forth in Schedule 2.2.12(c) hereto, neither the 
Company nor any Subsidiary maintains or contributes (or has maintained or 
contributed to) any Company Benefit Plan which provides, or has a liability 
to provide, life insurance, medical, severance, or other employee welfare 
benefit to any employee upon his retirement or termination of employment, 
except as may be required by Section 4980B of the Code.

               "Plan" means any bonus, incentive compensation, deferred 
compensation, pension, profit sharing, retirement, stock purchase, stock 
option, stock ownership, stock appreciation rights, phantom stock, leave of 
absence, layoff, vacation, day or dependent care, legal services, cafeteria, 
life, health, accident, disability, workers' compensation or other insurance, 
severance, separation or other employee benefit plan, practice, policy or 
arrangement of any kind, including, but not limited to, any "employee benefit 
plan" within the meaning of section 3(3) of ERISA. "Company Benefit Plan" 
means any Plan, other than a Multiemployer Plan, established by the Company 
or any of its Subsidiaries or to which the Company or any of its Subsidiaries 
contributes or has contributed (including any such Plans not now maintained 
by the Company or any of its Subsidiaries or to which the Company or any of 
its Subsidiaries does not now contribute, but with respect to which the 
Company or any of its Subsidiaries has or may have any liability).  True and 
complete copies of all Company Benefit Plans (and, if applicable, related 
trust agreements) and all amendments thereto and significant written 
interpretations thereof with respect to which the Company or any of its 
Subsidiaries has or may have any liability and the most recent Forms 5500 
required to be filed with respect thereto have been furnished to Parent after 
the date of this Agreement.  Schedule 2.2.12(d) sets forth each Company 
Benefit Plan with respect to which benefits will be accelerated, vested, 
increased or paid as a result of the transactions contemplated by this 
Agreement.

          2.2.13.  TAX RETURNS; AUDITS AND LIABILITIES.  Except as disclosed 
in Schedule 2.2.13 hereto, the Company and each of the Subsidiaries have 
filed or validly extended all federal, state, local and foreign income and 
other tax returns required to be filed by them due on or prior to the date 
hereof and on or prior to the Closing, and each such filed return is complete 
and accurate in all material respects.  Except as previously disclosed in 
Schedule 2.2.13 hereto, the Company and each of the Subsidiaries have paid 
all taxes of any nature whatsoever, with any related penalties and interest 
(any of the foregoing being referred to herein as a "Tax"), required to be 
paid on or before the date hereof, other than such Taxes as are being 
contested in good faith and for which adequate reserves have been provided; 
PROVIDED, HOWEVER, that it shall not be a breach of this or any other 
representation and warranty contained herein or any other term hereof if it 
shall be determined that Speedring, Inc. and/or the Company owes in the 
aggregate not more than $600,000 in respect of franchise Taxes, including 
interest and penalties (collectively the "Disputed Alabama Taxes"), to the 
State of Alabama, Department of Revenue in connection with its dispute which 
is the subject of SPEEDRING, INC., TAXPAYER, V. STATE OF ALABAMA DEPARTMENT 
OF REVENUE (Docket Number, F.95-237, F.95-288).  The amount of the Disputed 
Alabama Taxes (excluding interest and penalties) is $387,830 and, as of 
December 31, 1995, the amount of such interest and penalties is $176,470.  To 
the best of the Company's knowledge, there are no written


                                     11


<PAGE>


claims or written assessments pending against the Company or any of the 
Subsidiaries for any alleged deficiency, except for the Disputed Alabama 
Taxes. Except as previously disclosed in Schedule 2.2.13 hereto or as 
discussed below, there are no agreements in effect with respect to the 
Company or any of the Subsidiaries to extend the period of limitations for 
the assessment or collection of any tax imposed by the Internal Revenue Code 
of 1986, as amended (the "Code"). No consent has been filed relating to the 
Company or any of the Subsidiaries pursuant to Section 341 of the Code, and 
neither the Company nor any of the Subsidiaries has agreed to have Section 
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as 
such term is defined in Section 341(f)(4) of the Code). To the best of the 
Company's knowledge, no property of the Company or of any of the Subsidiaries 
is property which the Purchaser, the Company or any of the Subsidiaries is or 
will be required to treat as being owned by another person pursuant to the 
provisions of Section 168(f)(8) of the Code.  Audits of federal income tax 
returns by the Internal Revenue Service have been completed for the tax years 
set forth on Schedule 2.2.13.  True and complete copies of any closing 
agreements entered into with the Internal Revenue Service have been furnished 
to Parent. Neither the Company nor any of the Subsidiaries is a party to, is 
bound by, or has any obligation under any tax sharing or similar agreement 
with any unaffiliated third party, TIAA or Foothill.  The forgiveness of 
indebtedness in connection with the Company's restructuring approved at a 
special meeting of stockholders of the Company held on March 22, 1994 was 
properly excluded from income under Section 108(a)(1)(B) of the Code.  To the 
best of the Company's knowledge, no written claim has ever been made by an 
authority in a jurisdiction where any of the Company and its Subsidiaries 
does not file Tax returns that it is or may be subject to taxation by that 
jurisdiction.  Each of the Company and its Subsidiaries has withheld and paid 
all Taxes required to have been withheld and paid in connection with amounts 
paid or owing to any employee, independent contractor, creditor, stockholder 
or other third party. None of the Company and its Subsidiaries pursuant to 
this plan of merger has made any payments, is obligated to make any payments, 
or is a party to any agreement that under certain circumstances could 
obligate it to make any payments that will not be deductible under Section 
280G of the Code.  None of the Company and its Subsidiaries (A) has been a 
member of an affiliated group filing a consolidated federal income Tax return 
(other than a group the common parent of which was the Company) or (B) has 
any liability for federal income Taxes of any person (other than any of the 
Company and its Subsidiaries) under Treas. Reg. Section 1.1502-6 (or any 
similar provision of state, local, or foreign law), as a transferee or 
successor, by contract, or otherwise.

