UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    Form 10-Q
                Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934


For Quarter Ended    September 30, 2000
                     ------------------

Commission File Number    0-10436
                          -------

                              L. B. Foster Company
                              --------------------
             (Exact name of Registrant as specified in its charter)

               Pennsylvania                    25-13247733
               ------------                    -----------
          (State of Incorporation) (I.R.S. Employer Identification No.)


                415 Holiday Drive, Pittsburgh, Pennsylvania 15220
                ------------------------------------------- -----
               (Address of principal executive offices) (Zip Code)

                                 (412) 928-3417
                                 --------------
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for shorter  period that the registrant was required
to file such reports),  and (2) has been subject to such filing requirements for
the past 90 days.

                       Yes  X              No

Indicate  the  number of shares of each of the  registrant's  classes  of common
stock as of the latest practicable date.

    Class                                 Outstanding at November 7, 2000
                                          -------------------------------
 Common Stock, Par Value $.01                   9,503,112 Shares

L.B. FOSTER COMPANY AND SUBSIDIARIES INDEX ----- PART I. Financial Information Page - ------------------------------ Item 1. Financial Statements: Condensed Consolidated Balance Sheets 2 Condensed Consolidated Statements of Income 3 Condensed Consolidated Statements of Cash Flows 4 Notes to Condensed Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 PART II. Other Information - --------------------------- Item 1. Legal Proceedings 18 Item 6. Exhibits and Reports on Form 8-K 18 Signature 20

PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS L.B. FOSTER COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands) September 30, December 31, 2000 1999 ---- ---- ASSETS (Unaudited) Current Assets: Cash and cash equivalents $ 1,292 $ 1,558 Accounts and notes receivable: Trade 65,219 52,110 Other 2,257 1,002 ------- ------- 67,476 53,112 Inventories 58,463 45,601 Current deferred tax assets 1,925 1,925 Other current assets 836 981 Property held for resale 1,333 2,856 ------- ------- Total Current Assets 131,325 106,033 ------- ------- Property, Plant & Equipment - At Cost 55,693 51,747 Less Accumulated Depreciation (24,505) (21,621) ------- ------- 31,188 30,126 ------- ------- Property Held for Resale 4,148 4,203 ------- ------- Other Assets: Goodwill and other intangibles - net 6,955 7,474 Investments 9,220 8,610 Deferred tax assets 1,720 1,720 Other assets 3,932 6,565 ------- ------- Total Other Assets 21,827 24,369 ------- ------- TOTAL ASSETS $ 188,488 $ 164,731 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current maturities of long-term debt $ 989 $ 1,141 Short-term borrowings 9,915 5,000 Accounts payable - trade 40,175 24,446 Accrued payroll and employee benefits 3,834 3,619 Current deferred tax liabilities 1,857 1,857 Other accrued liabilities 2,897 2,233 ------- ------- Total Current Liabilities 59,667 38,296 ------- ------- Long-Term Borrowings 40,000 40,000 ------- ------- Other Long-Term Debt 3,700 4,136 ------- ------- Deferred Tax Liabilities 6,293 6,293 ------- ------- Other Long-Term Liabilities 1,776 1,356 ------- ------- STOCKHOLDERS' EQUITY: Common stock 102 102 Paid-in capital 35,306 35,377 Retained earnings 45,536 42,505 Treasury stock (3,904) (3,364) Accumulated other comprehensive income 12 30 ------- ------- Total Stockholders' Equity 77,052 74,650 ------- ------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 188,488 $ 164,731 ========= ========= See Notes to Condensed Consolidated Financial Statements.

L. B. FOSTER COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In Thousands, Except Per Share Amounts) Three Months Nine Months Ended Ended September 30, September 30, --------------------------------------- 2000 1999 2000 1999 --------------------------------------- (Unaudited) (Unaudited) Net Sales $74,428 $63,025 $205,609 $175,551 Cost of Goods Sold 64,269 53,063 176,899 149,485 ------ ------ ------- ------- Gross Profit 10,159 9,962 28,710 26,066 Selling and Administrative Expenses 7,993 7,332 23,351 19,779 Interest Expense 1,195 1,237 3,130 2,160 Other Income (1,331) (233) (2,205) (893) ------ ------ ------- ------- 7,857 8,336 24,276 21,046 ------ ------ ------- ------- Income from Continuing Operations, Before Income Taxes 2,302 1,626 4,434 5,020 Income Tax Expense 920 600 1,774 1,803 ------ ------ ------- ------- Income from Continuing Operations 1,382 1,026 2,660 3,217 Income/(Loss) from Discontinued Operations, Net of Taxes 736 (174) 371 (667) ------ ------ ------- ------- Net Income $ 2,118 $ 852 $ 3,031 $ 2,550 ======= ======= ======= ======== Basic Earnings Per Common Share From: Continuing Operations $ 0.15 $ 0.11 $ 0.28 $ 0.33 Discontinued Operations 0.08 (0.02) 0.04 (0.07) ------ ------ ------- ------- Basic Earnings Per Common Share $ 0.23 $ 0.09 $ 0.32 $ 0.26 ======= ======= ======= ======== Diluted Earnings Per Common Share From: Continuing Operations $ 0.15 $ 0.11 $ 0.28 $ 0.33 Discontinued Operations 0.08 (0.02) 0.04 (0.07) ------ ------ ------- ------- Diluted Earnings Per Common Share $ 0.23 $ 0.09 $ 0.32 $ 0.26 ======= ======= ======= ======== See Notes to Condensed Consolidated Financial Statements.

L.B. Foster Company and Subsidiaries Condensed Consolidated Statements of Cash Flows (In Thousands) Nine Months Ended September 30, 2000 1999 ----------------------- CASH FLOWS FROM OPERATING ACTIVITIES: (Unaudited) Income from continuing operations $ 2,660 $ 3,217 Adjustments to reconcile net income to net cash provided (used) by continuing operations: Depreciation and amortization 3,828 2,730 (Gain) Loss on sale of property, plant and equipment (766) 72 Change in operating assets and liabilities: Accounts receivable (14,364) 2,364 Inventories (12,862) (8,649) Property held for resale (57) (18) Other current assets 145 (1,008) Other non-current assets 2,004 1,133 Accounts payable - trade 15,729 1,988 Accrued payroll and employee benefits 215 (1,388) Other current liabilities 81 (785) Other liabilities 420 239 -------- ------- Net Cash Used by Continuing Operations (2,967) (105) Net Cash Provided (Used) by Discontinued Operations 954 (777) -------- ------- Net Cash Used by Operating Activities (2,013) (882) -------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of property, plant and equipment 1,690 206 Capital expenditures on property, plant and equipment (3,423) (3,727) Purchase of DM&E stock (6,000) Acquisition of business (17,389) -------- ------- Net Cash Used by Investing Activities (1,733) (26,910) -------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of revolving credit agreement borrowings 4,915 30,000 Exercise of stock options and stock awards 185 329 Treasury share acquisitions (796) (1,702) Repayments of long-term debt (813) (749) -------- ------- Net Cash Provided by Financing Activities 3,491 27,878 -------- ------- Effect of exchange rate on cash (11) 13 -------- ------- Net (Decrease) Increase in Cash and Cash Equivalents (266) 99 Cash and Cash Equivalents at Beginning of Period 1,558 874 -------- ------- Cash and Cash Equivalents at End of Period $ 1,292 $ 973 ======== ======= Supplemental Disclosures of Cash Flow Information: Interest Paid $ 3,097 $ 1,274 ======== ======= Income Taxes Paid $ 1,797 $ 2,261 ======== ======= During 2000 and 1999, the Company financed certain capital expenditures totaling $225,000 and $1,056,000, respectively, through the issuance of capital leases. See Notes to Condensed Consolidated Financial Statements.

L. B. FOSTER COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. FINANCIAL STATEMENTS -------------------- The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all estimates and adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included, however, actual results could differ from those estimates. The results of operations for these interim periods are not necessarily indicative of the results that may be expected for the year ended December 31, 2000. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1999. 2. ACCOUNTING PRINCIPLES --------------------- In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial Statements." SAB 101 outlines the basic criteria that must be met to recognize revenue and provides guidelines for disclosure related to revenue recognition policies. As required, the Company will implement SAB 101 in the fourth quarter of 2000 and does not expect it to have a material effect on its consolidated financial statements. In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative financial instruments and hedging activities. In June 1999, FASB Statement No. 137, "Accounting for Derivative Instruments and Hedging Activities: Deferral of Effective Date of the FASB Statement No. 133," was issued. This statement delays the effective date to all fiscal quarters of all fiscal years beginning after June 15, 2000. This statement will be adopted by the Company in 2001 and is not expected to have a material effect on the consolidated financial statements. 3. ACCOUNTS RECEIVABLE ------------------- Credit is extended on an evaluation of the customer's financial condition and, generally, collateral is not required. Credit terms are consistent with industry standards and practices. Trade accounts receivable at September 30, 2000 and December 31, 1999 have been reduced by an allowance for doubtful accounts of $(1,609,000) and $(1,555,000), respectively. Bad debt expense was $58,000 and $100,000 for the nine month periods ended September 30, 2000 and 1999, respectively.

4. INVENTORIES ----------- Inventories of the Company at September 30, 2000 and December 31, 1999 are summarized as follows in thousands: September 30, December 31, 2000 1999 - ------------------------------------------------------------------------ Finished goods $ 51,755 $ 28,755 Work-in-process 3,427 13,000 Raw materials 5,808 6,298 - ------------------------------------------------------------------------ Total inventories at current costs: 60,990 48,053 (Less): Current costs over LIFO stated values (1,927) (1,852) Reserve for the decline in market value of inventories (600) (600) - ------------------------------------------------------------------------ $ 58,463 $ 45,601 - ------------------------------------------------------------------------ - ------------------------------------------------------------------------ Inventories of the Company are generally valued at the lower of last-in, first-out (LIFO) cost or market. Other inventories of the Company are valued at average cost or market, whichever is lower. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations must necessarily be based on management's estimates of expected year-end levels and costs. 5. PROPERTY HELD FOR RESALE ------------------------ September 30, December 31, (in thousands) 2000 1999 - ------------------------------------------------------------------------------- Location: - ------------------------------------------------------------------------------- Norcross, GA $3,059 $3,055 Coated pipe assets formerly located in Newport, KY 1,333 1,345 Pomeroy, OH 646 665 St. Marys, WV 443 483 Houston, TX 1,511 - ------------------------------------------------------------------------------- Property held for resale $5,481 $7,059 Less current portion 1,333 2,856 - ------------------------------------------------------------------------------- $4,148 $4,203 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- The Norcross, GA location consists of buildings and approximately 28 acres of land, which are being underutilized by the Company's business. The former Newport, KY facility consisting of machinery and equipment was included in the Company's coated pipe division of the tubular products segment.

Due to unfavorable market conditions, management suspended operations in September 1998 and intends to dispose of the assets. The Newport machinery and equipment was dismantled in 2000 and the assets were moved to an off-site storage location in Birmingham, AL. An impairment loss of $183,000 was recorded in 1999 in anticipation of the disposal cost. The Pomeroy, OH and St. Marys, WV locations , consisting of machinery and equipment, buildings, land and land improvements which comprise the Company's Mining division of the rail products segment, were determined not to meet the Company's long-range strategic goals. The Company continues to explore the divestiture of these assets. In March 2000, the Company sold an undeveloped 62-acre portion of a 127-acre Houston, TX property for approximately $2,000,000 with an approximate gain of $800,000. 6. DISCONTINUED OPERATIONS ----------------------- In September 2000, the Company sold the assets of the Monitor Group for $1.5 million cash. Additional revenues may be derived from an earnout agreement that is based upon the buyer's future sales. The nine months ended September 30, 2000 includes net income from discontinued operations of approximately $371,000 which consists of a $900,000 gain (net of tax) on the sale and an operating loss of approximately $529,000 (net of tax). In the fourth quarter of 1999, the Company classified the operations of the Monitor Group, a developer of portable mass spectrometers, as a discontinued operation, pending its sale. 7. BORROWINGS ---------- In accordance with the original terms and conditions of the Company's revolving credit agreement, the line of credit was reduced from $70.0 million to $64.0 million in September of 2000 due to asset sales. The interest rate is, at the Company's option, based on the prime rate, the domestic certificate of deposit rate (CD rate) or the Euro-bank rate (LIBOR). The interest rates are established quarterly based upon cash flow and the level of outstanding borrowings to debt as defined in the agreement. Interest rates range from prime to prime plus 0.25%, the CD rate plus 0.575% to 1.8%, the LIBOR rate plus .575% to 1.8%. Borrowings under the agreement, which expires July 1, 2003, are secured by eligible accounts receivable, inventory, and the pledge of the Company-held DM&E Preferred stock. The agreement includes financial covenants requiring a minimum net worth, a minimum level for the fixed charge coverage ratio, and a maximum level for the consolidated total indebtedness to EBITDA ratio. The agreement also restricts investments, indebtedness, and the sale of certain assets.

8. EARNINGS PER COMMON SHARE ------------------------- The following table sets forth the computation of basic and diluted earnings per common share: Three Months Ended Nine Months Ended September 30, September 30, (in thousands, except earnings per share) 2000 1999 2000 1999 - -------------------------------------------------------------------------------- Numerator: Numerator for basic and diluted earnings per common share - net income available to common stockholders: Income from continuing operations $1,382 $1,026 $2,660 $3,217 Income (loss) from dis- continued operations 736 (174) 371 (667) ------- ------- ------- ------- Net Income $2,118 $852 $3,031 $2,550 ======= ======= ======= ======= Denominator: Weighted average shares 9,456 9,581 9,502 9,692 ------- ------- ------- ------- Denominator for basic earnings per common share 9,456 9,581 9,502 9,692 Effect of dilutive securities: Contingent issuable shares pursuant to the Company's Incentive Compensation Plans 49 53 56 45 Employee stock options 6 272 27 252 ------- ------- ------- ------- Dilutive potential common shares 55 325 83 297 Denominator for diluted earnings per common share - adjusted weighted average shares and assumed conversions 9,511 9,906 9,585 9,989 ======= ======= ======= ======= Basic earnings per common share: Continuing operations $0.15 $0.11 $0.28 $0.33 Discontinued operations 0.08 (0.02) 0.04 (0.07) ------- ------- ------- ------- Basic earnings per common share $0.23 $0.09 $0.32 $0.26 ======= ======= ======= ======= Diluted earnings per common share: Continuing operations $0.15 $0.11 $0.28 $0.33 Discontinued operations 0.08 (0.02) 0.04 (0.07) ------- ------- ------- ------- Diluted earnings per common share $0.23 $0.09 $0.32 $0.26 ======= ======= ======= =======

9. COMMITMENTS AND CONTINGENT LIABILITIES -------------------------------------- The Company is subject to laws and regulations relating to the protection of the environment and the Company's efforts to comply with environmental regulations may have an adverse effect on the Company's future earnings. In the opinion of management, compliance with the present environmental protection laws will not have a material adverse effect on the financial condition, competitive position, or capital expenditures of the Company. The Company is subject to legal proceedings and claims which arise in the ordinary course of its business. In the opinion of management, the amounts of ultimate liability with respect to these actions will not materially effect the financial position of the Company. At September 30, 2000, the Company had outstanding letters of credit of approximately $3,987,000. 10. BUSINESS SEGMENTS ----------------- The Company is organized and evaluated by product group, which is the basis for identifying reportable segments. The Company is engaged in the manufacture, fabrication and distribution of rail, construction and tubular products. The Company's portable mass spectrometer segment, the Monitor Group, was classified as a discontinued operation on December 31, 1999. Prior period results have been adjusted to reflect this classification. Additionally, the prior period presentation has been restated to reflect the January 1, 2000 change in reporting segment of the buildings division from rail to construction. The following tables illustrate revenues and profits/(losses) of the Company by segment: Three Months Ended Nine Months Ended September 30, 2000 September 30, 2000 Net Segment Net Segment (in thousands) Sales Profit/(Loss) Sales Profit/(Loss) - -------------------------------------------------------------------------------- Rail products $38,862 $415 $107,420 ($283) Construction products 30,148 1,322 83,096 3,684 Tubular products 5,381 527 14,915 1,249 - -------------------------------------------------------------------------------- Total $74,391 $2,264 $205,431 $4,650 ================================================================================ Three Months Ended Nine Months Ended September 30, 1999 September 30, 1999 Net Segment Net Segment (in thousands) Sales Profit/(Loss) Sales Profit/(Loss) - -------------------------------------------------------------------------------- Rail products $36,121 $933 $102,606 $2,088 Construction products 20,819 604 51,711 1,560 Tubular products 5,988 503 20,976 1,822 - -------------------------------------------------------------------------------- Total $62,928 $2,040 $175,293 $5,470 ================================================================================ Segment profits, as shown above, include internal cost of capital charges for assets used in the segment at a rate of, generally, 1% per month. The following table provides a reconciliation of reportable net profit/(loss) to the Company's consolidated total:

Three Months Ended Nine Months Ended September 30, September 30, (in thousands) 2000 1999 2000 1999 - -------------------------------------------------------------------------------- Net Profit/(Loss) - -------------------------------------------------------------------------------- Total for reportable segments $2,264 $2,040 $4,650 $5,470 Cost of capital for reportable segments 3,156 3,002 9,054 7,927 Interest expense (1,195) (1,237) (3,130) (2,160) Other income 1,331 233 2,205 893 Corporate expense and other unallocated charges (3,254) (2,412) (8,345) (7,110) - -------------------------------------------------------------------------------- Income from continuing operations, before income taxes $2,302 $1,626 $4,434 $5,020 ================================================================================ There has been no change in the measurement of segment profit/(loss) from December 31, 1999. There has been a significant increase in the construction segment's inventory and accounts receivable from December 31, 1999 due to the availability of flat web sheet piling and "H" bearing pile. 11. ACQUISITIONS ------------ In August of 2000, the Company contributed a note, having principal and interest of approximately $2.7 million, to a limited liability company created by the Company and its trackwork supplier in exchange for a 30% ownership position. This resulted in acquired goodwill of $1.7 million, which is being amortized on a straight-line basis over fifteen years. On June 30 1999, the Company acquired all of the outstanding stock of CXT Incorporated (CXT), a Spokane, WA based manufacturer of engineered prestressed and precast concrete products primarily used in the railroad and transit industries. The purchase price of $17,514,000 has been allocated based on fair values of the assets acquired and liabilities assumed. This allocation has resulted in acquired goodwill of approximately $4,221,000, which is being amortized on a straight-line basis over twenty years. The acquisition was reported using the purchase method of accounting and has been included in operations since the date of acquisition. The purchase price was allocated to the assets and liabilities based on estimated fair values as of the acquisition date. Had the acquisition been made at the beginning of 1999, the Company's pro forma unaudited results would have been: Nine Months Ended (Dollars in thousands, except per share data) September 30, 1999 - -------------------------------------------------------------------------- Net sales $195,264 Income from continuing operations 2,755 Basic earnings per common share from continuing operations $0.28 The unaudited pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which would have actually resulted had the acquisition been in effect on January 1, 1999, or of future results of operations.

12. SPECIAL CHARGES --------------- The Company has formulated plans to consolidate or downsize sales and administrative functions and several plant operations as part of its overall plan to increase asset utilization and streamline administrative functions. Special charges of $1,226,000 pretax or $0.08 per share after tax were included in the year to date results. The Company expects to record additional nonrecurring pretax charges of approximately $400,000 related to these programs by its fiscal 2001 year-end. The costs accrued for the implemented programs were based upon management estimates using the latest information available at the time the accrual was established.

Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months Ended Nine Months Ended September 30, September 30, ===================== ======================= 2000 1999 2000 1999 ===================== ======================= (Dollars in thousands) Net Sales: Rail Products $38,862 $36,121 $107,420 $102,606 Construction Products 30,148 20,819 83,096 51,711 Tubular Products 5,381 5,988 14,915 20,976 Other 37 97 178 258 ---------------------- ------------------------- Total Net Sales $74,428 $63,025 $205,609 $175,551 ====================== ========================= Gross Profit: Rail Products $4,534 $5,620 $13,133 $13,791 Construction Products 4,856 3,550 13,717 9,494 Tubular Products 990 969 2,623 3,420 Other (221) (177) (763) (639) ----------------------- ------------------------ Total Gross Profit 10,159 9,962 28,710 26,066 ----------------------- ------------------------ Expenses: Selling and admin- istrative expenses 7,993 7,332 23,351 19,779 Interest expense 1,195 1,237 3,130 2,160 Other income (1,331) (233) (2,205) (893) ----------------------- ------------------------ Total Expenses 7,857 8,336 24,276 21,046 ----------------------- ------------------------ Income From Cont- inuing Operations Before Income Taxes 2,302 1,626 4,434 5,020 Income Tax Expense 920 600 1,774 1,803 ----------------------- ------------------------ Income From Cont- inuing Operations 1,382 1,026 2,660 3,217 Income/(Loss) From Discontinued Op- erations, Net Of Taxes 736 (174) 371 (667) ---------------------- ------------------------- Net Income $2,118 $852 $3,031 $2,550 ====================== ========================= Gross Profit %: Rail Products 11.7% 15.6% 12.2% 13.4% Construction Products 16.1% 17.1% 16.5% 18.4% Tubular Products 18.4% 16.2% 17.6% 16.3% Total Gross Profit 13.6% 15.8% 14.0% 14.8% ====================== ========================= Note: As of January 1, 2000, the Company elected to change the reporting segment of its buildings division from rail to construction. The 1999 results have been restated to conform to the current presentation.

Third Quarter 2000 Results of Operations - ---------------------------------------- Income from continuing operations for the third quarter of 2000 was $1.4 million or $0.15 per share on net sales of $74.4 million. This compares to a 1999 third quarter income from continuing operations of $1.0 million or $0.11 per share on net sales of $63.0 million. Net operating losses from the Monitor Group, classified as a discontinued operation on December 31, 1999, were $0.3 million in the third quarters of 2000 and 1999. Rail products' 2000 third quarter net sales were $38.9 million or an increase of 7.6% over the same period last year. Construction products' net sales increased 44.8% from the year earlier quarter as shipments of "H" bearing pile and flat web sheet piling, and sales from the Company's Geotechnical division increased. Tubular products' sales decreased 10.1% from the same quarter of 1999 due to the lack of pipe coating projects at the Birmingham, AL facility. Changes in net sales are primarily the result of changes in volume rather than changes in prices. The gross margin percentage for the total Company was 13.6% in the third quarter of 2000 and 15.8% in the 1999 third quarter. Rail products' gross margin percentage declined to 11.7% in the third quarter of 2000 from 15.6% in the year earlier quarter. These results reflect the continuing downturn in the rail supply industry resulting from reduced capital spending by the Class I railroads. The gross margin percentage for construction products declined 1.0% from the year earlier quarter primarily due to the mix of piling products sold and lower margins on certain sign structure projects. Tubular products' gross margin percentage in the third quarter of 2000 increased 2.2% from the same period last year, primarily due to higher profit margins on threaded products. Selling and administrative expenses increased 9% over the prior year period due to profit sharing accruals and the special charges discussed later. Other income for the third quarter of 2000 includes $700,000 from the sale of Houston, TX property and $350,000 income on the collection of certain notes receivable. The provision for income taxes was recorded at 40% in the third quarter of 2000. The third quarter of 1999 provision was recorded at 37% due to the implementation of certain tax planning strategies. First Nine Months of 2000 Results of Operations - ----------------------------------------------- Income from continuing operations for the fist nine months of 2000 was $2.7 million or $0.28 per share on net sales of $205.6 million. This compares to net income from continuing operations of $3.2 million or $0.33 per share on net sales of $175.6 million for the first nine months of 1999. Net operating losses from the Monitor Group, classified as a discontinued operation on December 31, 1999, were $0.9 million and $1.1 million in the first nine months of 2000 and 1999, respectively. Rail products' net sales in the first nine months of 2000 were $107.4 million, an increase of 4.7% over the same period last year. Sales volume increased due to the inclusion of nine months of CXT shipments in 2000 versus three months in 1999. The CXT shipments more than offset the decline in rail shipments which was the result of increased industry competition due to spending cutbacks by the major railroads. Construction products' year to date net sales increased 60.7% over the same period last year as shipments of "H" bearing pile and flat web sheet piling increased. The inclusion of nine months of CXT's building revenues in 2000 versus three months revenues in 1999, along with increased sales from the Company's Geotechnical division, also contributed to the increase in construction products' sales. Net sales of tubular products declined 28.9% in the first nine months of 2000 compared to the same period in 1999. This was the result of the depletion of the Newport, KY inventory in 1999 and a downturn in the pipe coating market.

The gross margin percentage for the Company in the first nine months of 2000 and 1999 was 14.0% and 14.8%, respectively. Rail products' gross margin percentage declined 1.2% due to the continuing downturn in the rail supply industry resulting from reduced capital spending from the Class I railroads. During the first nine months of 2000, the gross margin percentage for construction products declined 1.9% primarily due to the mix of piling products sold and lower margins on sign structure projects. Tubular products' gross margin percentage improved 1.3% due to more efficient operations at the Langfied, TX threading facility which partially offset weakness in pipe coating activity. Selling and administrative expenses have increased 18% over the same period last year due to the inclusion of expenses associated with CXT operations and the special charges discussed below. Interest expense increased over the year earlier quarter due to an increase in outstanding borrowings associated with the acquisition of CXT. Other income in 2000 includes $800,000 from the sale of Houston, TX property and $400,000 income on the collection of certain notes receivable. The provision for income taxes was recorded at 40% in 2000 compared to 35.8% in the first nine months of 1999. The 1999 provision reflected the implementation of certain tax planning strategies. Special Charges - --------------- The Company has formulated plans to consolidate or downsize sales and administrative functions and several plant operations as part of its overall plan to increase asset utilization and streamline administrative functions. Special charges of $115,000 pretax were included in the third quarter's results. Year to date, special charges of $1.2 million pretax or $0.08 per share after tax have been recorded. The Company expects to record additional nonrecurring pretax charges of approximately $400,000 related to these programs by its fiscal 2001 year-end. The costs accrued for the implemented programs were based upon management estimates using the latest information available at the time the accrual was established. Liquidity and Capital Resources - ------------------------------- The Company generates internal cash flow from the sale of inventory and the collection of accounts receivable. During the first nine months of 2000, the average turnover rate for accounts receivable remained relatively the same as in the same period last year. The average inventory turnover rate for the first nine months of 2000 was lower than the same period in 1999, particularly in new rail products and fabricated sign structures. Working capital at September 30, 2000 was $71.7 million compared to $67.7 million at December 31, 1999. During the first quarter of 1999, the Company announced a program to purchase up to 1,000,000 shares of its common stock. As of September 30, 2000, 408,398 shares had been purchased under this program at a cost of $2.1 million. No shares were purchased in the third quarter of 2000. The Company had capital expenditures of approximately $3.4 million in the first nine months of 2000. Capital expenditures in 2000, excluding acquisitions, are expected to be approximately $4.8 million and are anticipated to be funded by cash flow from operations or available external sources. Total revolving credit agreement borrowings at September 30, 2000 and December 31, 1999 were $49.9 million and $45.0 million, respectively. At September 30, 2000 the Company had $10.1 million in unused borrowing commitment. Outstanding letters of credit at September 30, 2000 were $4.0 million. Management believes its internal and external sources of funds are adequate to meet anticipated needs.

In accordance with the original terms and conditions of the Company's revolving credit agreement, the line of credit was reduced from $70.0 million to $64.0 million in September of 2000 due to asset sales. The interest rate is, at the Company's option, based on the prime rate, the domestic certificate of deposit rate (CD rate) or the Euro-bank rate (LIBOR). The interest rates are established quarterly based upon cash flow and the level of outstanding borrowings to debt as defined in the agreement. Interest rates range from prime to prime plus 0.25%, the CD rate plus 0.575% to 1.8%, the LIBOR rate plus .575% to 1.8%. Borrowings under the agreement, which expires July 1, 2003, are secured by eligible accounts receivable, inventory, and the pledge of the Company held DM&E Preferred stock. The agreement includes financial covenants requiring a minimum net worth, a minimum level for the fixed charge coverage ratio, and a maximum level for the consolidated total indebtedness to EBITDA ratio. The agreement also restricts investments, indebtedness, and the sale of certain assets. Dakota, Minnesota & Eastern Railroad - ------------------------------------ The Company maintains a significant investment in the Dakota, Minnesota & Eastern Railroad Corporation (DM&E), a privately-held, regional railroad which operates over 1,100 miles of track in five states. At December 31, 1998, the Company's investment in the stock was recorded at its historical cost of $1.7 million, comprised of $0.2 million of common stock and $1.5 million of the DM&E's Series B Preferred Stock and warrants. On January 13, 1999, the Company increased its investment in the DM&E by acquiring $6.0 million of DM&E Series C Preferred Stock and warrants. On a fully diluted basis, the Company owns approximately 16% of the DM&E's common stock. Although the market value of the DM&E is not readily determinable, management believes that this investment, if the DM&E's Powder River Basin project is successful, will be worth significantly more than its historical cost. The DM&E announced in June 1997 that it plans to build an extension from the DM&E's existing line into the low sulfur coal market of the Powder River Basin in Wyoming and to rebuild approximately 600 miles of its existing track (the Project). The DM&E also has announced that the estimated cost of this project is $1.4 billion. The Project is subject to approval by the Surface Transportation Board (STB). In December 1998, the STB made a finding that the DM&E had satisfied the transportation aspects of applicable regulations. The STB issued a draft environmental impact statement for the Project in September of 2000, with a comment period extending to January 5, 2001. New construction on this project may not begin until the STB reaches a final decision. The DM&E has stated that it could repay project debt and cover its operating costs if it captures a 5% market share in the Powder River Basin. If the Project proves to be viable, management believes that the value of the Company's investment in the DM&E could increase dramatically. Other Matters - ------------- In September 2000, the Company sold the assets of the Monitor Group division for $1.5 million cash. Additional revenues may be derived from an earnout agreement that is based upon the buyer's future sales. In August of 2000, the Company contributed a note, having principal and interest of approximately $2.7 million, to a limited liability company created by the Company and its trackwork supplier in exchange for a 30% ownership position.

In March 2000, the Company sold an undeveloped 62-acre portion of a 127-acre Houston, TX property for approximately $2.0 million. The gain on the sale of $800,000 was finalized in the third quarter of 2000. Management continues to evaluate the overall performance of certain operations. A decision to terminate an existing operation could have a material adverse effect on near-term earnings but would not be expected to have a material adverse effect on the financial condition of the Company. Outlook - ------- The Company has become TXI Chaparral's exclusive North American distributor of steel sheet piling and "H" bearing pile. Shipments of "H" bearing pile began very late in the third quarter of 1999 from TXI Chaparral's new Petersburg, VA facility. Current mill indications are that the startup of steel sheet piling production will not commence until the first quarter of 2001 with no appreciable production quantities expected until the second quarter of 2001. The rail segment of the business depends on one source, in which the Company currently maintains a 30% ownership position, for fulfilling certain trackwork contracts. At September 30, 2000, the Company had $7.9 million committed to this supplier including inventory progress payments, leased equipment, and other receivables, principally interest charges on inventory progress payments. If, for any reason, this supplier is unable to perform, the Company could experience a negative short-term effect on earnings. In November, the Company received $700,000 as a payout for the leased equipment. A substantial portion of the Company's operations is heavily dependent on governmental funding of infrastructure projects. Significant changes in the level of government funding of these projects could have a favorable or unfavorable impact on the operating results of the Company. Additionally, governmental actions concerning taxation, tariffs, the environment or other matters could impact the operating results of the Company. The Company's operating results may also be affected by adverse weather conditions. Although backlog is not necessarily indicative of future operating results, total Company backlog at September 30, 2000, was $150.6 million. The following table provides the backlog by business segment: Backlog September 30, December 31, 2000 1999 1999 - ------------------------------------------------------------------------------ (Dollars in thousands) Rail Products $ 95,642 $116,695 $107,457 Construction Products 52,717 48,023 45,463 Tubular Products 2,252 1,543 2,012 - ------------------------------------------------------------------------------ Total Backlog $150,611 $166,261 $154,932 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Note: The prior year presentation has been restated to reflect the January 1, 2000 change in reporting segment of the buildings division from rail to construction.