          2.2.14.  INTELLECTUAL PROPERTY.  The Company and the Subsidiaries have
all licenses, franchises, patents, patent applications, patent licenses, patent
rights, trademark rights, trade names, trade name rights, copyrights, permits,
authorizations and other rights as are necessary for the conduct of their
respective businesses (collectively, "Intellectual Property"), except for any
failure to have any such Intellectual Property which, singly or in the
aggregate, would not have a material adverse effect on the Business Condition of
the Company and its Subsidiaries taken as a whole.  Schedule 2.2.14 hereto sets
forth a true and complete list of all Intellectual Property and in reasonable
detail the expiration date, registration number and other identifying
information of all patent and other rights as to which the Company or any of its
Subsidiaries has the exclusive right to use, including the exclusive right to
manufacture and market the systems covered by such patent rights until the
expiration of such patents.  All of the foregoing are in full force and effect,
and the Company and each of the Subsidiaries are in compliance with the
foregoing without any


                                     12


<PAGE>


known conflict with the valid rights of others, except for any failure to be 
in full force and effect or in compliance which, singly or in the aggregate, 
would not have a material adverse effect on the Business Condition of the 
Company and its Subsidiaries taken as a whole.  No event has occurred which 
permits (or will, as a result of the execution and performance of this 
Agreement and the transactions contemplated herein, permit), or after notice 
or lapse of time or both would permit, the revocation of any such license or 
other right, or adversely affect the rights thereunder, except for any 
revocation or adverse affect which, singly or in the aggregate, would not 
have a material adverse effect on the Business Condition of the Company and 
its Subsidiaries taken as a whole. There is no litigation or other 
governmental proceeding pending or, to the best knowledge of the Company, 
threatened, the result of which may adversely affect the validity or the 
extension or renewal of any of the foregoing, except for any such result 
which, singly or in the aggregate, would not have a material adverse effect 
on the Business Condition of the Company and its Subsidiaries taken as a 
whole.  

          2.2.15  MATERIAL CONTRACTS; GOVERNMENT CONTRACTS.  (a) Schedule 
2.2.15(a) hereto contains a true and complete list of all agreements, 
instruments, orders and other contracts (including any and all amendments 
thereto), written or oral, to which the Company or any of its Subsidiaries is 
a party and which are material to the Business Condition of the Company and 
its Subsidiaries taken as a whole, and, in any event (i) all agreements, 
instruments, orders and other contracts involving the payment or receipt of 
more than $100,000, (ii) all agreements providing for the lease of real 
property and (iii) all distribution and representative agreements 
(collectively, "Significant Contracts").  True and complete copies of all 
written Significant Contracts have been delivered to Parent.  Except as 
disclosed in Schedule 2.2.15(a), to the Company's knowledge, each such 
Significant Contract is in full force and effect and constitutes a legal, 
valid and binding obligation of the respective parties thereto, and neither 
the Company nor any of its Subsidiaries is in default or breach of (with or 
without the giving of notice or the passage of time) any such Significant 
Contract, except breaches or defaults, if any, which would not have a 
materially adverse effect on the Business Condition of the Company and its 
Subsidiaries taken as a whole.

               (b)  Schedule 2.2.15(b) hereto sets forth a true and complete 
list of (i) the five largest suppliers (by dollar volume) of products and 
services to the Company or any of its Subsidiaries during the years ended 
April 30, 1995 and 1994, indicating the existing contractual arrangements, if 
any, with each such firm, and (ii) the names of any sole-source suppliers to 
the Company or any of its Subsidiaries of significant materials or services 
with respect to which practical alternative sources of supply are not 
available on comparable terms and conditions, indicating the contractual 
arrangements for continued supply from each such firm.  The Company has no 
knowledge of any termination, cancellation or limitation of, or any 
modification or change in, the business relationship of the Company or any of 
its Subsidiaries with any of the suppliers listed in Schedule 2.2.15(b) 
hereto, except for any such termination, cancellation, limitation, 
modification or change, which, singly or in the aggregate, would not have a 
material adverse effect on the Business Condition of the Company and its 
Subsidiaries taken as a whole, and except as set forth in such Schedule.  
Schedule 2.2.15(b) hereto sets forth a true and complete list of the ten 
largest customers (by dollar volume) of the Company and its Subsidiaries 
during the years ended April 30, 1995 and 1994, indicating the existing 
contractual arrangements, if any, with each such firm.  The Company has no 
knowledge of any termination, cancellation or 

                                     13


<PAGE>


limitation of, or any modification or change in, the business relationship of 
the Company and its Subsidiaries with any of the customers listed in Schedule 
2.2.15(b) hereto, except for any such termination, cancellation, limitation, 
modification or change which, singly or in the aggregate, would not have a 
material adverse effect on the Business Condition of the Company and its 
Subsidiaries taken as a whole, and except as set forth in such schedule.  

               All unfilled purchase and sales orders and orders for the 
provision of services made by the Company or any of its Subsidiaries were 
made in the usual and ordinary course of business at the then current market 
price. Except as set forth in Schedule 2.2.15(b) hereto, none of such orders 
or other contracts calls for deliveries or performance thereunder beyond a 
period of 90 days from the date hereof or, except as described in such 
Schedule, contains any agreements granting special discounts or terms.  The 
Company has delivered to Parent a true and complete copy of its standard 
form(s) of purchase and sales order(s) and warranty agreement(s) for the 
Company and each of its Subsidiaries.

               (c)  "Federal Government Contract" means a mutually binding 
legal relationship (including, but not limited to, bilateral contracts, job 
orders, or task orders issued under basic ordering agreements, letter 
contracts, purchase orders, or contract modifications) between the Company or 
any of its Subsidiaries and any executive agency or instrumentality or any 
independent establishment in the legislative or judicial branch of the 
Federal Government, under which the Company or any of its Subsidiaries is 
obligated to furnish supplies or services in return for payment by the 
Federal Government.  For purposes of this Agreement, the term Federal 
Government Contract" includes subcontracts at any tier which the Company or 
any of its Subsidiaries holds under a Federal Government Contract awarded to 
any other person or party. Except as set forth in Schedule 2.2.15(c) hereto, 
there are no outstanding claims asserted in writing, or to the knowledge of 
the Company threatened in writing, against the Company or any of its 
Subsidiaries or likely to be asserted by the Company or any of its 
Subsidiaries against the Federal Government or another contractor under a 
Federal Government Contract.  Except as set forth in Schedule 2.2.15(c) 
hereto, there are no outstanding claims asserted in writing or, to the 
knowledge of the Company threatened in writing, by the Federal Government or 
another contractor against the Company or any of its Subsidiaries under a 
Federal Government Contract. Except as set forth in Schedule 2.2.15(c) 
hereto, the Company and its Subsidiaries have no:  (i) Federal Government 
Contracts as to which any of them has failed to comply with any term or 
condition in any material manner;  (ii) Federal Government Contracts as to 
which any of them has reason to believe that it will be unable to perform in 
any material fashion with the requirements thereof; (iii) Federal Government 
Contracts under which work is being performed, to the Company's knowledge, 
without written contract coverage; (iv) Federal Government Contracts with 
funding ceilings which (x) to Company's knowledge, have been exceeded or (y) 
the Company reasonably anticipates will be exceeded; and (v) fixed-price 
Federal Government Contracts which the Company anticipates can only be or 
will be completed at a material loss.  The accounting system of the Company 
and its Subsidiaries meets the requirements of the Federal Acquisition 
Regulation and the Cost Accounting Standards in all material respects.  
Except as set forth in Schedule 2.2.15(c), none of the Company and its 
Subsidiaries have received during the last six years any written governmental 
reports (or reports of outside legal counsel which were submitted to any 
governmental authority) arising from audits or other investigations of the 
Federal