Market Risk and Risk Management Policies - ---------------------------------------- The Company is not subject to significant exposure to change in foreign currency exchange rates. The Company does hedge the cash flows from operations of its Canadian subsidiary. The Company manages its exposures to changes in foreign currency exchange rates on firm sales commitments by entering into foreign currency forward contracts. The Company's risk management objective is to reduce its exposure to the effects of changes in exchange rates on sales revenue over the duration of the transaction. At September 30, 2000, the Company had outstanding foreign currency forward contracts to purchase $212,000 Canadian for approximately $146,000 US. The Company is also exposed to changes in interest rates primarily from its long-term debt arrangements. The Company uses interest rate derivative instruments to manage exposure to interest rate changes. The Company has entered into an interest rate swap agreement as the fixed rate payor to reduce the impact of changes in interest rates on a portion of its revolving borrowings. At September 30, 2000 the swap agreement had a notional value of $8,000,000 consisting at 5.48% and expires in January 2001. The swap agreement's floating rate is based on LIBOR. Any amounts paid or received under the agreement are recognized as adjustments to interest expense. Neither the fair market value of the agreement nor the interest expense adjustments associated with the agreement has been material. Forward-Looking Statements - -------------------------- Statements relating to the potential value or viability of the DM&E or the Project, or management's belief as to such matters, are forward-looking statements and are subject to numerous contingencies and risk factors. The Company has based its assessment on information provided by the DM&E and has not independently verified such information. In addition to matters mentioned above, factors which can adversely affect the value of the DM&E, its ability to complete the Project or the viability of the Project include the following: labor disputes, any inability to obtain necessary environmental and government approvals for the Project in a timely fashion, the expense of environmental mitigation measures required by the Surface Transportation Board, an inability to obtain financing for the Project, competitor's response to the Project, market demand for coal or electricity and changes in environmental laws and regulations. The Company wishes to caution readers that various factors could cause the actual results of the Company to differ materially from those indicated by forward-looking statements made from time to time in news releases, reports, proxy statements, registration statements and other written communications (including the preceding sections of this Management's Discussion and Analysis), as well as oral statements made from time to time by representatives of the Company. Additional delays in TXI Chaparral's production of steel sheet piling would, for example, have an adverse effect on the Company's performance. The nonrecurring charges through 2001 are estimates and are subject to change as the Company further develops its plans. Except for historical information, matters discussed in such oral and written communications are forward-looking statements that involve risks and uncertainties, including but not limited to general business conditions, the availability of material from major suppliers, the impact of competition, the seasonality of the Company's business, taxes, inflation and governmental regulations. Sentences containing words such as "anticipates", "expects", or "will" generally should be considered forward-looking statements.

PART II OTHER INFORMATION ------------------------- Item 1. LEGAL PROCEEDINGS ----------------- See Note 9, "Commitments and Contingent Liabilities", to the Condensed Consolidated Financial Statements. Item 6. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- a) EXHIBITS -------- Unless marked by an asterisk, all exhibits are incorporated by reference: 3.1 Restated Certificate of Incorporation as amended to date, filed as Appendix B to the Company's April 17, 1998 Proxy Statement. 3.2 Bylaws of the Registrant, as amended to date, filed as Exhibit 3B to Form 8-K on May 21, 1997. 4.0 Rights Agreement, dated as of May 15, 1997, between L.B. Foster Company and American Stock Transfer & Trust Company, including the form of Rights Certificate and the Summary of Rights attached thereto, filed as Exhibit 4A to Form 8-A dated May 23, 1997. 4.0.1 Amended Rights Agreement dated as of May 14, 1998, between L. B. Foster Company and American Stock Transfer & Trust Company, filed as Exhibit 4.0.1 to Form 10-Q for the quarter ended June 30, 1998. 4.1 Third Amended and Restated Loan Agreement by and among the Registrant and Mellon Bank, N.A., PNC Bank, National Association, and First Union National Bank dated as of June 30, 1999 and filed as Exhibit 4.1 to Form 10-Q for the quarter ended June 30, 1999. 10.12 Lease between CXT Incorporated and Pentzer Development Corporation, dated April 1, 1993 and filed as Exhibit 10.12 to Form 10-K for the year ended December 31, 1999. 10.12.1 Amendment dated March 12, 1996 to lease between CXT Incorporated And Pentzer Development Corporation, filed as Exhibit 10.12.1 to Form 10-K for the year ended December 31, 1999. 10.13 Lease between CXT Incorporated and Crown West Realty, L.L.C. dated December 20, 1996 and files as Exhibit 10.13 to Form 10-K for the year ended December 31, 1999. 10.14 Lease between CXT Incorporated and Pentzer Development Corporation, dated November 1, 1991 and filed as Exhibit 10.14 to form 10-K for the year ended December 31, 1999. 10.15 Lease between CXT Incorporated and Union Pacific Railroad Company, dated February 13, 1998, and filed as Exhibit 10.15 to form 10-K for the year ended December 31, 1999. 10.16 Lease between Registrant and Greentree Building Associates for Headquarters office, dated as of June 9, 1986, as amended to date, filed as Exhibit 10.16 to Form 10-K for the year ended December 31, 1988. 10.16.1 Amendment dated June 19, 1990 to lease between Registrant and Greentree Building Associates, filed as Exhibit 10.16.1 to Form 10-Q for the quarter ended June 30, 1990. 10.16.2 Amendment dated May 29, 1997 to lease between Registrant and Greentree Building Associates, filed as Exhibit 10.16.2 to Form 10-Q for the quarter ended June 30, 1997. 10.19 Lease between the Registrant and American Cast Iron Pipe Company for Pipe-Coating facility in Birmingham, Alabama dated December 11, 1991, filed as Exhibit 10.19 to Form 10-K for the year ended December 31, 1991. 10.19.1 Amendment to Lease between the Registrant and American Cast Iron Pipe Company for Pipe-Coating facility in Birmingham, Alabama dated April 15, 1997, filed as Exhibit 10.19.1 to Form 10-Q for the quarter ended March 31, 1997. 10.20 Asset Purchase Agreement, dated June 5, 1998, by and among the Registrant and Northwest Pipe Company, filed as Exhibit 10.0 to Form 8-K on June 18, 1998. 10.21 Stock Purchase Agreement dated June 3, 1999 by and among the Registrant and the shareholders of CXT Incorporated, filed as Exhibit 10.0 to Form 8-K on July 14, 1999. * 10.22 Agreement of Purchase and Sale dated September 13, 2000, by and among the Registrant and Monitor Acquisition Co. LLC. 10.33.2 Amended and Restated 1985 Long-Term Incentive Plan, as amended and restated February 26, 1997, filed as Exhibit 10.33.2 to Form 10-Q for the quarter ended June 30, 1997. ** 10.34 Amended and Restated 1998 Long-Term Incentive Plan for Officers and Directors, as amended and restated February 24, 1999 and filed as Exhibit 10.34 to Form 10-K for the year ended December 31, 1998. ** 10.45 Medical Reimbursement Plan, filed as Exhibit 10.45 to Form 10-K for the year ended December 31, 1992. ** 10.46 Leased Vehicle Plan, as amended to date, filed as Exhibit 10.46 to Form 10-K for the year ended December 31, 1997. ** 10.50 L.B. Foster Company 2000 Incentive Compensation Plan, filed as Exhibit 10.50 to Form 10-K for the year ended December 31, 1999. ** 10.51 Supplemental Executive Retirement Plan, filed as Exhibit 10.51 to Form 10-K for the year ended December 31, 1994. ** 19 Exhibits marked with an asterisk are filed herewith. * 27 Financial Data Schedule ** Identifies management contract or compensatory plan or arrangement required to be filed as an Exhibit. b) Reports on Form 8-K No reports on Form 8-K were filed by the Registrant during the nine month period ended September 30, 2000. SIGNATURE Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. L.B. FOSTER COMPANY -------------------- (Registrant) Date: November 13, 2000 By /s/Roger F. Nejes ------------------ -------------------------- Roger F. Nejes Sr. Vice President- Finance and Administration & Chief Financial Officer (Principal Financial Officer and Duly Authorized Officer of Registrant)

  


5 1,000 9-MOS DEC-31-2000 SEP-30-2000 1,292 0 67,476 1,609 58,463 131,325 63,837 27,168 188,488 59,667 43,700 0 0 102 76,950 188,488 205,609 205,609 176,899 176,899 0 0 3,130 4,434 1,774 2,660 371 0 0 3,031 0.32 0.32

                         AGREEMENT OF PURCHASE AND SALE


                                  By and Among


                               L.B. Foster Company

                                       And


                           Monitor Acquisition Co. LLC





                               September 13, 2000








                                 TABLE OF CONTENTS
                                                                          Page

1.      Purchase and Sale of Assets..........................................1
        1.1.     Transfer of Assets..........................................1
        1.2.     Liabilities Retained by Seller..............................3
        1.3.     Liabilities Assumed by Buyer................................4
        1.4.     Excluded Assets.............................................4
        1.5.     Permitted Encumbrances......................................4
2.      Purchase Price Payment; Other Closing Deliveries; Closing............5
        2.1.     Purchase Price..............................................5
        2.2.     Payment of the Purchase Price...............................5
        2.3.     Allocation of Purchase Price................................5
        2.4.     Closing and Closing Date....................................5
        2.5.     Items to be Delivered by Seller at Closing..................5
        2.6.     Items to be Delivered by Buyer at Closing...................8
3.      Representations and Warranties of Seller............................10
        3.1.     Corporate Status...........................................10
        3.2.     Corporate Power and Authority..............................10
        3.3.     Enforceability.............................................10
        3.4.     Ownership of Assets........................................10
        3.5.     Adequacy of Assets.........................................10
        3.6.     Financial Statements; Undisclosed Liabilities..............10
        3.7.     Absences of Adverse Changes or Other Events................11
        3.8.     Leased Real Estate.........................................12
        3.9.     Owned and Leased Tangible Personal Property................12
        3.10.    [Intentionally Omitted.]...................................12
        3.11.    Patents and Certain other Intellectual Property Rights.....12
        3.12.    Engineering Drawings and Know-How..........................14
        3.13.    Prepaid Items and Deposits.................................14
        3.14.    Insurance and Bonds........................................14
        3.15.    Product Warranties.........................................14
        3.16.    Contracts..................................................14
        3.17.    Proposals and Bids.........................................15
        3.18.    Agreements with Employees..................................15
        3.19.    Insider Contracts..........................................15
        3.20.    Other Material Contracts...................................16
        3.21.    Customers..................................................16
        3.22.    Taxes......................................................16
        3.23.    Environmental Matters......................................17
        3.24.    Compliance with Other Laws.................................17
        3.25.    Absence of Conflict or Breach..............................18
        3.26.    Consents and Approvals.....................................18
        3.27.    Litigation.................................................18
        3.28.    No Undisclosed Information.................................18
4.      Representations and Warranties of Buyer.............................18
        4.1.     Corporate Status...........................................19
        4.2.     Corporate Power and Authority..............................19
        4.3.     Litigation.................................................19
        4.4.     Disclosure.................................................19
5.      Intentionally Omitted...............................................19
6.      Covenants of Seller.................................................19
7.      Intentionally Omitted...............................................22
8.      Conditions to Obligations of Buyer..................................22
        8.1.     Representations, Warranties and Covenants..................22
        8.2.     FIRPTA Certificate.........................................22
        8.3.     Intentionally Omitted......................................22
        8.4.     Delivery of Assets to be Acquired..........................22
        8.5.     No Litigation..............................................22
        8.6.     Required Consents..........................................23
        8.7.     Satisfaction of Liens......................................23
        8.8.     Employment Agreements......................................23
        8.9.     Documents..................................................23
9.      Conditions to Obligations of Seller.................................23
        9.1.     Representations, Warranties and Covenants..................23
        9.2.     No Litigation and Lack of Consent..........................23
        9.3.     Delivery of Purchase Price.................................24
10.     Indemnification.....................................................24
        10.1.    Indemnification by Seller..................................24
        10.2.    Indemnification by Buyer...................................26
        10.3.    Notice of Claims...........................................26
        10.4.    Survival of Indemnity Obligation...........................27
        10.5.    Exclusive Remedy...........................................28
11.     Earn-Out Payments...................................................28
        11.1.    General....................................................28
        11.2.    Definitions................................................28
        11.3.    Earn-Out Payments..........................................29
        11.4.    Earn-Out Statement.........................................30
        11.5.    Payment....................................................32
        11.6.    Buy-Out Provisions.........................................32
        12.     Prorations and Allocations..................................33
        13.     Costs and Expenses..........................................34
        14.     Absence Broker or Finder....................................34
        15.     Instruments of Further Assurance............................34
        16.     Right of Buyer to Nominate Related Company..................35
        17.     News Releases...............................................35
        18.     Successors and Assigns......................................35
        19.     Governing Law...............................................35
        20.     Execution in Counterparts...................................36
        21.     Miscellaneous...............................................36
        21.1.    Entire Agreement...........................................36
        21.2.    Amendments.................................................36
        21.3.    Headings and Captions......................................36
        21.4.    Gender and Number..........................................36
        21.5.    Notices....................................................36
        21.6.    Severability...............................................37
        21.7.    Bulk Sales.................................................37
        21.8.    No Third Party Beneficiaries...............................38
        21.9.    No Waiver..................................................38
        21.10.   Schedules and Exhibits.....................................38
        21.11.   Knowledge..................................................38


                         AGREEMENT OF PURCHASE AND SALE

     This  Agreement of Purchase and Sale (this  "Agreement")  is made this 13th
day of  September,  2000 by and  between  L.B.  FOSTER  COMPANY,  a  corporation
organized  and  existing  under  the laws of the  Commonwealth  of  Pennsylvania
("Seller"),  and  MONITOR  ACQUISITION  CO.  LLC,  a limited  liability  company
organized and existing under the laws of the State of Delaware ("Buyer").

                              W I T N E S S E T H :

                                   BACKGROUND

     WHEREAS,  Buyer desires to purchase  from Seller,  Fosmart Inc., a Delaware
corporation  or  Natmaya,  Inc.,  a Delaware  corporation,  each a  wholly-owned
subsidiary   of  the  Seller   (each,   a   "Subsidiary"   and   together,   the
"Subsidiaries"),  and  Seller  desires  to  sell  to  Buyer  and  to  cause  the
Subsidiaries  to sell to  Buyer,  on the terms and  conditions  hereinafter  set
forth,  all of the  properties,  rights  and  assets of Seller of every kind and
description,  except the Excluded  Assets (as  hereinafter  defined),  which are
primarily used or held for use in connection  with, or necessary for or material
to, or directly resulting from the operation of, Seller's business of designing,
developing,  marketing  and  manufacturing  mass  spectrometers  (the  "Acquired
Business"),  including,  but not limited to (i) all of the assets  purchased  by
Seller  under that certain  Agreement  of Purchase and Sale (the "1997  Purchase
Agreement"), dated May 6, 1997, among Industrial Scientific Corporation ("ISC"),
a Pennsylvania corporation,  Industrial Scientific of Delaware, Inc., a Delaware
corporation  and Seller,  and all  products and  works-in-process  in any manner
arising  therefrom  or  relating  thereto,  whether  developed  by  Seller,  the
Subsidiaries  or, to the extent  transferable,  any of Seller's  employees  (the
"Predecessor Assets").