                                     14


<PAGE>


Government Contracts (past or present) of the Company or any of its 
Subsidiaries that assert (x) overcharging, defective pricing practices or 
Cost Accounting Standards noncompliance, or (y) any other issues, except in 
each case of assertions relating to clause (y), which, if true, would not 
have a material adverse effect on the Business Condition of the Company and 
its Subsidiaries, taken as a whole.  Except as set forth in Schedule 
2.2.15(c) hereto, to the Company's knowledge, there are no pending or actual 
audits or investigations by any Government agency or instrumentally 
concerning the Federal Government Contracts of the Company or any of its 
Subsidiaries or any individual involved with those contracts.  Except as set 
forth in Schedule 2.2.15(c) hereto, there are no outstanding or anticipated 
claims or obligations under any warranty provision of the Federal Government 
Contracts.  There are no pending debarment or suspension proceedings 
involving the Company or any of its Subsidiaries, and none of the Company and 
its Subsidiaries is aware of any facts or circumstances which could result in 
a debarment or suspension.  Except as set forth in Schedule 2.2.15(c) hereto, 
the Company and its Subsidiaries have title or license to all inventions, 
drawings, software, technical data, know-how and the like necessary to 
perform its Federal Government Contracts, except for the absence of which, 
singly or in the aggregate, would not have a material adverse effect on the 
Business Condition of the Company and its Subsidiaries, taken as a whole.  
None of the businesses conducted by the Company or any of its Subsidiaries 
requires security clearances except for a U.S. Department of Energy clearance 
held by Speedring, Inc.

          2.2.16  TITLE TO PROPERTIES.  Each of the Company and its 
Subsidiaries has good and, in the  case of real property interests, 
marketable title to all of the assets and properties which it purports to 
own, free and clear of all liens, claims, rights of third parties and other 
encumbrances (collectively, "Encumbrances"), except as set forth in Schedule 
2.2.16 hereto and except for (a) liens of current taxes not yet due and 
payable or of taxes the validity of which is being contested in good faith by 
appropriate proceedings, (b) Encumbrances to secure indebtedness owed to TIAA 
or Foothill which shall be released and discharged in full at the Effective 
Time and (c) Encumbrances which may be discharged by the payment of, or the 
posting of a bond, in the aggregate amount not exceeding $50,000 and such 
Encumbrances as do not interfere with the conduct of the businesses of the 
Company and its Subsidiaries as now conducted.

          2.2.17.  UNION CONTRACT, LABOR RELATIONS, ETC.  None of the Company 
and its Subsidiaries is a party to any collective bargaining agreement and no 
such agreement is being negotiated.  The Company and its Subsidiaries have 
been in material compliance with all applicable Laws respecting employment 
terms, conditions and practices, have withheld all amounts required by Law or 
contract to be withheld from the wages or salaries of its employees and are 
not liable for any arrears of wages or any Taxes or penalties for failure to 
comply with any of the foregoing. The Company and its Subsidiaries have not 
engaged in any unfair labor practice and have not discriminated on the basis 
of race, color, national origin, sex, religion, age, marital status or 
handicap in its employment conditions or practices, and there exists no 
pending, or to the knowledge of Seller, threatened, unfair labor practice 
charges or discrimination complaints relating to race, color national origin, 
sex, religion, age, marital status or handicap against the Company or any of 
its Subsidiaries before any domestic (Federal, state or local) or foreign 
board, department, commission or agency nor, to the knowledge of the Company, 
does any basis 

                                     15


<PAGE>


therefor exist, except for any such basis which, if true, would not, singly 
or in the aggregate, have a material adverse effect on the Business Condition 
of the Company and its Subsidiaries taken as a whole.  There are no existing 
or, to the knowledge of the Company, threatened labor strikes, disputes, 
grievances, controversies or other labor troubles affecting Company, in 
connection with its operation of its businesses.  There are no pending or, to 
the knowledge of the Company, threatened representation questions respecting 
the employees of the Company or any of its Subsidiaries, nor, to the 
knowledge of the Company, does any basis therefor exist, except for any such 
basis which, if true, would not, singly or in the aggregate, have a material 
adverse effect on the Business Condition of the Company and its Subsidiaries 
taken as a whole.

          2.2.18.   INSURANCE.  (a) There are no outstanding or unsatisfied 
requirements or recommendations by any insurance company that issued a policy 
with respect to the Company or any of its Subsidiaries or by any Board of 
Fire Underwriters or other body exercising similar functions or by any 
governmental authority requiring or recommending any repairs or other work to 
be done on or with respect to, or requiring or recommending any equipment or 
facilities to be installed on or in connection with, the Company or any of 
the Subsidiaries.

               (b)  Schedule 2.2.18 hereto contains a complete and accurate 
list of all policies or binders of fire, liability, title, worker's 
compensation and other forms of insurance (showing as to each policy or 
binder the carrier, policy number, coverage limits, deductibles or 
self-insured retentions, expiration dates, annual premiums and a general 
description of the type of coverage provided) maintained by the Company or 
any of its Subsidiaries on its business, property or personnel.  All of such 
policies are sufficient for material compliance with all requirements of Law 
and of all contracts to which the Company or any of its subsidiaries is a 
party.  Neither the Company nor any of its Subsidiaries is in default under 
any of such policies or binders, and none of them has failed to give any 
notice in a timely fashion requesting coverage thereunder.  There are no 
facts upon which an insurer might be justified in reducing coverage or 
increasing premiums on existing policies or binders, except for any such 
reductions or increases which, singly or in the aggregate, would not have a 
material adverse effect on the Business Condition of the Company and its 
Subsidiaries taken as a whole.  There are no outstanding unpaid claims under 
any such policies or binders.  Such policies and binders provide sufficient 
coverage (in amounts and scope of coverage) for the risks insured against 
(including, without limitation, in the case of workers' compensation 
policies, sufficient coverage (in amount and scope) of any pending or future 
claims of any current or former employees of the Company or any of its 
Subsidiaries), are in full force and effect and shall be kept in full force 
and effect by the Company through 12:01 A.M. on the day following the 
Effective Time.  The workers' compensation and unemployment insurance ratings 
and contributions of the Company and its Subsidiaries since January 1, 1993 
are set forth in Schedule 2.2.18 hereto.

          2.2.19.   ENVIRONMENTAL MATTERS.

          (a)  For the purposes of this Agreement:     "Environmental Matters 
means any matter arising out of, relating to or resulting from pollution, 
protection of the environment and human health or safety, health or safety of 
employees, sanitation, and any matters relating to emissions, discharges, 
releases or threatened releases of Hazardous Materials or otherwise arising 


                                     16


<PAGE>


out of, resulting from or relating to the manufacture, processing, 
distribution, use, treatment, storage, disposal, transport or handling of 
Hazardous Materials.

          "Environmental Costs" means any actual or potential cleanup costs, 
remediation, removal, or other response costs (which shall include costs to 
come into compliance with Environmental Laws), investigation costs, losses, 
liabilities or other obligations, damages and amounts paid in settlement 
arising out of or relating to or resulting from any Environmental Matter.  

          "Environmental Laws" means all federal, state or local Laws 
governing Environmental Matters, as the same have been or may be amended from 
time to time, including any common law cause of action providing any right or 
remedy with respect to Environmental Matters, and all applicable judicial and 
administrative decisions, orders, and decrees relating to Environmental 
Matters.

          "Hazardous Materials" means any pollutants, contaminants, or 
hazardous or toxic substances, materials, wastes, constituents or chemicals 
that are regulated by, or form the basis of liability under, any 
Environmental Laws.

          (b)  (i)  Each of the Company and its Subsidiaries has materially 
complied with all applicable Environmental Laws. Except as set forth on 
Schedule 2.2.19(b)(i), each of the Company and its Subsidiaries has obtained 
and is in compliance with, all permits licenses, authorizations, 
registrations and other governmental consents ("Environmental Permits") 
required to be obtained by it by applicable Environmental Laws for the use, 
storage, treatment, transportation, release, emission and disposal of raw 
materials, by-products, wastes and other substances used or produced by or 
otherwise relating to its business, except for any failure to be in full 
force and effect or make such filings which, singly or in the aggregate, 
would not have a material adverse effect on the Business Condition of the 
Company and its Subsidiaries taken as a whole.  Except as set forth on 
Schedule 2.2.19(b)(i), all such Environmental Permits are in full force and 
effect, and each of the Company and its Subsidiaries has made all appropriate 
filings for issuance or renewal of such Environmental Permits, except for any 
failure to obtain or be in compliance with such Environmental Permits which, 
singly or in the aggregate, would not have a material adverse effect on the 
Business Condition of the Company and its Subsidiaries taken as a whole.  
Except as set forth on Schedule 2.2.19(b)(i), all of the assets of each of 
the Company and its Subsidiaries are free of any Hazardous Materials (except 
those authorized pursuant to and in accordance with Environmental Permits 
held by the Company or any Subsidiary) and free of all contamination arising 
from, relating to, or resulting from any such Hazardous Materials, except for 
any such failure which, singly or in the aggregate, would not have a material 
adverse effect on the Business Condition of the Company and its Subsidiaries 
taken as a whole.  

          (ii) Except as set forth on Schedule 2.2.19(b)(ii), there are no 
claims, notices civil, criminal or administrative actions suits, hearings, 
investigations, inquiries or proceedings pending or threatened that are based 
on or related to any Environmental Matters or the failure to have any 
required Environmental Permits, which, if true are, either individually or in 
the aggregate, reasonably expected to have a material adverse effect on the 
Business Condition of the Company


                                     17


<PAGE>


and its Subsidiaries, taken as a whole.  Except as set forth on Schedule 
2.2.19(b)(ii), there are no facts, events, conditions, circumstances, 
activities, practices, incidents, actions, omissions or plans (collectively, 
"Facts"), (1) that could reasonably be expected to interfere with or prevent 
continued material compliance with the Environmental Laws and Environmental 
Permits referred to in the first two sentences of (b)(i) above, or (2) that 
could reasonably be expected to give rise to any liability or other 
obligation under any Environmental Laws that may require any of the Company 
or its Subsidiaries to incur any material Environmental Costs, or (3) that 
are reasonably likely to form the basis of  any claim, action, suit, 
proceeding, hearing, investigation or inquiry based on or related to any 
Environmental Matter involving any of the Company or its Subsidiaries, other 
than Facts that are reasonably likely to form such basis which, if true, 
would not, singly or in the aggregate, have a material adverse effect on the 
Business Condition of the Company and its Subsidiaries taken as a whole.  
Except as set forth on Schedule 2.2.19(b)(ii), each of the Company and its 
Subsidiaries has not used any waste disposal site, or otherwise disposed of, 
transported, or arranged for the transportation of, any Hazardous Materials 
to any place or location, or in violation of any Environmental Laws.  To the 
best knowledge of the Company, there are no underground storage tanks or 
surface impoundments at, on, about under or within any of the owned or leased 
real property of and of the Company or its Subsidiaries, or any portion 
thereof.  Schedule 2.2.19(b)(ii) lists all underground storage tanks or 
surface impoundments that were removed by the any of the Company or its 
Subsidiaries or, to the knowledge of the Company, removed by others from any 
of the owned or leased real property of any of the Company or its 
Subsidiaries.  Except as set forth in Schedule 2.2.19(b)(ii), none of the 
Company and its Subsidiaries has received any written notice from a 
governmental agency that it may be a "potentially responsible party" at any 
waste disposal site or other location used for the disposal of any Hazardous 
Materials.

                                3.  COVENANTS

     3.1. ACQUISITION PROPOSALS.  The Company shall not, and shall cause each 
of its Subsidiaries and each of the Company's and Subsidiaries' respective 
officers, directors, agents and representatives not to, solicit or encourage 
(including by way of furnishing any non-public information concerning the 
Company's or any Subsidiary's business, properties or assets), any 
acquisition proposal, and neither the Company nor any of its Subsidiaries 
shall engage in discussions, furnish any non-public information about the 
Company or any of its Subsidiaries or enter into agreements with respect to 
any acquisition proposal; PROVIDED, HOWEVER, the Board may furnish non-public 
information about the Company or any of its Subsidiaries to a third party 
which hereafter makes a bonafide acquisition proposal which the Board of 
Directors of the Company, in its good faith, reasonable judgment determines 
to be superior to the transaction contemplated by this Agreement and for 
which financing is then committed if, upon the advice of outside legal 
counsel, the failure to provide such information would impose significant 
liability upon the Board of Directors or the Company.  The Company shall 
promptly provide written notice to Parent of the receipt of an acquisition 
proposal, and any proposal, inquiry or contact with any person with respect 
thereto, and shall, in any such notice, indicate in reasonable detail the 
identity of the offeror and principal terms and conditions thereof and keep 
Parent informed of the status thereof.  The term "acquisition proposal" shall 
mean any proposal for a merger or other business combination or similar 
transaction involving the Company or any of its Subsidiaries or for the


                                     18


<PAGE>


acquisition of a substantial equity interest in or a substantial part of the 
assets of the Company or of any of its Subsidiaries (collectively, a "Sale 
Transaction").