     NOW, THEREFORE, for and in consideration of the mutual agreements contained
herein, and other good and valuable  consideration,  the receipt and sufficiency
of which are hereby  acknowledged,  and  intending to be legally  bound  hereby,
Seller and Buyer covenant, represent, warrant, stipulate and agree as follows:

1.       Purchase and Sale of Assets.

     1.1.  Transfer of Assets.  Subject to and in  accordance  with the terms of
this Agreement,  on the Closing Date, as defined in Section 2.4  hereof,  Seller
and the Subsidiaries shall sell, convey,  transfer,  assign and deliver to Buyer
free  and  clear  of all  liens,  encumbrances  or  adverse  claims  of any kind
("Liens")  (except  for  Permitted  Encumbrances,  as such  term is  defined  in
Section 1.5  hereof),  and Buyer shall  purchase and accept from Seller,  all of
Seller's (and any of its affiliates') right, title,  interest and benefit in and
to the properties,  rights and assets of Seller (or any such affiliate) of every
kind and character,  real, personal,  tangible,  intangible or mixed,  primarily
used by, or primarily held by Seller (or any such affiliate) in connection with,
or necessary  for or material to, or directly  resulting  from the operation of,
the Acquired Business, except the Excluded Assets (collectively,  the "Assets"),
which shall include but not be limited to, the following:

     (a) all items of tangible personal property owned, leased or used by Seller
(or any of its affiliates)  primarily in connection with the Acquired  Business,
including,  but not limited to, all equipment,  inventory,  supplies,  vehicles,
furnishings  and other  personal  property of any nature,  all of which are more
fully  described  in  Schedule  3.9 or  Schedule  3.12,  and all  owned  realty,
leasehold and other interests in real property,  buildings and  improvements and
construction-in-progress, all of which are more fully described in Schedule 3.8;

     (b) all of the intangible  property  (including,  without  limitation,  the
goodwill of the Acquired  Business) and  intellectual  property and intellectual
property rights owned,  leased,  licensed,  held or used by Seller or any of its
affiliates primarily in connection with the Acquired Business, and all licenses,
franchises,  permits,  authorizations,  agreements and arrangements that concern
the same or that  concern like items owned,  licensed,  leased,  held or used by
others and used by Seller or any of its affiliates  primarily in connection with
the Acquired Business (collectively,  the "Intellectual  Property"),  including,
without  limitation,  all  software  (including,  but not limited to, all source
codes and object  codes),  products,  trade secrets,  inventions,  improvements,
technology,  know-how,  processes,  methods,  plans,  data  (including,  but not
limited  to,  research  data),   marketing  plans  and  strategies,   forecasts,
trademarks,  service  marks,  domain  names,  trade  names  (including,  without
limitation, the names "Monitor Group" and "Monitor" and any variations thereof),
patents and patent rights, logos and copyrights,  including,  but not limited to
(i) any of the foregoing in respect of or in any manner primarily relating to or
resulting from the Predecessor  Assets,  and (ii) those trademarks and trademark
registrations  (both  state  and  federal),   service  marks  and  service  mark
registrations   (both  state  and   federal),   domain  names  and  domain  name
registrations,   trade  names,  patents  (including  all  reissues,   divisions,
continuations,   extensions  and  foreign   counterparts   thereof)  and  patent
disclosure documents, logos, copyright registrations and applications for any of
the foregoing (including all abandoned applications therefor) listed on Schedule
3.11;

     (c) all  operating  data and  records  of Seller  or any of its  affiliates
primarily  relating to the Acquired  Business,  including,  without  limitation,
client  and  customer  lists  and  records,   referral  sources,   research  and
development reports and records, production reports and records, equipment logs,
operating  guides and manuals,  copies of  financial,  accounting  and personnel
records, correspondence and other similar documents and records;

     (d)  all   licenses,   permits  and  other   governmental   approvals   and
authorizations,  whether  federal,  state or local,  owned,  held or utilized by
Seller  or any of its  affiliates  primarily  in  connection  with the  Acquired
Business  and all  pending  applications  therefor,  in each case to the  extent
transferable to Buyer, each of which is listed on Schedule 3.24;

     (e) all of the rights of Seller or any of its  affiliates  to, in and under
any  existing   contracts  with  purchasers  which  Buyer  assumes  pursuant  to
Section 2.5,  and all other  contracts or agreements  primarily  relating to the
Acquired  Business,  including,  but not  limited  to, all  contracts  and other
arrangements  with  employees  of Seller or any of its  affiliates  primarily in
respect of the Acquired  Business,  and all variances,  easements,  right-of-way
agreements and options,  claims,  contract rights, goodwill and the right to use
the names "Monitor Group" and "Monitor" and all variants  thereof;  all of which
are more fully described in the various Schedules attached hereto; and

     (f) all other  properties,  rights and assets of every kind,  character  or
description owned,  leased,  licensed,  used or held for use by Seller or any of
its affiliates  primarily in connection with the Acquired  Business,  whether or
not  similar  to the items  specifically  set forth  above,  including,  without
limitation,  the  Predecessor  Assets  and,  to  the  extent  transferable,  all
properties,  rights and assets of every kind,  character  or  description  which
hereafter  may  become  the  property  of Seller  under  the  terms of  Seller's
Employment Agreement with Anthony N. Duryea listed on Schedule 3.18 hereof.

     1.2. Liabilities  Retained by Seller.  Seller shall retain, and Buyer shall
not assume and shall not have any liability or obligation of any kind whatsoever
with respect to, any indebtedness, obligations or other liabilities of Seller or
any of its affiliates of any kind  whatsoever,  whether  pursuant to contract or
otherwise,  except for those  contractual  liabilities and obligations of Seller
which shall be expressly assigned by Seller and assumed by Buyer pursuant to the
various  assignment and assumption  agreements  identified in Section 2.5 hereof
(all such  liabilities  and  obligations  retained  by Seller  are  collectively
referred to herein as the "Retained  Liabilities").  In  amplification  thereof,
Seller and Buyer  acknowledge  and agree that Buyer  shall not  assume,  and the
Retained  Liabilities shall include,  any liability for leasehold  rentals,  any
taxes  (including,  but not  limited  to, any  federal,  state or local  income,
property,  withholding,  employment,  sales, use, excise or other taxes) and any
interest and penalties thereon and additions  thereto,  any liability for wages,
salaries  or  overtime,  vacation  pay,  holiday  pay or for any other  employee
benefits or arising under or relating to any employee benefit plan, or any other
obligation  or  liability  of Seller or any of its  affiliates  whatsoever,  on,
arising out of or attributable to the conduct of the Acquired Business or use of
the Assets through the Closing Date; provided,  however, that Buyer shall assume
the  liability  for the  performance  after  the  Closing  Date of all  Seller's
obligations under the contracts which are expressly assigned to it by Seller and
assumed by Buyer as provided in Section 2.5 hereof.

     1.3.  Liabilities  Assumed by Buyer.  Buyer shall assume and be responsible
for all  liabilities  and  obligations  arising  from and after the Closing Date
under those  contracts  assigned by Seller and assumed by Buyer  pursuant to the
various assignment and assumption  agreements  identified in Section 2.5 hereof.
Except as expressly set forth in the preceding  sentence,  and without  limiting
the generality of Section 1.2 hereof,  Buyer shall not assume and shall not have
any liability or obligation for any of the  liabilities or obligations of Seller
or any of its  affiliates  of any kind  whatsoever,  whether  known or  unknown,
absolute,  accrued,  contingent  or  otherwise,  all of which  shall  constitute
Retained Liabilities.

     1.4.  Excluded Assets.  Notwithstanding  the foregoing,  it is specifically
agreed that the following assets are excluded from the Assets:  all cash in bank
accounts of Seller; all accounts receivable of Seller; all prepaid insurance and
surety  bonds;  all rights to refunds of federal and state taxes (and  penalties
and interest  thereon)  previously paid by Seller;  each of the assets which are
specifically  listed on Schedule  1.4 as Excluded  Assets;  and all rights which
accrue  to or are  retained  by Seller  under  and by  virtue of this  Agreement
(collectively, the "Excluded Assets").

     1.5. Permitted Encumbrances. The Acquired Business and the Assets are to be
sold and conveyed to Buyer free and clear of all Liens except the following (the
"Permitted Encumbrances"):

     (a) Any laws,  regulations,  building codes, or ordinances (including those
relating to zoning building and environmental  protection)  relating to the use,
occupancy,  subdivision or improvement of the premises at which Seller  conducts
operations  of the Acquired  Business  which have been adopted or imposed by any
governmental body, provided that they do not, individually, or in the aggregate,
prohibit or interfere with the operations of the Acquired Business or the use of
the Assets in the manner in which such operations are presently conducted or the
manner in which the  Assets are  presently  used or  otherwise  give rise to any
liability;

     (b) Any taxes,  assessments and other governmental charges in the nature of
taxes not yet due and payable as of the Closing Date, which shall be apportioned
as provided in Section 12 hereof;

     (c) Any statutory  Liens or  encumbrances  that apply generally in favor of
commercial  landlords;  provided,  however,  that no events have occurred  which
would  give  any  commercial  landlord  any  right  to  enforce  such  Liens  or
encumbrances; and

     (d) Any mechanics',  carriers', workmen's, repairmen's and other like Liens
which have not been  perfected  arising or  incurred in the  ordinary  course of
business of the Acquired Business that will be satisfied by Seller in due course
following the Closing.

2.       Purchase Price Payment; Other Closing Deliveries; Closing.

     2.1. Purchase Price.  Buyer shall acquire and accept the Assets from Seller
and  shall pay to Seller  the  aggregate  amount  of One  Million  Five  Hundred
Thousand Dollars  ($1,500,000) for the Assets (the "Purchase  Price"),  plus the
Earn-Out Payments provided for in Section 11 hereof.

     2.2.  Payment of the Purchase Price.  On the Closing Date,  Buyer shall pay
the full  amount of the  Purchase  Price to Seller by wire  transfer  of Federal
funds in the amount of One million Five Hundred Thousand Dollars ($1,500,000).

     2.3.  Allocation of Purchase  Price.  The Purchase Price shall be allocated
among the Assets in accordance with Schedule 2.3. Schedule 2.3 shall be prepared
in accordance with Section 1060 of the Internal Revenue Code of 1986, as amended
(the "Code").  Buyer and Seller agree to be bound by such allocation and to file
all  returns  and reports in respect of the  transactions  herein  contemplated,
including,  but not limited to, all federal, state and local tax returns, on the
basis of such allocation.

     2.4. Closing and Closing Date. The closing  hereunder (the "Closing") shall
take place at the  offices of Seller (or by mail and  facsimile,  if the parties
hereto so agree) at 10:00 A.M.,  local time,  on September  13, 2000 or at such
other  place  and time and date as may be  agreed to in  writing  by Seller  and
Buyer.  The date for  Closing as  determined  under this  Section  2.4 is herein
called the "Closing Date."

     2.5.  Items to be  Delivered  by  Seller at  Closing.  In  addition  to its
delivery  to Buyer of the  Assets,  at or prior  to the  Closing,  Seller  shall
execute,  acknowledge  and deliver  (or,  with  respect to any patents or patent
applications  held  by the  Subsidiaries,  cause  each  Subsidiary  to  execute,
acknowledge and deliver) to Buyer the following in form and substance reasonably
acceptable to Buyer;

     (a) an assignment agreement with respect to the lease for real property and
personal  property,  other than  excluded  Assets  described in Schedule 3.8 and
Schedule  3.9,  together  with the executed  consent to such  assignment  of the
landlord  (and  lessor)  thereunder  (the  "Assignment  and  Amendment  of Lease
Agreement");

     (b) an  assignment  and  assumption  agreement  with respect to each of the
contracts  described in Schedule 3.16 and (to the extent  transferable)  any and
all transferable rights of Seller (but none of Seller's  obligations) under each
of  the  employment  agreements  and  confidentiality  agreements  described  in
Schedule 3.18 (the "Assignment and Assumption of Contracts");

     (c) an assignment  agreement with respect to all Intellectual  Property (as
defined  in  Section  1.1(b))  described  in Section  1.1(b) or  Schedule  3.11,
together  with  all of the  goodwill  connected  or  associated  therewith  (the
"Assignment of Intellectual Property");

     (d) separate assignment  agreements with respect to each of the patents and
patent  applications,  trademark  registrations  and  applications  therefor and
copyright  registrations and applications  therefor  described in Schedule 3.11,
together with all of the goodwill connected or associated therewith, in form and
substance  suitable for  recording  in the United  States  Patent and  Trademark
Office  or the  United  States  Copyright  Office,  as the case may be (the "PTO
Assignments");

     (e)  separate   master  foreign  patent   assignments   from  each  of  the
Subsidiaries  with  respect to the  foreign  patents  and  patent  applications,
described in Schedule 3.11,  together with all goodwill  connected or associated
therewith (the "Assignment of Foreign Rights");

     (f) a general  assignment  and bill of sale with respect to the Assets (the
"Bill of Sale");

     (g)  possession of the business  premises of the Acquired  Business free of
all  tenants,  licensees  and  occupants,  including  sets  of all  keys to such
premises,  codes and alarm  codes in the  possession  or under  the  control  of
Seller;

     (h) originals (if  available,  otherwise  photocopies)  of each of the
permits,  licenses and other authorizations  described in Schedule 3.24, if
any;

     (i) officer's  certificates  of Seller,  each dated as of the Closing Date,
whereby Seller certifies the accuracy of the representations and warranties made
by it in Article III and that each of the conditions to the obligations of Buyer
hereunder has been satisfied;

     (j) a certificate dated as of the Closing Date from the corporate secretary
or assistant  secretary of Seller,  certifying that attached to such certificate
are (i)  resolutions  of the  Board of  Directors  of  Seller  which  have  duly
authorized  Seller's  execution,  delivery and performance of this Agreement and
the consummation of the transactions contemplated thereby, and (ii) the Articles
of  Incorporation  and  By-laws  of Seller as then in  effect,  together  with a
signature and incumbency certificate;

     (k)  certificates  of good  standing of Seller  dated not more than 20 days
prior to the Closing Date,  issued by the Secretary of State of the Commonwealth
of Pennsylvania;

     (l) copies of all real and personal property leases,  operating  contracts,
employment agreements and confidentiality agreements, patents, trademark, domain
name and copyright  registration  certificates and applications therefor and all
other written  agreements  and  instruments  described in the various  Schedules
attached hereto;

     (m) copies of all requisite  governmental  or other third party consents or
approvals with respect to the transactions contemplated in this Agreement; and

     (n) an opinion of  Seller's  legal  counsel,  David L.  Voltz,  in form and
substance reasonably satisfactory to counsel for Buyer, to the effect that:

     (i) Seller is a duly incorporated and existing corporation in good standing
under the laws of the Commonwealth of Pennsylvania;

     (ii) This Agreement and the other  agreements and  instruments  executed in
connection  herewith have each been duly  authorized,  executed and delivered by
Seller  and  constitute  the legal,  valid and  binding  obligations  of Seller,
enforceable   against   Seller  in   accordance   with  their  terms,   and  the
enforceability thereof may be affected by applicable bankruptcy, reorganization,
insolvency,  moratorium or similar laws affecting the  enforcement of creditors'
rights generally and the possible  unavailability of certain equitable remedies,
including the remedy of specific performance;

     (iii) Seller has the power and  authority  to execute,  deliver and perform
this  Agreement  and each of the other  documents and  instruments  contemplated
hereby,  and  to  carry  out  its  obligations  hereunder  and  thereunder.  The
execution,  delivery and  performance  of this  Agreement  and each of the other
documents and instruments  contemplated  hereby have been duly authorized by all
necessary action by law, the Articles of Incorporation and By-laws of Seller and
otherwise by Seller;

     (iv) The execution and delivery of this  Agreement and the other  documents
and instruments contemplated hereby do not, and the performance by Seller of the
transactions  contemplated hereby and thereby will not: (x) violate any statute,
regulation, rule, injunction,  judgment, order, decree, ruling, charge, or other
restriction of any government,  governmental  agency or court to which Seller is
subject or any provision of the Articles of  Incorporation or By-laws of Seller;
or (y) conflict with, result in a breach of, constitute a default under,  result
in the acceleration of, create in any party the right to accelerate,  terminate,
modify, or cancel, or require any notice under any agreement,  contract,  lease,
license,  instrument or other arrangement to which Seller is a party or by which
Seller  is bound or to which  any of the  Assets is  subject  (or  result in the
imposition  of any lien,  charge or other  encumbrance  upon any of the Assets),
except  where  the   violation,   conflict,   breach,   default,   acceleration,
termination, modification,  cancellation, failure to give notice or lien, charge
or encumbrance would not have a material adverse effect on the Acquired Business
or on the ability of the parties to this Agreement to fulfill their  obligations
or consummate the transactions contemplated by this Agreement.