     3.2. STOCK OPTIONS AND AWARDS.  Prior to the Effective Time, the Company 
shall make all necessary and appropriate adjustments to, and shall use its 
best efforts to obtain all necessary consents with respect to, all options to 
acquire Shares (whether or not currently exercisable) which have been granted 
pursuant to the Option Plan and which are outstanding immediately prior to 
the Effective Time to provide that in cancellation and settlement thereof the 
Company shall, immediately prior to the Effective Time make a cash payment to 
the holder of each such cancelled option in an amount equal to (i) the 
positive excess, if any, of the Merger Price over the per Share exercise 
price of such option, multiplied by (ii) the number of Shares covered by such 
option (such amount being hereinafter referred to as the "Option 
Consideration"). All amounts payable under this Section 3.2 shall be subject 
to any required withholding of taxes and shall be paid without interest 
thereon.

     3.3. INTERIM OPERATIONS.  During the period from the date of this 
Agreement to the Effective Time, except as specifically provided by this 
Agreement, or as otherwise approved in writing by the Purchaser:

          3.3.1.    The Company shall and shall cause each of the 
Subsidiaries to conduct their respective businesses only in, and not to take 
any action except in, the ordinary and usual course of business and 
consistent with past practice;

          3.3.2.    The Company shall not and shall not permit any of the 
Subsidiaries to make or propose any change or amendment in their respective 
charters or by-laws;

          3.3.3.    The Company shall not and shall not permit any of the 
Subsidiaries to issue, pledge or sell any shares of capital stock or any 
other securities of any of them or issue any securities convertible into or 
exchangeable for, or options, warrants to purchase, scrip, rights to 
subscribe for, calls or commitments of any character whatsoever relating to, 
or enter into any contract, understanding or arrangement with respect to the 
issuance of, any shares of capital stock or any other securities of any of 
them (other than pursuant to this Agreement or employee stock options issued 
under the Option Plan and outstanding on the date of this Agreement), or 
enter into any arrangement or contract with respect to the purchase or voting 
of shares of their capital stock, or adjust, split, combine or reclassify any 
of their securities, or make any other changes in their capital structures.

          3.3.4.    The Company shall not and shall not permit any of the 
Subsidiaries to declare, set aside, pay or make any dividend or other 
distribution or payment (whether in cash, stock or property) with respect to, 
or purchase or redeem, any shares of the capital stock of any of them or 
agree to do any of the foregoing.

          3.3.5.    The Company shall use its best efforts to preserve intact 
the business organization of the Company and each of the Subsidiaries, to 
keep available the services of its and


                                     19


<PAGE>

their present officers and key employees, and to preserve the good will of 
those having business relationships with it and the Subsidiaries.

          3.3.6.    Except as provided in this Agreement, the Company shall 
not and shall not permit any of the Subsidiaries to adopt or amend any bonus, 
profit sharing, compensation, severance, termination, stock option, pension, 
retirement, deferred compensation, employment or other employee benefit plan, 
agreement, trust, plan, fund or other arrangement for the benefit or welfare 
of any director, officer or employee, or (except for normal increases in the 
ordinary course of business that are consistent with past practices and that, 
in the aggregate, do not result in a material increase in benefits or 
compensation expense to the Company) increase in any manner the compensation 
or fringe benefits of any director, officer or employee or pay any benefit 
not required by any existing plan and arrangement (including, without 
limitation, the granting of stock options or stock appreciation rights or the 
removal of existing restrictions in any benefit plans or agreements) or enter 
into any contract, agreement, commitment or arrangement to do any of the 
foregoing.

          3.3.7.    Except with respect to transactions between and among the 
Company and any of the Subsidiaries in the ordinary course of its business, 
the Company shall not and shall not permit any of the Subsidiaries to incur 
or assume any indebtedness for money borrowed (other than borrowings in the 
ordinary course of business under its currently existing revolving credit 
facility with TIAA and Foothill) or issue or sell any debt securities or 
guarantee (except for the guarantee by the Company of Subsidiary trade 
payables in the ordinary course of business consistent with past practice) 
any indebtedness or enter into any contract, agreement, commitment or 
arrangement to do any of the foregoing; PROVIDED, HOWEVER, that the Company 
shall comply with all terms of its term loan agreements with TIAA and 
Foothill, including, without limitation, making the scheduled amortizations 
of principal and payments of interest required to be made thereunder on and 
prior to the Effective Time and shall cause all borrowings and interest under 
its revolving  credit facility with Foothill to be repaid not later than the 
Effective Time; PROVIDED FURTHER, HOWEVER, that the Company's performance of 
such obligations with respect to the repayment of its term loans and 
revolving credit facility shall not relieve the Company and its Subsidiaries 
of their other obligations hereunder.  

          3.3.8.    The Company shall not and shall not permit any of the 
Subsidiaries to encumber, sell, lease or otherwise dispose of or acquire any 
assets other than in the ordinary course of business and, in any event, sell 
or compromise any accounts receivables (except for the compromise of accounts 
receivables in an amount not to exceed $50,000 in the aggregate), or enter 
into any merger or other agreement providing for the acquisition of the 
Company or any of the Subsidiaries by any third party or acquire (by merger, 
consolidation, or acquisition of stock or assets) any corporation, 
partnership or other business organization or division thereof or enter into 
any contract, agreement, commitment or arrangement to do any of the 
foregoing, in each case without the prior written consent of Parent; 
PROVIDED, HOWEVER, that none of the Company and its Subsidiaries shall 
acquire or agree or commit to acquire any capital asset (by purchase or 
lease) having a value greater than $50,000, except for the acquisition, 
committed prior to the date hereof, made by lease on terms acceptable to 
Parent of  (w) a tube bender from Eaton Leonard, at a purchase price not 
exceeding $165,000, (x) a SNK Five Axis Machinery Center, at a purchase


                                     20


<PAGE>


price not exceeding $320,000, (y) a Zygo beam expander, at a purchase price 
not exceeding $200,000 and (z) the overhaul of a machine used by L&S 
AeroTech, Inc. by H&H Wilson, at a purchase price not exceeding $57,000, 
which $57,000 item may be purchased if a lease is not available 
(collectively, the "Excluded Commitments"); PROVIDED FURTHER, HOWEVER, that 
none of the Company and its Subsidiaries shall acquire or agree or commit to 
acquire any capital asset (by purchase or lease) having a value of $50,000 or 
less if the value of all such acquisitions or agreements or commitments to 
make such acquisitions, together with all acquisitions of capital assets 
having a value greater than $50,000 and agreements and commitments to make 
such acquisitions (other than the Excluded Commitments), shall exceed 
$250,000.

     3.4. ACCESS AND INFORMATION.  The Company shall afford to Parent and its 
representatives such access during normal business hours throughout the 
period prior to the Effective Time to the Company's books, records (including 
without limitation, tax returns and work papers of the Company's independent 
auditors), plant, personnel, advisors and to such other information as Parent 
shall reasonably request.  The Confidentiality and Non-Disclosure Agreement, 
dated October 31, 1995, between the Company and Parent (the "Confidentiality 
Agreement") is hereby amended to delete Sections 2, 7 and 10 thereof.  All 
other terms and provisions of the Confidentiality Agreement remain in full 
force and effect in accordance with their terms.

     3.5. CERTAIN FILINGS; CONSENTS AND ARRANGEMENTS. Parent, the Purchaser 
and the Company shall (a) promptly make their respective filings, and shall 
thereafter use their best efforts to promptly make any required submissions 
with respect to the purchase of Shares under the Shareholders Agreement, the 
Merger and the transactions contemplated by this Agreement and (b) cooperate 
with one another (i) in promptly determining whether any filings are required 
to be made or consents, approvals, permits or authorizations are required to 
be obtained under any other federal, state or foreign law or regulation or 
any consents, approvals or waivers are required to be obtained from other 
parties to contracts material to the Company's business (including, without 
limitation, Significant Contracts) in connection with the consummation of the 
purchase of Shares under the Shareholders Agreement or the Merger and (ii) in 
promptly making any such filings, furnishing information required in 
connection therewith and seeking timely to obtain any such consents, permits, 
authorizations, approvals or waivers.

     3.6. STATE TAKEOVER STATUTES. The Company shall, upon the request of the 
Purchaser, take all reasonable steps to assist the Purchaser in complying 
with, in rendering inapplicable, or in making any challenge to the validity 
or applicability to the purchase of Shares under the Shareholders Agreement 
or the Merger of, any state takeover, business combination, control share 
acquisition or similar laws or regulations.

     3.7. PROXY STATEMENT.  The Company shall prepare the Proxy Statement, 
file it with the Commission, and mail it to all holders of Shares.  Parent, 
the Purchaser and the Company shall cooperate with each other in the 
preparation of the Proxy Statement.

     3.8. ADDITIONAL AGREEMENTS.  Subject to the terms and conditions herein 
provided, each of the parties hereto agrees to use all reasonable efforts to 
take promptly, or cause to be taken, all


                                     21


<PAGE>


actions and to do promptly, or cause to be done, all things necessary, proper 
or advisable under applicable laws and regulations to consummate and make 
effective the transactions contemplated by this Agreement, including using 
its best efforts to obtain all necessary waivers, consents and approvals and 
effecting all necessary registrations and filings, subject, however, to any 
required approval of the Merger by the shareholders of the Company. In case 
at any time after the Effective Time any further action is necessary or 
desirable to carry out the purposes of this Agreement, the proper officers 
and/or directors of Parent, the Purchaser and the Company shall take such 
necessary action.

     3.9. REPAYMENT OF TERM DEBT.  At the Effective Time, Parent shall cause 
to be repaid to TIAA and Foothill the aggregate remaining amount of principal 
then due by the Company under its term loan agreements with TIAA and 
Foothill, together with all accrued interest (without penalty or premium) 
then due thereon.  

                                4. CONDITIONS

     4.1  CONDITIONS TO THE OBLIGATIONS OF PARENT, PURCHASER AND THE COMPANY. 
The obligations of Parent, Purchaser and the Company to consummate the Merger 
are subject to the satisfaction, at or before the Effective Time, of each of 
the following conditions:

          4.1.1.    The shareholders of the Company shall have duly approved 
the Merger, if required by applicable law.

          4.1.2.    The acquisition by Purchaser of the Shares owned by 
Foothill and TIAA pursuant to the Shareholders Agreement and the consummation 
of the Merger shall not be prohibited by any order, decree or injunction of a 
court of competent jurisdiction (each party agreeing to use all reasonable 
efforts to have any such order reversed or injunction lifted), and there 
shall not have been any action taken or any statute, rule or regulation 
enacted, promulgated or deemed applicable to such transactions by any 
governmental entity that, in the written opinion of legal counsel to Parent 
or the Company, as the case may be, make consummation of such transactions 
illegal.

          4.1.3.    Any applicable waiting period under the Hart-Scott-Rodino 
Antitrust Act shall have expired or been terminated.

     4.2  CONDITIONS TO THE OBLIGATIONS OF PARENT AND PURCHASER.  The 
obligations of Parent and Purchaser to consummate the Merger are subject to 
the satisfaction, at or before the Effective Time, of each of the following 
additional conditions:

          4.2.1.    The representations and warranties of the Company set 
forth in this Agreement shall have been true and correct in all material 
respects when made and (unless made as of a specified date) shall be true and 
correct in all material respects as if made as of the Effective Time.


                                     22


<PAGE>


          4.2.2.    The Company shall have performed and complied in all 
material respects with all covenants and agreements required by this 
Agreement to be performed or complied with by them at or prior to the 
Effective Time.

          4.2.3.    Parent and Purchaser shall have received an opinion from 
Latham & Watkins, in the form previously agreed by the parties as set forth 
in Exhibit A hereto and such other opinions as Parent or Parent's financing 
sources may reasonably request, which may be given to Parent and Purchaser 
with reliance permitted by such financing sources.

          4.2.4.    Foothill and TIAA shall have tendered for purchase by 
Purchaser an aggregate of 749,788 Shares, constituting 95% of the Shares then 
outstanding, free and clear of all Encumbrances, pursuant to the Shareholders 
Agreement.  

          4.2.5.    Parent and Purchaser shall have received all financing 
necessary in connection with the purchase of Shares from Foothill and TIAA 
and the Merger.

          4.2.6.    There shall not have been instituted or pending any 
action or proceeding by any court or Governmental entity or tribunal, 
domestic or foreign, which is reasonably likely to (i) restrain or prohibit 
the consummation of the purchase of the Shares from Foothill and TIAA by 
Purchaser pursuant to the Shareholders Agreement or the Merger or any of the 
other transactions contemplated by this Agreement, or (ii) impose material 
limitations on the ability of Parent or Purchaser effectively to acquire or 
hold, or requiring Parent or Purchaser or any of its affiliates or 
subsidiaries to dispose of or hold separate, the Shares, or any material 
portion of the assets of the Company.