     2.6. Items to be Delivered by Buyer at Closing.  In addition to its payment
of the  Purchase  Price,  at or  prior  to the  Closing,  Buyer  shall  execute,
acknowledge and deliver to Seller the following in form and substance reasonably
acceptable to Seller:

     (a) the Assignment and Amendment of Lease Agreement;

     (b) the Assignment and Assumption of Contracts;

     (c) an officer's  certificate  dated as of the Closing  Date whereby  Buyer
certifies  the  accuracy  of the  representations  and  warranties  set forth in
Article  IV and  that  each  of the  conditions  to the  obligations  of  Seller
hereunder has been satisfied;

     (d) a  certificate  from the  managing  member  of Buyer,  certifying  that
attached to such  certificate  are (i) resolutions of the Members of Buyer which
have  duly  authorized  Buyer's  execution,  performance  and  delivery  of this
Agreement and the transactions contemplated thereby, and (ii) the Certificate of
Formation and Limited  Liability  Company  Agreement of Buyer as then in effect,
together with a signature and incumbency certificate; and

     (e) an opinion of its counsel,  Debevoise & Plimpton, in form and substance
reasonably satisfactory to counsel for Seller, to the effect that:

     (i) Buyer is a duly formed and existing limited  liability  company in good
standing under the laws of the State of Delaware with limited  liability company
power to enter into and perform this Agreement; and

     (ii) This  Agreement  has been duly  authorized,  executed and delivered by
Buyer and  constitutes  its  legal,  valid and  binding  obligation  enforceable
against Buyer in accordance with its terms, except as the enforceability thereof
may be affected by applicable bankruptcy, reorganization, insolvency, moratorium
or similar laws affecting the enforcement of creditors' rights generally and the
possible  unavailability of certain equitable remedies,  including the remedy of
specific performance;

     (iii)  Buyer has the  limited  liability  company  power and  authority  to
execute,  deliver and perform this  Agreement,  and to carry out its obligations
hereunder.  The execution,  delivery and performance of this Agreement have been
duly authorized by all necessary limited liability company action by Buyer; and

     (iv) The execution and delivery of this  Agreement and the other  documents
and instruments  contemplated hereby do not, and the performance by Buyer of the
transactions  contemplated  hereby and thereby will not:  (x) to its  knowledge,
violate any statute,  regulation,  rule,  injunction,  judgment,  order, decree,
ruling,  charge, or other restriction of any government,  governmental agency or
court to which Buyer is subject, (y) violate any provision of the Certificate of
Formation of Buyer; or (z) conflict  with,  result in a breach of,  constitute a
default under,  result in the  acceleration of, create in any party the right to
accelerate,  terminate,  modify,  or  cancel,  or require  any notice  under any
agreement,  contract,  lease, license,  instrument or other arrangement to which
Buyer is a party or by which Buyer is bound or to which any of Buyer's assets is
subject, except where the violation,  conflict,  breach, default,  acceleration,
termination, modification,  cancellation, failure to give notice or lien, charge
or encumbrance  would not have a material adverse effect on the ability of Buyer
to fulfill its obligations or consummate the  transactions  contemplated by this
Agreement.

3.       Representations and Warranties of Seller.

     Seller  represents  and warrants to Buyer,  as of the date hereof and as of
the Closing Date, as follows:

     3.1.  Corporate  Status.  Seller is a corporation  duly organized,  validly
existing and in good standing under the laws of  Pennsylvania  and will continue
to be so as of the Closing Date. Seller has full power and authority to carry on
its business, including the Acquired Business, as conducted at the present time.

     3.2. Corporate Power and Authority. The execution and delivery by Seller of
this Agreement and each of the documents and instruments  contemplated hereby to
be executed by it and the performance by Seller of its obligations hereunder and
thereunder  have been duly  authorized by Seller's Board of Directors and by any
and all other  necessary  corporate  action.  Seller has full  corporate  right,
power,  legal  capacity and authority to enter into and perform its  obligations
under this  Agreement  and each of the documents  and  instruments  contemplated
hereby to be executed by it in  accordance  with their  respective  terms and to
transfer to Buyer good and marketable title to the Assets.

     3.3.  Enforceability.  This  Agreement  and each of the  other  agreements,
documents and instruments  contemplated hereby,  constitutes and will constitute
the valid and legally binding obligation of Seller in accordance with its terms.

     3.4.  Ownership of Assets.  Each of Seller and/or the  Subsidiaries  is the
owner of the  Assets,  and has good and  marketable  title to all of the Assets,
free and clear of all Liens except for Permitted Encumbrances;  no other person,
firm or corporation  will have at Closing any interest  whatsoever in any of the
Assets;  and the purchase  and sale  provided for herein will vest in Buyer good
and  marketable  title to the  Assets  free and  clear of all Liens  except  for
Permitted Encumbrances.

     3.5. Adequacy of Assets.  The Assets constitute,  in the aggregate,  all of
the property and assets,  including, but not limited to, all of the Intellectual
Property (but excluding  general  corporate  overhead and intellectual  property
used by the Seller primarily in the operation of its other businesses) necessary
for the  conduct  of the  Acquired  Business  in the  manner in which and to the
extent to which it is currently being, and has historically been, conducted.

3.6.     Financial Statements; Undisclosed Liabilities.

     (a) The accounting information shown on the "Financial Statement" set forth
as Schedule 3.6 is in  accordance  with the books and records of the Seller,  in
all  material  respects,  and  represents  selected  financial  data,  including
tangible and  intangible  asset  investments,  development  expenses,  sales and
marketing  expenses,  and  sales  data of the  Seller  directly  related  to the
Acquired  Assets  as of the  dates  and  periods  indicated,  in  each  case  in
conformity with GAAP consistently  applied with the exception that inventory and
plant equipment  expenditures following the acquisition of the Acquired Business
by Seller were routinely written off as period costs.

     (b) Seller does not have,  primarily in relation to the Acquired  Business,
any liabilities or obligations of any nature, whether known, unknown,  absolute,
accrued, contingent or otherwise and whether due or to become due, except (i) as
and to the extent disclosed on, or reserved against on the face of the Financial
Statements and (ii) for liabilities and obligations  that are (A) incurred after
June 30, 2000 in the ordinary  course of the business and are not  prohibited by
this  Agreement  and (B)  individually  and in the  aggregate  would not have or
result in a material adverse effect on the Acquired Business.

     3.7.  Absences of Adverse  Changes or Other Events.  Except as set forth on
Schedule 3.7, since June 30, 2000, Seller has not, primarily with respect to the
Acquired Business or the Assets:

     (A) created or incurred any liability  (absolute or contingent)  except for
unsecured  current  liabilities  under  contracts  entered  into in the ordinary
course of business consistent with past practices;

     (B)  loaned  any  money or  otherwise  pledged  the  credit of  Seller,  or
mortgaged,  pledged or subjected to any Lien or otherwise  encumbered any of the
Assets;

     (C) sold, transferred,  conveyed,  assigned, returned to the vendor thereof
or  otherwise  disposed of any of the Assets  except for the sale of products in
the ordinary course of business consistent with past practices,  or increased or
decreased its inventory above or below levels customarily maintained;

     (D) waived any rights of substantial value;

     (E) made any capital  commitments or expenditures  or capital  additions or
improvements  which in the aggregate exceed Five Thousand Dollars  ($5,000),  or
made any unusual or extraordinary commitment or expenditure;

     (F) suffered any labor disputes or organization activity by its employees;

     (G) become bound by or entered into any contract, commitment or transaction
other than in the ordinary course of business consistent with past practices;

     (H) adjusted in any way, either directly or indirectly the  compensation or
benefits  paid or payable to any  shareholder,  officer,  director,  consultant,
agent or employee;

     (I)  transferred,  granted or been granted any rights or licenses under any
Intellectual  Property other than in the ordinary course of business  consistent
with past  practices,  or entered into any  settlement  regarding  the breach or
infringement of any Intellectual Property;

     (J)  entered  into any  contract or  agreement  to do or perform any of the
foregoing actions; or

     (K) suffered or  sustained  any  material  adverse  change in the Assets or
liabilities  or in the business or  condition,  financial or  otherwise,  of the
Acquired Business.

     3.8. Leased Real Estate.  Seller is the lessee under the real estate leases
described on Schedule 3.8, and Seller (primarily in connection with the Acquired
Business) has no other interest in any real estate and does not conduct business
or operations at any location other than those described in such Leases.  Seller
now enjoys  quiet and  undisturbed  possession  under each  lease  described  on
Schedule  3.8.  Such  real  estate  is free and  clear of any  zoning  or use or
building  restriction  or any pending,  proposed or threatened  zoning or use or
building restriction which would either singly or in the aggregate, interfere in
any material way with the present or any  currently  intended use of any of such
leased  real  estate.  Each  lease is valid and  binding  and in full  force and
effect, and is not in default as to the payment of rent or otherwise.

     3.9. Owned and Leased  Tangible  Personal  Property.  All material items of
tangible  personal  property  owned or leased by Seller in  connection  with the
Acquired  Business (other than personal property used generally by the Seller in
its corporate  offices) are fully described on Schedule 3 9. Except as described
on Schedule 3.9, Seller has good and marketable title to all such owned tangible
personal  property free and clear of any Lien  whatsoever,  except for Permitted
Encumbrances.  All leases with respect to such leased tangible personal property
are valid and binding and in full force and effect, and are not in default as to
the payment of rent or otherwise.

     3.10. [Intentionally Omitted.]

     3.11.  Patents and Certain other  Intellectual  Property  Rights.  Attached
hereto as  Schedule 3.11 is a true and correct listing of all of the patents and
patent   applications   (including  all  reissues,   divisions,   continuations,
extensions  and foreign  counterparts  thereof),  patent  disclosure  documents,
inventions,  improvements,  trademarks and service marks,  trademark and service
mark  registrations  (both  state  and  federal),  trademark  and  service  mark
applications,  domain  names and  domain  name  registrations,  trade  names and
copyrights   (whether  or  not  registered)  and  copyright   registrations  and
applications owned, licensed, leased, held or used by Seller or any affiliate of
Seller in connection with the Acquired  Business and which  constitute a portion
of the Intellectual  Property (other than intellectual  property that is used by
the Seller primarily in its other businesses)  (including the nature of Seller's
or its affiliate's  interest,  i.e., whether owned, licensed or leased), and all
licenses, franchises, permits, authorizations,  agreements and arrangements that
concern the same or that  concern like items owned,  licensed,  leased,  held or
used by others  and used by  Seller in  connection  with the  Acquired  Business
(other than those that are used by Seller  primarily  in its other  businesses),
true and correct and complete copies of all such licenses, franchises,  permits,
authorizations,  agreements and arrangements having heretofore been delivered by
Seller to  Buyer.  Except  as  disclosed  on  Schedule 3.11,  all such  patents,
trademarks,   trade  names,   domain  names,   service  marks,   copyrights  and
registrations and all licenses, franchises, permits, authorizations,  agreements
and  arrangements  are  subsisting and in force and free from any default on the
part of Seller,  and Seller has not  received  any notice of any  action,  suit,
proceeding or  investigation  relating  thereto or  threatening  the  ownership,
validity or enforceability of any thereof. Except as disclosed on Schedule 3.11,
no claims  have been  asserted  or  threatened  in  writing,  and no claims  are
pending, by any person or entity regarding the use of any Intellectual Property,
or challenging or questioning the ownership, validity or effectiveness of any of
the Intellectual  Property or of any license,  agreement or arrangement relating
thereto,  and  Seller  does not know of any basis for any such  claim,  nor does
Seller  know of any such  claim  against  any third  party for  infringement  or
misappropriation of any of Seller's rights to the Intellectual Property.  Except
as disclosed on Schedule 3.11,  in the conduct of the Acquired Business,  Seller
has not, and Seller's use of the Intellectual Property in the ordinary course of
the  Acquired  Business  as  currently  conducted  does not  misappropriate  the
property of or breach or  infringe on the rights of any person or entity  within
any of the  countries  which  are  covered  by the  patents  (whether  issued or
pending)  listed on Schedule  3.11.  The Assets  include,  and Seller owns or is
licensee of, all rights to all of the items of  Intellectual  Property  that are
listed on  Schedule 3.11,  and all such items  constitute the only  intellectual
property  and  intellectual  property  rights that are  necessary to conduct the
Acquired Business in the manner in which it is currently conducted. Each item of
Intellectual Property is fully transferable to Buyer free and clear of any Liens
other than Permitted  Encumbrances and the purchase and sale provided for herein
will vest in Buyer good and  marketable  title to (or full  right to make,  use,
copy,  distribute and sell,  with respect to any and all licenses of rights held
by Seller) all of the Intellectual  Property, no assignment,  sale, agreement or
encumbrance  having  heretofore  been entered into by Seller or any  predecessor
thereof  which  would  conflict  with  the  assignment  to  Buyer  of any of the
Intellectual  Property.  Seller  has the  right to  assign  to Buyer any and all
licenses  (if any) to which  Seller is a party that  relate to the  Intellectual
Property.

     3.12.   Engineering   Drawings  and  Know-How.   Except  as  set  forth  on
Schedule 3.12, Seller owns free and clear of any claim or restriction or royalty
or other payment all of the Assets owned by Seller, and has the right to use all
other  Assets in the manner as  currently  used in the  Acquired  Business.  The
Assets  include all of Seller's  right title and interest to all  manufacturing,
engineering and other drawings, designs, product formulae, technology, and other
data and information  (whether  completed or in development),  and trade secrets
and know-how,  owned or used by, and material to, Seller in connection  with any
mass spectrometer  and/or the Acquired Business (other than any of the foregoing
used by the Seller primarily in its other businesses).

     3.13.  Prepaid Items and Deposits.  Attached  hereto,  made part hereof and
marked  Schedule  3.13 is a true and correct  description  of all of the prepaid
items and  deposits of or in respect of the  Acquired  Business as of August 31,
2000.

     3.14.  Insurance and Bonds.  Attached  hereto,  made part hereof and marked
Schedule  3.14  is a true  and  correct  description  listing  all  policies  of
insurance  and all  surety  and other  bonds to which  Seller in  respect of the
Acquired  Business  now  is  a  party,  or  during  the  immediately   preceding
seventy-two  (72) months was a party.  All of such policies and bonds which have
expired were valid and in full force and effect during their  respective  terms,
and all other of such  policies and bonds are valid and in full force and effect
at the present  time,  and no claim has been made,  or notice  given,  and there
exists no ground,  to cancel or avoid any of said policies or bonds or to reduce
the coverage provided thereby.

     3.15. Product  Warranties.  Except as set forth on Schedule 3.15,  which is
made part hereof,  neither  Seller nor, to the best of Seller's  knowledge,  any
predecessor of Seller (with respect to the Acquired  Business),  has at any time
prior to the date hereof sold or otherwise  distributed any products relating to
or in connection with the Assets or the Acquired  Business.  Except as set forth
in Schedule 3.12,  there are no product  warranties  outstanding with respect to
any such products,  the Assets or the Acquired  Business,  no such products have
been  returned  to  Seller or any  predecessor  of Seller  with  respect  to the
Acquired  Business  by any third party  purchaser,  no product  warranty  claims
relating to or in connection with the Assets or the Acquired  Business have been
made against  Seller or any  predecessor  of Seller with respect to the Acquired
Business,  and Buyer  will have no  obligation  or  liability  in respect of any
products or product warranties sold,  distributed or issued, as the case may be,
relating  to or in  connection  with the Assets or the  Acquired  Business on or
prior to the Closing Date.

     3.16. Contracts. Attached hereto, made part hereof and marked Schedule 3.16
is a true and correct description of all of the contracts or like obligations of
every kind of Seller in  respect  of the  Acquired  Business  (other  than those
contracts of Seller applicable primarily to the Seller's other businesses) which
have not been described on one or more of the various Schedules  hereto.  Except
as set  forth on  Schedule  3.16,  Seller  is not in  default  under any of said
contracts,  and no claim of default thereunder has been asserted against Seller,
and no condition or state of facts exists  which,  with notice or the passage of
time or both, would constitute a default under any of said contracts, as to time
or manner of performance, or as to warranties thereunder, or otherwise.