          4.2.7.    All required authorizations, orders, grants, consents, 
permissions, approvals and waivers of third parties or any governmental 
entity with jurisdiction over the transactions contemplated by this Agreement 
shall have been received and shall remain in effect (including, in all 
events, without limitation, Significant Contracts).

          4.2.8.    Parent shall be satisfied that all outstanding options 
under the Option Plan shall, at and after the Effective Time, represent only 
the right to receive the Option Consideration.  

          4.2.9.    Parent shall have received evidence satisfactory to it 
and its legal counsel that, at and after the Effective Time, (i) all 
obligations under the Principal Shareholders Agreements shall have been 
terminated without liability to the Company or any of its Subsidiaries and 
(ii) all encumbrances on the assets of the Company and its Subsidiaries 
created thereby shall have been released and discharged in full.

     4.3. CONDITIONS TO THE COMPANY.  The obligations of the Company to 
consummate the Merger are subject to the satisfaction, at or before the 
Effective Time, of each of the following additional conditions:

          4.3.1.    The representations and warranties of Parent and the 
Purchaser set forth in this Agreement shall have been true and correct in all 
material respects when made and (unless


                                     23


<PAGE>


made as of a specified date) shall be true and correct in all material 
respects as if made as of the Effective Time.

          4.3.2.    Parent and the Purchaser shall have performed and 
complied in all material respects with all covenants and agreements required 
by this Agreement to be performed or complied with by them at or prior to the 
Effective Time.

          4.3.3.    There shall not have been instituted or pending any 
action or proceeding by any court or Governmental entity or tribunal, 
domestic or foreign, which is reasonably likely to restrain or prohibit the 
consummation of the purchase of the Shares from Foothill and TIAA by 
Purchaser pursuant to the Shareholders Agreement or the Merger or any of the 
other transactions contemplated by this Agreement.

          4.3.4.    All required authorizations, orders, grants, consents, 
permissions, approvals and waivers of any governmental entity with 
jurisdiction over the transactions contemplated by this Agreement shall have 
been received and remain in effect.

                              5.  MISCELLANEOUS

     5.1. TERMINATION. This Agreement may be terminated and the Merger 
contemplated herein may be abandoned, whether prior to or after approval by 
the stockholders of the Company:

     (a) by the mutual consent of Parent and the Company;

     (b) by either Parent or the Company, if either (or any permitted 
assignee) is prohibited by an order or injunction (other than an order or 
injunction on a temporary or preliminary basis) of a court of competent 
jurisdiction from consummating the Merger and all means of appeal and all 
appeals from such order or injunction have been finally exhausted;

     (c) by either Parent or the Company if (i) any required approval by 
stockholders of the Company of the Merger is not obtained or (ii) the Merger 
shall not have been consummated, within 180 days after the date hereof;

     (d)  by (i) either Parent, on the one hand, or the Company, on the other 
hand, if the representations and warranties of the other contained herein 
shall not be true and correct in all material respects when made, or shall 
have thereafter ceased to be true and correct in all material respects as if 
made as of such later date (other than representations and warranties that 
speak as of a specific date), or the other shall not in all material respects 
have performed each obligation and agreement and complied with each covenant 
to be performed and complied with by it under this Agreement, or (ii) Parent 
if Foothill or TIAA shall have breached in any material respect any of their 
representations, warranties or agreements contained in the Shareholders 
Agreement with respect to the voting or disposition of their Shares.

     (e)  by Parent, if (i) the Board of Directors of the Company shall have 
withdrawn or modified, or resolved to withdraw or modify, in any manner 
adverse to Parent and Purchaser its


                                     24


<PAGE>


recommendation or approval of the Merger or this Agreement, or  (ii) the 
Company's Board of Directors shall have accepted, adopted, approved, or 
recommended acceptance, adoption or approval of any tender or exchange offer 
for any Shares or other agreement with a third party with respect to the 
acquisition or purchase of all or any substantial part of the assets of, or 
equity interest in, the Company or other similar transaction or business 
combination involving the Company or any of its Subsidiaries, or resolved to 
do any of the foregoing; 

     (f)  by Parent if any person, entity or "group" (as defined in the 
Exchange Act) shall have commenced a tender or exchange offer seeking to 
acquire a third or more of the then outstanding Shares or makes in writing or 
announces an acquisition proposal.

     In the event of such termination and abandonment, no party hereto (or 
any of its directors or officers) shall have any liability or further 
obligation to any other party to this Agreement except as provided in Section 
5.11 and except that nothing herein will relieve any party from liability for 
any breach of this Agreement.

     5.2  NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.  The 
representations, warranties and agreements in this Agreement shall terminate 
at the Effective Time or the termination of this Agreement pursuant to 
Section 5.1, as the case may be, except that the agreements set forth in this 
Section 5.2 and the last sentence of Section 3.8 shall survive the Effective 
Time indefinitely, and those set forth in Sections 5.2, 5.11 and Section 3.4 
shall survive termination indefinitely.

     5.3. WAIVER AND AMENDMENT. Any provision of this Agreement may be waived 
at any time by the party which is entitled to the benefits thereof and this 
Agreement may be amended or supplemented at any time before or after adoption 
of this Agreement by the stockholders of the Company but, after any such 
approval, no amendment shall be made which decreases the cash price per 
Share. No such waiver, amendment or supplement shall be effective unless in 
writing and signed by the party or parties sought to be bound thereby.

     5.4. ENTIRE AGREEMENT. This Agreement contains the entire agreement 
among Parent, the Purchaser and the Company with respect to the Merger and 
the other transactions contemplated hereby, and such agreements supersede all 
prior agreements among the parties with respect to such matters, including 
the Letter of Intent, dated December 15, 1995, between the Company and Parent.

     5.5. APPLICABLE LAW. This Agreement shall be governed by and construed 
in accordance with the laws of the State of Delaware applicable to contracts 
made and to be performed in that State.

     5.6. INTERPRETATION. For purposes of this Agreement, a "Subsidiary" of a 
corporation means any corporation more than 50% of whose outstanding voting 
securities are directly or indirectly owned by such other corporation. The 
descriptive headings contained herein are for convenience and reference only 
and shall not affect in any way the meaning or interpretation of this 
Agreement.