     3.17.  Proposals  and Bids.  There are no proposals or bids which Seller in
respect of the Acquired  Business has  outstanding  with respect to  prospective
contracts.

3.18.    Agreements with Employees.

     (A) Except as set forth on  Schedule 3.18,  Seller is not (with  respect to
the Acquired Business) a party to any employment, severance or change of control
agreement, written or oral.

     (B) Except as set forth on  Schedule 3.18,  Seller has, with respect to the
Acquired Business,  no pension,  profit sharing,  short term disability or other
employee benefit plan (including,  without limitation,  any equity based plan or
incentive  compensation  plan),  or any health  care,  life  insurance  or other
employee  welfare  plan,  for its  employees  (collectively,  "Employee  Benefit
Plans").  Each of the  Employee  Benefit  Plans has been  operated  in  material
compliance with its applicable terms and applicable law.

     (C)  Schedule 3.18  sets forth a true and correct listing of all employment
and  confidentiality  agreements  relating to the  Acquired  Business  and/or to
Seller's use of the Assets (other than those agreements of the Seller applicable
primarily to the Seller's other businesses), naming each signatory thereto.

     (D) The employees of Seller, with respect to the Acquired Business, are not
parties to any  collective  bargaining  agreement  with  Seller and there are no
grievances,  disputes or controversies  with any union or any other organization
of the employees of Seller, or threats of strikes, work stoppages or any pending
demands for collective  bargaining by any union or  organization.  Schedule 3.18
lists each of the employees currently primarily engaged in the Acquired Business
(other than those employees of Seller providing  corporate  overhead services to
the Acquired Business).

     3.19.  Insider  Contracts.  There are no  contracts,  agreements,  purchase
orders,   licenses,   commitments,   leases,   agreements,   understandings   or
arrangements,  including  loan  arrangements,  between  Seller  and  any  of its
officers,  directors  or  shareholders,  or any  related or  affiliated  person,
corporation  or other entity which  primarily  relate to the Acquired  Business,
except as set forth on Schedule 3.19 attached hereto and made part hereof, or as
set  forth  and  identified  as such on any  other  Schedule  hereto (a true and
correct and complete copy of each such written document and a true,  correct and
complete written  description of each such oral  relationship  having heretofore
been  delivered  by Seller to Buyer).  Without  limiting the  generality  of the
foregoing,  the Seller has not  entered  into any  patent  licensing  or similar
agreement  with  Anthony  Duryea  or his  assigns  (other  than  the  employment
agreement between Anthony Duryea and Seller listed on Schedule 3.18).

     3.20. Other Material Contracts. There are no other (i.e., not identified on
one or  more  of the  foregoing  Schedules  hereto)  written  or  oral  material
contracts,  agreements,  understandings  and  arrangements  which  relate in any
manner to the Acquired  Business or the Assets and to which Seller is a party or
by  which  Seller  is bound  (other  than  contracts  of the  Seller  applicable
primarily to the Seller's other businesses) ("material contracts"). For purposes
of this  Section  3.20,  "material"  shall mean  containing  an  obligation  (i)
requiring, or reasonably anticipated to require, the payment of more than $5,000
in the aggregate,  or (ii) not terminable by Seller, without penalty, within one
year after the Closing  Date, or (iii) any loan,  credit or financing  agreement
for any future loans,  credits or  financing,  or (iv) of guaranty or suretyship
irrespective of the term or amount involved.

     3.21. Customers. Attached hereto, made part hereof and marked Schedule 3.21
is a true and  correct  listing  of each  customer  of Seller in  respect of the
Acquired  Business.  Seller  has no reason to  believe  that  there  will be any
adverse change in any such relationship, whether as a result of the consummation
of the transactions provided for by this Agreement or otherwise.

     3.22. Taxes. Seller has timely and properly filed all federal, state, local
and foreign tax returns and reports and forms relating to the Acquired  Business
and/or the Assets  which Seller is or has been  required to file,  either on its
own behalf or on behalf of its employees or other persons or entities, including
but not limited to income, profits, franchise, sales, use, occupation, property,
excise, ad valorem,  and payroll  (including  employee taxes withheld),  and all
such  returns and  reports  and forms are true and  correct and  complete in all
respects.  Seller has paid all taxes,  including  penalties and interest and any
other additions thereto,  if any, which have become due pursuant to such returns
or reports or forms or pursuant to  assessments  received by Seller with respect
to the Acquired  Business and/or the Assets,  and there is no further  liability
(whether or not  disclosed on such returns or reports or forms or  assessments).
All taxes (including all interest and penalties  thereon and additions  thereto)
required to be withheld by Seller in respect of the Acquired Business and/or the
Assets have been duly and timely  withheld,  and such  withheld  taxes have been
either duly and timely paid to the proper governmental authority or properly set
aside in  accounts  for such  purpose  and, to the extent due on or prior to the
Closing Date, will be duly and timely paid to the proper governmental authority.
No waiver has been  granted,  and on or prior to the Closing Date no waiver will
be granted,  extending the time for examination of any of such returns.  Seller,
with respect to the Acquired Business and/or the Assets, has not filed a consent
of any type described in Section 341 (f) of the Code.

     3.23. Environmental Matters. Seller (i) is currently in compliance with all
applicable  Environmental  Laws  pertaining  to its  operation  of the  Acquired
Business,  and has  obtained  all  permits  and other  authorizations  needed to
operate the  facilities  of the  Acquired  Business,  (ii) has not  violated any
applicable  Environmental  Law in the  operation of the Acquired  Business,  and
(iii) is unaware of any present requirements of any applicable Environmental Law
which is due to be imposed upon it and which will increase its cost of complying
with such Environmental Laws in the operation of the Acquired Business. All past
on-site  generation,  treatment,  storage and disposal of Waste,  including then
Hazardous  Waste,  by Seller and its  predecessors  pertaining  to the  Acquired
Business   have  been  done  in  compliance   with  the   currently   applicable
Environmental  Laws;  and all past off-site  treatment,  storage and disposal of
Waste,  including  Hazardous  Waste,  generated  by Seller and its  predecessors
pertaining to the Acquired  Business have been done in compliance  with the then
currently  applicable  Environmental Laws. As used in this Agreement,  the terms
(i) "Environmental  Laws"  include but are not limited to any federal,  state or
local law,  statute,  charter or ordinance,  and any rule,  regulation,  binding
interpretation,  binding policy,  permit,  order,  court order or consent decree
issued pursuant to any of the foregoing, which pertains to, governs or otherwise
regulates any of the following activities,  including without limitation (a) the
emission,  discharge, release or spilling of any substance into the air, surface
water, groundwater, soil or substrata; (b) the manufacturing,  processing, sale,
generation,  treatment,  storage, disposal,  labeling or other management of any
waste,  hazardous  substance or hazardous  waste,  and (ii) "Waste,"  "Hazardous
Substance," and "Hazardous  Waste" include any substance  defined as such by any
applicable environmental law.

     3.24.  Compliance  with Other  Laws.  Seller's  operation  of the  Acquired
Business has  complied in all  material  respects  with all  governmental  laws,
statutes,  rules,  regulations and orders not addressed in Section 3.23, and has
secured all  necessary  and  material  permits and  authorizations  and licenses
issued  by,  federal,   state,  local  and  foreign  agencies  and  authorities,
applicable to the operation of the Acquired Business,  properties and operations
(including but not limited to those  concerned with energy,  pollution  control,
franchising and other distribution arrangements, antitrust and trade regulation,
civil rights, labor and discrimination, safety and health, zoning and land use),
the violation of which (or, in the case of necessary permits,  authorizations or
licenses,  the failure to secure)  could have a material  adverse  effect on the
business,  operations,  properties or Assets, or on the condition,  financial or
otherwise,  of the  Acquired  Business.  A  complete  list of all such  permits,
authorizations  and  licenses  is attached  hereto,  made part hereof and marked
Schedule  3.24. All such permits,  authorizations  and licenses are valid and in
full force and effect,  Seller is in compliance with their requirements,  and no
proceeding  is pending  or, to the best of  Seller's  knowledge,  threatened  to
revoke or amend any of them. Except as set forth on Schedule 3.24,  none of such
permits,  authorizations  and  licenses  is or will be in any  way  impaired  or
affected by the execution and delivery of this Agreement or the  consummation of
the transactions contemplated hereby.

     3.25.  Absence  of  Conflict  or  Breach.   The  execution,   delivery  and
performance  of this  Agreement by Seller will not conflict  with or result in a
breach of any of the terms,  conditions  or  provisions  of the  Certificate  of
Incorporation or By-laws of Seller, or of any law,  statute,  rule or regulation
of any governmental  authority, or conflict with or result in a breach of any of
the terms, conditions or provisions of any judgment,  order, injunction,  decree
or ruling of any court or  arbitration  tribunal or  governmental  authority  to
which  Seller  is  subject,  or of any  provision  of any  contract,  agreement,
understanding  or  arrangement  to which Seller is a party or by which Seller is
bound,  including,  without  limitation,  any contracts,  licenses,  agreements,
understandings  or  arrangements  listed on any of the  Schedules  hereto or any
other material contract, or constitute a material default thereunder, or give to
others any interests or rights thereunder, including any rights of acceleration,
termination  or  cancellation,  in or with  respect to the business or assets of
Seller.

     3.26.  Consents and Approvals.  Except as set forth on Schedule 3.26, there
are no authorizations, consents, approvals or notices required to be obtained or
given or  waiting  periods  required  to  expire in order  that  this  Agreement
(including,   without   limitation,   under  the   Hart-Scott-Rodino   Antitrust
Improvements Act of 1976, as amended) and the  transactions  provided for herein
may be  consummated  by Seller  without giving rise to any liability or material
loss of rights by Seller of the Acquired Business.

     3.27. Litigation.  There are no actions at law or in equity, or arbitration
proceedings,  or claims or investigations,  pending or, to the best knowledge of
Seller, threatened, or state of facts existing which could give rise to any such
action, proceedings, claim or investigation, to which Seller is (or, in the case
of  threatened  actions,  would be) a party  which  would  adversely  affect the
Acquired  Business  or any of the Assets or which  might  impair the  ability of
Seller to perform this  Agreement;  there are no proceedings  pending or, to the
best  knowledge  of  Seller,   threatened   against  Seller  by  or  before  any
governmental board, department,  commission,  bureau,  instrumentality or agency
relating primarily to the Acquired Business.

     3.28. No Undisclosed Information. To Seller's knowledge, no representation,
warranty  or  covenant  by  Seller  in  this  Agreement  or in any  Schedule  or
certificate  furnished  by or on  behalf  of  Seller  in  connection  with  this
Agreement  contains any untrue  statement of a material fact or omits to state a
material  fact  required to be stated herein or therein or necessary to make the
statements contained herein or therein not misleading.

4.       Representations and Warranties of Buyer.

     Buyer  represents  and warrants to Seller,  as of the date hereof and as of
the Closing Date, as follows:

     4.1. Corporate Status.  Buyer is a limited liability company duly organized
and  validly  existing  and in good  standing  under  the  laws of the  State of
Delaware.

     4.2. Corporate Power and Authority.  The execution and delivery by Buyer of
this Agreement and the  performance by Buyer of its  obligations  hereunder have
been duly authorized by all required limited  liability company action of Buyer.
Buyer has the  limited  liability  company  power to enter into and  perform its
obligations  under  this  Agreement  in  accordance  with its  terms  and has no
contractual or other  restriction upon its so doing.  This Agreement and each of
the other agreements,  documents and instruments contemplated hereby constitutes
and will  constitute  the  valid  and  legally  binding  obligation  of Buyer in
accordance with its terms.

     4.3. Litigation.  There is no action, suit or proceeding pending, or to the
best knowledge of Buyer,  threatened  against or affecting Buyer which questions
the legality or propriety of the transactions contemplated by this Agreement.

     4.4. Disclosure.  No representation,  warranty or covenant by Buyer in this
Agreement or in any certificate furnished by or on behalf of Buyer in connection
with this Agreement contains any untrue statement of a material fact or omits to
state a material  fact  required to be stated  herein or therein or necessary to
make the statements contained herein or therein not misleading.

     5. Intentionally Omitted.

     6. Covenants of Seller.

     (A) To assure that Buyer will  realize the value and  goodwill  inherent in
the Acquired Business and the Assets,  Seller covenants and agrees that from and
after  the date of this  Agreement  and for a period  of five  years  after  the
Closing Date,  neither Seller nor any entity under  Seller's  direct or indirect
control shall:

     (1) directly or indirectly (a) engage in (as an owner, partner,  consultant
or otherwise) any business which would be competitive with the Acquired Business
in any manner, whether with respect to the design,  development,  manufacture or
sale of mass  spectrometers  or any other  business  currently  conducted by the
Acquired Business or the sale, license, manufacture or marketing of infrared gas
analyzers  or  quadropole  analyzers,  anywhere in the world;  or (b) acquire or
retain any  financial  interest  having a fair value in excess of the greater of
$5,000 in, or 5% of the equity of, any business which is so engaged; or

     (2)  directly  or  indirectly  (a) induce any of  Seller's  customers  with
respect to the  Acquired  Business to patronize  any business  similar to any of
those described in clause (1) above; (b) canvass,  solicit or accept from any of
Seller's customers with respect to the Acquired Business any business similar to
any of those  described  in clause  (1)  above;  or (c)  request  or advise  any
individual or company which is a customer of Seller with respect to the Acquired
Business to withdraw, curtail or cancel any such customer's business with Buyer;
or

     (3) directly or indirectly,  at any time following the Closing Date, in any
way utilize,  disclose,  copy,  reproduce or retain in its possession any of the
Intellectual  Property  provided that Seller may retain  copies of  Intellectual
Property that is in the public domain (other than as a result of Seller's breach
of this Agreement).

     Seller acknowledges and agrees that the foregoing restrictions set forth in
this Section  6(B) are  reasonable  in scope and  duration and are  necessary to
protect Buyer after the Closing Date. If, however, any provision of this Section
6(B) is under any circumstances adjudged by a court of competent jurisdiction to
be invalid or unenforceable,  the same will in no way affect any other provision
of Section 6(B) or any other part of this  Agreement,  the  application  of such
provision in any other  circumstances or the validity or  enforceability of this
Agreement.  If  any  such  provision,  or  any  part  thereof,  is  held  to  be
unenforceable  because of the  duration of such  provision  or the area  covered
thereby,  the parties agree that the court making such  determination  will have
the power to reduce the duration and/or area of such provision, and/or to delete
specific words or phrases in order to render the provision  enforceable,  and in
its reduced form such provision  will then be enforceable  and will be enforced.
Upon breach of any  provision of Section 6(B) of this  Agreement,  Buyer will he
entitled to injunctive  relief since the remedy at law would be  inadequate  and
insufficient.  In addition to such injunctive relief, Buyer shall be entitled to
such damages as it can show it has sustained by reason of such breach.

     (B) Seller  further  covenants  and agrees  that from and after the Closing
Date it shall:

     (1) Upon Buyer's  request  (and at Buyer's  expense),  promptly  provide to
Buyer all  pertinent  facts and  documents  relating to any of the  Intellectual
Property  as may be known and  accessible  to  Seller,  and  Seller,  at Buyer's
expense, will testify as to the same in any proceeding, interference, litigation
and  adversarial  proceeding  related  thereto  and will  promptly  execute  and
deliver,  at Buyer's expense,  to Buyer or Buyer's legal  representative any and
all papers,  instruments or affidavits required to apply for, obtain,  maintain,
issue and enforce any of the  Intellectual  Property  which may be  necessary to
carry out the purposes thereof;

     (2)  Cooperate  with  Buyer to ensure an orderly  transition  in respect of
those  employees of Seller who accept  employment  with Buyer from and after the
Closing Date; and

     (3) Use its  reasonable  efforts,  upon the  request  and at the expense of
Buyer,  to make available to Buyer all of Seller's rights and benefits under the
1997 Purchase Agreement and to otherwise cooperate with Buyer to enable Buyer to
enjoy the practical realization thereof.