                                     25


<PAGE>


     5.7. NOTICES.  Each party shall promptly give written notice to the 
other party upon becoming aware of the occurrence or, to its knowledge, 
impending or threatened occurrence, of any event which would cause or 
constitute a breach of any of its representations, warranties or covenants 
contained or referenced to in this Agreement and will use its best efforts to 
prevent or promptly remedy the same. All notices or other communications 
hereunder shall be in writing and shall be given (and shall be deemed to have 
been duly given only upon receipt) by delivery in person, by facsimile, or by 
registered or certified mail, postage prepaid, return receipt requested 
addressed as follows:

     If to the Company:

          Precision Aerotech, Inc.
          7777 Fay Avenue, Suite 200
          La Jolla, CA  92037
          Attention:  Richard W. Detweiler

     With a copy to:

          Latham & Watkins
          701 B Street, Suite 2100
          San Diego, CA  92101-8197
          Attention:  Thomas Edwards

     If to Parent or the Purchaser:

          Vernitron Corporation
          645 Madison Avenue
          New York, NY  10022
          Attention:  Stephen W. Bershad

     With a copy to:

          Vernitron Corporation
          645 Madison Avenue
          New York, NY  10022
          Attention:  Elliot N. Konopko

or to such other address as any party may have furnished to the other parties 
in writing in accordance herewith.

     5.8. COUNTERPARTS. This Agreement may be executed in any number of 
counterparts, each of which shall be deemed to be an original but all of 
which together shall constitute but one agreement.


                                     26


<PAGE>


     5.9. SEVERABILITY. Any term or provision of this Agreement which is 
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, 
be ineffective to the extent of such invalidity or unenforceability without 
rendering invalid or unenforceable the remaining terms and provisions of this 
Agreement or affecting the validity or enforceability of any of the terms or 
provisions of this Agreement in any other jurisdiction. If any provision of 
this Agreement is so broad as to be unenforceable, such provision shall be 
interpreted to be only so broad as is enforceable.

     5.10. PARTIES IN INTEREST; ASSIGNMENT. This Agreement is binding upon 
and is solely for the benefit of the parties hereto and their respective 
successors, legal representatives and assigns. The Purchaser shall have the 
right (a) to assign to Parent or any direct or indirect wholly owned 
subsidiary of Parent any and all rights and obligations of the Purchaser 
under this Agreement, including, without limitation, the right to substitute 
in its place another subsidiary as one of the constituent corporations in the 
Merger (such subsidiary assuming all of the obligations of the Purchaser in 
connection with the Merger) and may require subsidiaries of the Company to 
merge with or sell all or part of their assets to subsidiaries of the 
Purchaser (or its assignees) in connection with the Merger, (b) to transfer 
to Parent or to any direct or indirect wholly owned subsidiary of Parent the 
right to purchase Shares from TIAA and Foothill and (c) to restructure the 
transaction to provide for the merger of the Company with and into the 
Purchaser or such other entity as provided above. If the Purchaser exercises 
its right to so restructure the transaction, the Company shall promptly enter 
into appropriate agreements to reflect such restructuring.

     5.11. EXPENSES AND TERMINATION FEE.

          5.11.1.   Except as otherwise set forth in this Section 5.11, 
whether or not the Merger is consummated, all costs and expenses incurred in 
connection with this Agreement and the transactions contemplated hereby shall 
be paid by the party incurring such expenses.

          5.11.2.   As a condition and inducement to Parent's and Purchaser's 
willingness to enter into this Agreement, in the event that (i) a fee is 
payable to Parent pursuant to Section 5.11.3 hereof, or (ii) this Agreement 
is terminated by Parent pursuant to Section 5.1(c)(i), 5.1(d), 5.1(e) or 
5.1(f) hereof, provided that neither Parent nor Purchaser is then in material 
breach of any of its representations and warranties or obligations hereunder, 
the Company shall reimburse the Purchaser and Parent (not later than five 
business days after submission of statements therefor) for all their 
out-of-pocket expenses and fees (including, without limitation, legal, 
investment banking, printing and depositary fees, commitment and other fees 
and expenses of lenders and potential lenders, and related fees and expenses) 
incurred by it or on its behalf in connection with the preparation, 
negotiation, execution and performance of this Agreement, including the 
Letter of Intent.

          5.11.3.   As a condition and inducement to Parent's and Purchaser's 
willingness to enter into this Agreement, in the event this Agreement is 
terminated by Parent (i) pursuant to Section 5.1(e) or 5.1(f) hereof and a 
Sale Transaction shall have occurred within one year following termination or 
(ii) pursuant to Section 5.1(d)(i) as a result of a material breach by the

                                     27


<PAGE>


Company of any of its agreements contained in Sections 3.1, 3.3.2, 3.3.3, 
3.3.4 or 3.3.7 or (iii) pursuant to Section 5.1(d)(ii) as a result of a 
material breach by Foothill or TIAA of any of their agreements contained in 
the Shareholders Agreement with respect to the voting or disposition of their 
Shares, provided that neither Parent nor the Purchaser is then in material 
breach of any of its obligations hereunder, the Company shall pay Parent (not 
later than five business days after the date of such termination) a fee of 
$800,000.

          5.11.4  If the Company shall fail to make payment when due of all 
or part of the amounts required to be paid pursuant to Sections 5.11.2 and/or 
5.11.3 hereof  (collectively, the "Expense Payments"), the Company shall also 
pay to Parent all costs and expenses (including reasonable attorneys' fees) 
incurred by Parent in connection with the collection thereof, plus interest 
on the unpaid amount of the Expense Payments and costs of collection at the 
rate of 12% per annum to the time of payment.

     5.12. PUBLICITY. So long as this Agreement is in effect, Parent, the 
Purchaser and the Company agree to consult with each other in issuing any 
press release or otherwise making any public statement with respect to the 
transactions contemplated hereby, and none of them shall issue any such press 
release or make any such public statement prior to such consultation, except 
as may be required by law or by obligations pursuant to any listing agreement 
with the NASDAQ Small Cap Market.  No party shall file or distribute this 
Agreement or any document delivered in connection herewith without the prior 
consent of the other parties hereto, except as required by law.

     5.13. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable 
damage would occur in the event that any of the provisions of this Agreement 
were not performed in accordance with their specific terms or were otherwise 
breached. It is accordingly agreed that the parties shall be entitled to an 
injunction or injunctions to prevent breaches of this Agreement and to 
enforce specifically the terms and provisions hereof in any court of the 
United States or any state having jurisdiction, this being in addition to any 
other remedy to which they are entitled at law or in equity.

     5.14. EMPLOYMENT AGREEMENTS.  Prior to the Effective Time, the Company 
shall not amend, without the consent of Parent, the Bonus and Severance 
Payment Agreement or Employment Agreement, dated the date hereof, between the 
Company and Richard Detweiler.


                                     28


<PAGE>


     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement.


     PRECISION AEROTECH, INC.                     VERNITRON CORPORATION


     By: /s/ Richard W. Detweiler                 By: /s/ Elliot N. Konopko
         ------------------------                     ---------------------
         President                                    Vice President



                                                  PA ACQUISITION CORPORATION


                                                  By: /s/ Elliot N. Konopko
                                                      ---------------------
                                                      Vice President





                                     29