     (C) Seller hereby covenants and agrees that from and after the date of this
Agreement,  except as may be required by law, rule or regulation or court order,
Seller  and each  entity  which is now or  hereafter  under  Seller's  direct or
indirect control shall:

     (1) Subject to Seller's rights set forth in Section 17 hereof, at all times
preserve the confidentiality of the Assets,  including, but not limited to, each
of the items of the Intellectual  Property,  and all data, documents,  financial
reports and other information primarily relating to the past, present and future
operations of the Acquired Business, whether now possessed by Seller or acquired
by Seller prior to or after the Closing Date  (collectively,  the  "Confidential
Information"). Seller agrees that it shall take all steps necessary or advisable
to ensure that each entity now or hereafter directly or indirectly controlled by
Seller, and all officers,  directors,  employees,  agents and representatives of
Seller,  and  any  entity  which  is now or  hereafter  directly  or  indirectly
controlled  by  Seller,   at  all  times  keep  the   Confidential   Information
confidential and do not divulge any of the Confidential Information to any other
person, firm or entity without Buyer's prior written consent.

     (2) At no time during the two year period after the Closing Date, initiate,
solicit,  encourage  or,  make,  have or engage in any  communications,  whether
written or oral and whether  private or public,  with or to any person,  firm or
entity (other than Buyer or Buyer's officers,  directors,  employees, agents and
representatives)  concerning  the future  conduct or business  prospects  of the
Acquired  Business,  the  adequacy,  sufficiency,  usefulness  or quality of the
Assets,  including,  but not limited to, any of the  Intellectual  Property,  or
Buyer's ability to operate the Acquired Business in a profitable manner.  Seller
agrees that each shall take all steps necessary or advisable to ensure that each
entity now or hereafter  directly or indirectly  controlled  by Seller,  and all
officers,  directors and management  employees of Seller and such entities,  and
all  technical  and  sales  personnel  of Seller  who have  worked  directly  or
indirectly  with the Assets,  comply in all respects with the provisions of this
Section 6(C) provided,  that if an individual was, but no longer is, an officer,
director,  employee  or  otherwise  considered  personnel  of the  Seller or its
affiliates,  Seller shall use its commercially reasonable efforts to enforce any
confidentiality  agreements  entered into by such  individual  with  Seller,  at
Buyer's expense.

     (3)  Notwithstanding  the  foregoing  paragraphs  (1) and (2),  the parties
hereto  expressly  agree that  statements  relating to the expenses  incurred by
Seller  relating to the Acquired  Business and  statements  concerning  Seller's
decision to sell the Assets and the Acquired  Business that are consistent  with
and in the  nature  of  prior  public  statements  made by  Seller  or that  are
otherwise required or appropriate by law shall not constitute a violation of the
restrictions set forth in the two immediately preceding paragraphs.

     (D) Seller further  covenants that it shall (i) pay all stamp,  sales, use,
value added, documents, excise, property transfer,  recording,  registration and
other similar taxes and charges ("Transfer Taxes")  attributable to the transfer
of the Assets to Buyer  pursuant to this  Agreement  and (ii) shall  prepare and
timely file all returns and reports and forms required to be filed in respect of
the Transfer Taxes.

     (E) Seller  further  covenants and agrees that,  promptly after the Closing
Date, it shall request the return of all  Confidential  Information  provided to
potential  purchasers  of the  Acquired  Business  and it shall  take all  other
reasonable  actions  requested by Buyer (and at Buyer's  expense) to enforce its
rights under any  confidentiality  or similar agreements with any such potential
purchasers.

     7. Intentionally Omitted.

     8. Conditions to Obligations of Buyer.

     The  obligations  of Buyer  hereunder  shall be  subject  to the  following
conditions, any or all of which may be waived in writing by Buyer:

     8.1. Representations, Warranties and Covenants. Each of the representations
and  warranties  of Seller  set forth in Article  III  hereof  shall be true and
correct on and as of the  Closing  Date with the same  effect as if made at such
time; and Seller shall have in all respects  performed and complied with each of
the agreements, covenants,  stipulations, terms and conditions hereof applicable
to it.

     8.2.   FIRPTA   Certificate.   Seller  shall  have  delivered  to  Buyer  a
certificate,  as  contemplated  under and  meeting the  requirements  of Section
1.1445-2(b)(2)(i) of the treasury regulations,  to the effect that Seller is not
a foreign  person  within the  meaning of the Code and the  applicable  treasury
regulations.

     8.3. Intentionally Omitted.

     8.4.  Delivery of Assets to be Acquired.  Seller shall have  delivered  the
Assets to Buyer, free and clear of all Liens other than Permitted Encumbrances.

     8.5. No Litigation.  No action or proceeding  shall have been instituted or
threatened  to set aside the  transactions  provided  for herein or to enjoin or
prevent the consummation thereof.

     8.6. Required  Consents.  All required or advisable  governmental and other
third party  consents and approvals  for the  consummation  of the  transactions
provided for herein shall have been secured,  including, but not limited to, all
third party  consents  required by the terms of the  applicable  agreement to be
obtained in connection  with the  assignment  to and  assumption by Buyer of the
various leases,  contracts,  licenses and other agreements of Seller as provided
herein, all of which are listed on Schedule 8.6 hereto.

     8.7.  Satisfaction  of Liens.  Seller  shall have  caused to be removed all
Liens on the  Assets  other  than the  Permitted  Encumbrances,  and shall  have
furnished evidence thereof to Buyer.

     8.8.  Employment  Agreements.  Each of the  employees  of Seller  listed on
Schedule 3.18  which Buyer elects to hire,  other than Anthony N. Duryea,  shall
have resigned  their  employment  with Seller,  accepted  employment  with Buyer
effective upon consummation of the transactions contemplated hereby and executed
a  Confidentiality  Agreement with Buyer acceptable to Buyer. Each of Anthony N.
Duryea's,  Gary M. Duryea's and Alan B. Celo's employment  agreement with Seller
listed on  Schedule 3.18  hereof shall have been  terminated  without any future
liability  of any kind on behalf of Buyer  and  Anthony  N.  Duryea  shall  have
executed and delivered an Employment  Agreement with Buyer in a form  acceptable
to Mr. Duryea and Buyer.

     8.9. Documents.  Seller shall have executed and delivered all documents and
instruments necessary or appropriate to consummate the transactions contemplated
hereby,  including,  but not limited to, each of those documents and instruments
provided for in Section 2.5, and all such other documents  reasonably  requested
by Buyer in connection with the consummation of the transactions contemplated by
this Agreement.

     9. Conditions to Obligations of Seller.

     The  obligations  of Seller  hereunder  shall be subject  to the  following
conditions, any or all of which may be waived in writing by Seller:

     9.1. Representations, Warranties and Covenants. Each of the representations
and warranties of Buyer set forth in Article IV hereof shall be true and correct
on and as of the Closing Date with the same effect as if made at such time;  and
Buyer  shall  have in all  respects  performed  and  complied  with  each of the
agreements,  covenants,  stipulations, terms and conditions hereof applicable to
Buyer.

     9.2. No Litigation and Lack of Consent.  No action or proceeding shall have
been instituted or threatened to set aside the transactions  provided for herein
or to enjoin or prevent the consummation  thereof; and all required governmental
consents and approvals for the consummation of such transactions shall have been
secured.

     9.3.  Delivery of Purchase  Price.  Buyer shall have delivered the Purchase
Price to Seller.

     10. Indemnification.

     10.1.  Indemnification by Seller.  Seller agrees to indemnify Buyer and its
affiliates  (together  with its  successors  and assigns) and hold them harmless
from and against and with respect to, and to pay and reimburse such  indemnified
persons for: any and all damage,  loss,  liability,  deficiency,  claim, expense
(including  any  reasonable   attorney  and  accountant  fees,  legal  costs  or
expenses),  action,  suit,  proceeding,  demand,  assessment  or  judgment to or
against  Buyer  (and/or its  affiliates)  or an appeal of any of the  foregoing,
whether  or  not  resulting  from  third-party  claims,  arising  out  of  or in
connection with:

     (A) any Retained Liability;

     (B) any breach or violation of, or non-performance by, Seller of any of its
representations, warranties, covenants or agreements contained in this Agreement
or in any document, certificate or schedule required to be furnished pursuant to
this Agreement;

     (C) any actual or alleged  infringement of any third-party  patent right in
any of the countries covered by the patents or patent  applications set forth in
Schedule 3.11 issued or published prior to the third  anniversary of the Closing
Date arising out of or in connection  with the  commercial  exploitation  of any
matter  covered  by any of the claims  set forth in U.S.  Patent  No.  5,304,799
titled  "Cycloidal Mass  Spectrometer  and Ionizer For Use Therein" issued April
19,  1994  (the  "Patent"),   except  to  the  extent  such  actual  or  alleged
infringement  is attributable  to additions or  modifications  to cycloidal mass
spectrometers which have not been completely or substantially developed prior to
the Closing by Seller, as reflected in any design, drawing, prototype,  computer
software or other  tangible  embodiment of any such  development in existence on
the Closing Date and made  available  to Buyer on or prior to the Closing  Date,
provided, however, that:

     (i) in the  event  Buyer  makes a  product  covered  by a patent  or patent
application  in Schedule  3.11 that  contains  an optional  addition or optional
modification  that  is not  reasonably  necessary  in  order  to  implement  the
invention disclosed and claimed in the relevant patent or patent applications in
Schedule  3.11 (an  "Optional  Addition"),  Seller  shall  not be  obligated  to
indemnify Buyer against a claim of patent  infringement by a third-party arising
out of Buyer's use of such  Optional  Addition up to and including the date that
Buyer  receives an  Infringement  Notice  (defined  below) with  respect to such
Optional  Addition  if Buyer had,  at the time of its  commercialization  of the
product utilizing such Optional Addition, a commercially  reasonable alternative
to such  Optional  Addition that would have caused  Buyer's  product not to have
infringed such  third-party  patent or any other patent (an  "Alternative")  and
(ii) if, with respect to an Optional Addition, Buyer receives a cease and desist
letter or a patent  notification  letter or is sued  claiming that such Optional
Addition is infringing a third party patent (an "Infringement  Notice"),  Buyer,
as a condition  precedent  to any right of  indemnification  with respect to the
claim set  forth in such  Infringement  Notice  hereunder,  shall (A)  determine
whether there is an  Alternative  to the  applicable  Optional  Addition and (B)
obtain an opinion of qualified counsel as to the validity and  enforceability of
such third party patent and whether it is  infringed  by the Optional  Addition.
Such opinion shall, at minimum, be based on a review of the product,  the patent
alleged  to be  infringed  and its file  history.  In the event that there is no
Alternative,  Seller  shall remain  liable with  respect to its  indemnification
obligations  in  connection  with the  actual or  alleged  infringement  of such
third-party  patent by such Optional Addition from and after the date of Buyer's
receipt of the Infringement  Notice,  whether or not counsel has determined that
the third-party  patent is valid,  enforceable and/or infringed by such Optional
Addition. In the event that there is an Alternative and Buyer does not implement
an Alternative,  Seller shall not be liable with respect to its  indemnification
obligations  in  connection  with the  actual or  alleged  infringement  of such
third-party  patent by such Optional Addition from and after the date of Buyer's
receipt of the Infringement  Notice,  whether or not counsel has determined that
the third-party  patent is valid,  enforceable and/or infringed by such Optional
Addition.  In all cases, if Buyer  determines that there is an Alternative,  and
Buyer  chooses to implement  such  Alternative,  Seller shall remain liable with
respect to its indemnification  obligations hereunder with respect to the use of
such Alternative to the extent otherwise applicable. Notwithstanding anything in
this proviso to the contrary,  if Buyer has notified Seller of its receipt of an
Infringement  Notice or any other  claim or charge  made by a third  party which
would be subject to  indemnification  under this  Article X,  Seller may, at its
option, negotiate in good faith with the appropriate third parties to obtain, at
Seller's expense, a license for Buyer from such third party, provided that Buyer
shall have the right to approve the terms and  conditions  of any such  license,
which approval shall not be unreasonably withheld.  Buyer shall promptly provide
to Seller copies of all opinions of counsel  obtained  under this section.  This
proviso shall not be interpreted  to expand in any way Seller's  indemnification
obligations set forth elsewhere in this Article X;

         and

     (D)   Transfer   Taxes  for  which  Seller  is   responsible   pursuant  to
Section 6(E).

     10.2. Indemnification by Buyer. Buyer shall indemnify Seller (together with
its successors and assigns) and hold it harmless from,  against and with respect
to: any and all damage,  loss,  deficiency,  expense  (including  any reasonable
attorney  and  accountant  fees,  legal  costs  or  expenses),   action,   suit,
proceeding,  demand, assessment or judgment to or against Seller or an appeal of
any of the foregoing arising out of or in connection with:

     (A)  any  debt,  obligation,   claim,   commitment,   liability  or  damage
specifically  assumed by Buyer pursuant to this  Agreement,  incurred or accrued
against  Buyer  subsequent  to the Closing  Date or arising out of the  business
activities  of Buyer  subsequent  thereto  except  to the  extent  the same is a
Retained  Liability or is the subject of any right to  indemnification  of Buyer
under Section 10.1 hereof; and

     (B) any breach or violation of, or  nonperformance  by, Buyer of any of its
representations, warranties, covenants or agreements contained in this Agreement
or in any document, certificate or schedule required to be furnished pursuant to
this Agreement.

     10.3.  Notice of Claims.  If any claim is made by or against a party which,
if sustained,  would give rise to a liability of another party  hereunder,  that
party (the "Claiming  Party") shall within ten (10) days thereafter cause notice
of the claim to be delivered to the other party (the  "Indemnifying  Party") and
shall afford the Indemnifying Party and its counsel, at the Indemnifying Party's
sole expense,  the  opportunity to defend or settle the claim (and, with respect
to claims  made by third  parties,  the  Claiming  Party shall have the right to
participate  at its sole  expense),  provided  that the failure of any  Claiming
Party to give  such  notice  shall not  relieve  the  Indemnifying  Party of its
indemnification  obligations  hereunder  except to the extent that such  failure
results  in  a  lack  of  actual  notice  to  the  Indemnifying  Party  and  the
Indemnifying Party is materially  prejudiced as a result of such failure to give
notice.  Any notice of a claim shall state, with reasonable  specification,  the
alleged  basis for the claim and the amount of liability  asserted by or against
the other party by reason of the claim, to the extent then known.  Failure by an
Indemnifying  Party to notify a Claiming  Party in  writing of the  Indemnifying
Party's  election to defend or settle any such claim  within ten (10) days after
notice  thereof  shall have been  delivered to the  Indemnifying  Party shall be
deemed a waiver by the Indemnifying  Party of its right to defend or settle such
claim. If notice is given and the Indemnifying Party fails to assume the defense
of the claim in writing within ten (10) days thereof, the claim may be defended,
compromised  or  settled  by the  Claiming  Party  without  the  consent  of the
Indemnifying  Party and the  Indemnifying  Party shall remain  liable under this
Article X. Except for claims related to Retained Liabilities or assumed by Buyer
as  provided  in Section  1.3,  claims  made for a breach of  representation  or
warranty  under  Section 3.4  hereof  and  claims  related  to fraud or  willful
misconduct (as to which foregoing  claims no deductible  shall apply),  no party
shall be required to  indemnify  any other  party until a  Twenty-Five  Thousand
Dollar ($25,000) deductible (the "Deductible") has been exceeded.  The aggregate
liability of any party hereto  under the  provisions  of this Article X shall be
limited to an amount not to exceed  $1,500,000 plus the aggregate  amount of all
Earn-Out  Payments made by Buyer under  Section 11 hereof (the "Cap")  provided,
however, that:

     (A)  the Cap  shall  not  apply  to any  claim  that  Buyer  may  have  for
indemnification pursuant to this Article X to the extent that such claim relates
to a Retained Liability,  fraud or willful misconduct by Seller,  provided that,
if  such  claim  relates  to  a  Retained  Liability,  Buyer  gives  Seller  the
opportunity to assume the defense or settlement of such claim in accordance with
the foregoing provisions of this Section 10.3; and

     (B) the Cap  shall  not  apply  to any  claim  that  Seller  may  have  for
indemnification pursuant to this Article X to the extent that such claim relates
to a liability or obligation  assumed by Buyer as provided in Section 1.3 or the
operation of the Acquired Business after the Closing Date,  provided that Seller
gives Buyer the opportunity to assume the defense or settlement of such claim in
accordance with the foregoing provisions of this Section 10.3.

     10.4. Survival of Indemnity  Obligation.  The rights of Buyer and Seller to
assert  claims for  indemnification  set forth in  Sections  10.1 and 10.2 shall
survive the Closing Date and shall expire:

     (A) with  respect to all  claims  other than  third  party  claims,  claims
related to the  nonpayment  of taxes or other  similar  claims  pursuant  to any
federal, state, county or other local taxing statutes,  claims made for a breach
of  representation or warranty under Section 3.4 and claims subject to subclause
(D) below, on the second (2nd) anniversary of the Closing Date;

     (B) with  respect to claims  relating to the  nonpayment  of taxes or other
similar  claims  pursuant to any  federal,  state,  county or other local taxing
statutes,  or with respect to Transfer Taxes, upon the expiration of ninety (90)
days following the date on which the running of the statute of limitations  with
respect to any such claim shall bar such assessment and collection of claim;

     (C) with respect to third party claims  against Buyer or its  successors or
assigns relating to any actual or alleged infringement of any third-party patent
right in any of the countries covered by the patents or patent  applications set
forth in Schedule  3.11  arising  out of or in  connection  with the  commercial
exploitation  of any  matter  covered  by any of the  claims  set  forth  in the
applicable patent or patent application in such country (as such right to assert
claims for  indemnification  is limited by the terms of Section 10.1(C) hereof),
on the third (3rd) anniversary of the Closing Date; provided,  however, that the
right to assert  claims for  indemnification  with  respect to such third  party
claims shall expire on the second (2nd)  anniversary  of the Closing Date in the
event that, prior to such anniversary,  Buyer or its successors or assigns shall
have sold or otherwise  transferred the applicable patent or patent  application
to a third party that is unaffiliated with Buyer; and

     (D) (1) except as  specifically  set forth to the contrary in paragraph (C)
of this  Section  10.5,  with  respect  to Buyer's  claims  for  indemnification
relating to Retained  Liabilities  and  liabilities  arising out of the business
activities of Seller prior to the Closing  Date,  and (2) with respect to claims
for  indemnification by Seller relating to liabilities  specifically  assumed by
Buyer as provided  in Section  1.3 of this  Agreement,  upon the  expiration  of
ninety  (90) days  following  the date on which the  running  of all  applicable
statute of  limitations  applicable  to any such claim shall bar  initiation  of
legal proceedings with respect to such claim.

     10.5.  Exclusive Remedy.  The remedies provided in this Section 10 shall be
the exclusive remedies for any breach of this Agreement (other than with respect
to Sections 6, 11, 12, 14 and 21.7 hereof).

     11. Earn-Out Payments.

     11.1. General.  Subject to the terms set forth herein, Buyer shall make the
Earn-Out  Payments  (as defined in  Section 11.3(A)  below) on or before 60 days
after the end of each  Earn-Out  Year (as defined in  Section 11.2  below).  The
right to receive the Earn-Out Payments shall represent only a right to receive a
cash payment and shall not include any  attributes of common stock and shall not
entitle  Seller to any rights of any kind other than as  specifically  set forth
herein.

     11.2.  Definitions.  (A) "Earn-Out  Year" shall refer to each calendar year
beginning  with 2001 and ending the  earlier of (i) 2012 and (ii) the first year
during which there are no Valid Patent  Claims  (whether due to the  expiration,
revocation  or  cancellation  of the  Patent or  otherwise,  but  subject to the
proviso at the end of Section 11.2(C)).

     (B) "Eligible  Product" shall mean any product of Buyer (or its affiliates,
successors and assigns,  as the case may be; as used in this Article XI, "Buyer"
shall be deemed to include Buyer and its  successors and assigns) (x) in which a
Valid  Patent  Claim  is part of such  product's  operation  or  performance  or
incorporated  into such product's design or structure and shall also include any
product designed by Buyer with a principal purpose of circumventing the Earn-Out
Payments, and (y) which has been shipped to a country where a Valid Patent Claim
exists in a commercial arrangement under which revenues are received by Buyer or
its  affiliates  (under the  meaning  with  respect  thereto  in the  Securities
Exchange  Act of 1934,  as amended).  Without  limiting  the  generality  of the
foregoing,  the parties agree as follows:  (i) a product that would otherwise be
an Eligible Product that is shipped for no immediate consideration, but with the
expectation of the development of a commercial relationship with the receiver of
the product shall not be deemed to be an Eligible  Product  unless and until the
earlier of (i) payment being made on or in connection  with such product or (ii)
the date that is 150 days after such product's shipment, unless such product has
been returned to Buyer prior to such date;  (ii) a product that would  otherwise
be an Eligible Product that is shipped as a replacement of a previously  shipped
Eligible Product shall not be deemed to be an Eligible Product,  (iii) a product
that is  returned to the Buyer,  its  successors  or assigns or any  licensee of
Buyer or its  successors  or assigns  for a refund  shall not be deemed to be an
Eligible  Product and; (iv) an Eligible Product shall not be deemed to have been
shipped more than once.

     (C) "Valid Patent  Claims" shall mean the claims of the patents and pending
applications  listed on  Schedule  3.11  hereto  which have been  granted or are
pending on the date hereof and which have not expired or been revoked, canceled,
nullified  or  finally  held  invalid  ("Patent   Rights"),   and  any  and  all
Improvements   (defined  below)  thereof.  The  term  "Improvements"  means  any
improvement,  enhancement,  extension or  modification of such Patent Rights and
any patentable or non-patentable  process or development of any kind based on or
derived from such Patent  Rights;  provided  that no Valid Patent Claim shall be
deemed to have  expired,  been  revoked,  canceled,  nullified  or finally  held
invalid  if such  event is  caused  directly  or  indirectly  by an  Improvement
initially developed by Buyer or its affiliates,  successors or assigns after the
Closing Date or by the failure of Buyer to pay required fees or expenses,  or to
take any other ministerial actions required to maintain such Valid Patent Claim.

     (D) "Prime Rate" means the rate of interest reported as the "prime rate" in
the money  rates  section of the Wall  Street  Journal  on the date an  Earn-Out
Payment is due and owing.

     11.3. Earn-Out Payments. (A) Patent Revenues.  Notwithstanding  anything in
this  Agreement to the contrary,  no payment of any kind shall be due or payable
by Buyer  under  this  Section 11  for the first  550  Eligible  Products  (such
cumulative  amount, the "Patent  Threshold").  Commencing with the Earn-Out Year
during which the Patent Threshold is exceeded, and thereafter at the end of each
subsequent  Earn-Out Year, Buyer shall,  subject to the other provisions of this
Section 11, make a payment to Seller (individually,  an "Earn-Out Payment", and,
collectively,  the "Earn-Out  Payments") for each Eligible Product subsequent to
Buyer's reaching the Patent Threshold as follows:

     (1) Buyer shall pay to Seller an amount  equal to the sum of (i) $1,000 for
each Eligible Product for non-medical applications (other than Portable Products
(defined below))  ("Industrial  Products"),  (ii) $375 for each Eligible Product
for medical applications  ("Medical Products") plus (iii) $650 for each Eligible
Product  that is portable,  special-purpose  mass  spectrometer  with an average
selling  price of no  greater  than  $12,500  ("Portable  Products"),  until the
aggregate  amount of the Earn-Out  Payments made for all Earn-Out Years by Buyer
to Seller hereunder equals $1 million;

     (2) thereafter, Buyer shall pay to Seller an amount equal to the sum of (i)
$300 for each Industrial Product,  (ii) $100 for each Medical Product plus (iii)
$225 for each  Portable  Product  until the  aggregate  amount  of all  Earn-Out
Payments made by Buyer to Seller under Sections 11.3(A)(1) and 11.3(A)(2) equals
$2.5 million; and

     (3) thereafter, Buyer shall pay to Seller an amount equal to the sum of (i)
$150 for each  Industrial  Product,  (ii) $50 for each Medical Product and (iii)
$100 for each Portable Product until there ceases to be an Earn-Out Year.

     For the avoidance of doubt,  the parties agree that under no  circumstances
will any  Earn-Out  Payments  be due or owing  with  respect  to the  first  550
Eligible Products.

     11.4. Earn-Out Statement. (A) Within 60 days after the end of each Earn-Out
Year,  Buyer shall  prepare and deliver to Seller (i) a statement  (an "Earn-Out
Statement"),  certified  by  its  Chief  Financial  Officer,  attesting  to  the
conformity of the  principles  used in calculating  the Earn-Out  Payment to the
provisions  of Section 11  hereof,  which  statement  shall  include  reasonable
supporting  documentation with respect to such calculation;  and (ii) pay Seller
the Earn-Out Payment which Buyer has calculated to be due.

     (B) The Earn-Out  Statement shall, at Seller's option, be subject to review
and   verification   by  an  independent   public   accounting   firm  or  other
representative  of Seller's choice.  If Seller chooses to conduct such a review,
it shall also have the right to review the Earn-Out  Statement from the Earn-Out
Year ended  immediately  prior to the most  recently  ended  Earn-Out  Year (the
"Prior  Earn-Out  Statement"),  provided that Seller did not previously  conduct
such a review of the Prior Earn-Out  Statement.  Such review will be at Seller's
expense,  unless such  accounting  firm shall discover a discrepancy (as finally
determined  pursuant to the procedures of this Section 11.4) of at least fifteen
percent of the Earn-Out  Payment (or Earn-Out  Payments,  as the case may be) in
question,  in which case the fees of such accounting firm shall be paid by Buyer
both with respect to the review which  uncovered the discrepancy and to a review
of  the  Prior   Earn-Out   Statement.   Buyer  shall  permit   Seller  and  its
representatives  to have reasonable  access to the data and information on which
the Earn-Out Statement (or Earn-Out Statements, as the case may be) was prepared
and to Buyer's employees and/or  representatives who assisted in its preparation
to the extent necessary to verify such information.

     (C) If Seller  agrees with the  Earn-Out  Statement  for the most  recently
ended Earn-Out Year (the "Current  Earn-Out  Statement")  and the calculation of
the Earn-Out Payment therein (the "Current Earn-Out Payment"), Seller shall send
written  notice of acceptance  thereof to Buyer.  Except in the case of fraud or
willful misconduct on the part of Buyer, Seller shall be deemed to have accepted
the Current  Earn-Out  Statement  and the  Current  Earn-Out  Payment  indicated
therein,  along with the Prior Year Earn-Out  Statement,  if applicable,  unless
within 60 days after the date of  delivery of the  Current  Earn-Out  Statement,
Seller  gives  written  notice to Buyer of an objection to any item thereon (the
"Objection  Notice"),  which Objection Notice shall specify in reasonable detail
the basis for such  objection.  The  Objection  Notice  shall also  specify  any
objections  Seller  has  with  respect  to  the  Prior  Earn-Out  Statement,  if
applicable.  If Seller  gives such an Objection  Notice,  Buyer and Seller shall
attempt in good faith to resolve the dispute as promptly as possible.

     (D) If Buyer and Seller  have not been able to agree upon a  resolution  of
the dispute  within 30 days after the date Seller  gave such  Objection  Notice,
such dispute shall be resolved fully and finally in Pittsburgh,  Pennsylvania by
an arbitration governed by the American Arbitration Association, provided that a
sole  arbitrator  shall be employed.  The  arbitration  shall be governed by the
state  equivalent of the Federal  Arbitration Act, 9 U.S.C.  1016, and judgment
upon the award  rendered by the  arbitrator  may be entered by any court  having
jurisdiction  thereof.  The  parties  shall  have  10 days  from  the end of the
discussion  between Buyer and Seller to agree upon a mutually  acceptable person
to act as arbitrator.  The arbitrator  shall be a neutral person (i.e., a person
not  affiliated  with either of the parties) and shall have the capacity to make
the  judgments  required to calculate the  applicable  Earn-Out  Payment.  If no
arbitrator  has been selected  within such time,  Buyer and Seller shall jointly
request the American  Arbitration  Association or another  mutually  agreed upon
organization  to  supply  with  10  days of  such  request  a list of  potential
arbitrators  with  qualifications  as  specified  by the  parties  in the  joint
request.  Within  five days of  receipt  of the list,  Buyer  and  Seller  shall
independently  rank  the  proposed  candidates,  shall  simultaneously  exchange
rankings,  and shall be deemed to have selected as the arbitrator the individual
receiving the highest  combined ranking who is available to serve. If there is a
tie, then the tie shall be broken by putting the names on slips of paper, mixing
them up and having one party  draw one slip of paper.  If Buyer or Seller  shall
not  cooperate in the selection of the  arbitrator,  the other may solely select
the  arbitrator  utilizing  the  procedures  set  forth  herein.  The  costs  of
arbitration  shall be apportioned  between Buyer and Seller as determined by the
arbitrator in such manner as the arbitrator deems reasonable taking into account
the circumstances of the case, the conduct of the parties during the proceeding,
and the result of the arbitration. Any arbitration proceeding shall be concluded
in a  maximum  of  one  month  from  the  date  of  the  Objection  Notice.  All
negotiations  pursuant  to this  Section  shall be  treated  as  compromise  and
settlement  negotiations  for  purposes  of Rule  408 of the  Federal  Rules  of
Evidence and comparable state Rules of Evidence. All negotiation and arbitration
proceedings  under this Section shall be treated as confidential  information in
accordance with the provisions of Section 6 (C) (1) hereof. Any arbitrator shall
be bound  by an  agreement  containing  confidentiality  provisions  at least as
restrictive  as those  contained in such Section.  Nothing herein shall preclude
Seller  or Buyer  from  seeking  equitable  relief  to  prevent  any  immediate,
irreparable harm to its interest, including multiple breaches of this Agreement.
Otherwise,  these procedures are exclusive and shall be fully exhausted prior to
the initiation of any litigation.  Either party may seek specific enforcement of
any  arbitrator's  decision  under this  Section  11.4.  The other  party's only
defense to such a request for specific  enforcement  shall be fraud by or on the
arbitrator.  Upon final  determination  of the appropriate  amount of applicable
Earn-Out Payment in question, the unpaid portion of such amount shall be paid in
accordance with the provisions of Section 11.5.

     11.5. Payment.  Buyer shall pay the unpaid portion (if any) of the Earn-Out
Payment for any  Earn-Out  Year no later than 5 days after the date the Earn-Out
Payment has been  conclusively  determined  (whether  pursuant  to an  agreement
between Buyer and Seller or pursuant to the arbitrator's  decision in accordance
with Section  11.4) in cash or by check.  Buyer shall pay to Seller  interest at
two percent (2%) above the Prime Rate on any such unpaid portion of the Earn-Out
Payment owed for the period beginning 60 days after the end of the Earn-Out Year
to which an Earn-Out  Payment  relates  until such  Earn-Out  Payment is paid in
full.

     11.6.  Buy-Out  Provisions.  (a) In the event that Buyer desires to sell or
transfer the Patent or an interest in the Patent  (excluding,  for the avoidance
of doubt,  any  non-exclusive  license of the  Patent),  or to sell or otherwise
transfer all, or substantially all of its assets,  including the Patent, whether
pursuant to a sale of stock or assets, a merger,  or otherwise (each, a "Buy-Out
Event"),  Buyer shall,  prior to  consummating  any such Buy-Out  Event,  at its
option (i) provide for the transferee or merged, consolidated or combined entity
(as the case may be) to assume  all of the  remaining  obligations  of Buyer set
forth in this  Section 11 (in which case Buyer shall be  automatically  released
from  any  further  obligation  to  make  any  payments  to  Seller  under  this
Section 11)  or (ii) if and  only if  Buyer  is not an  "affiliate"  (under  the
meaning  with  respect  thereto as set forth in the  Securities  Exchange Act of
1934, as amended) of any of the other parties to the Buy-Out Event,  irrevocably
agree to pay Seller the Buy-Out Payment  (defined  below) as finally  determined
pursuant to the terms  hereof.  If Buyer pays Seller the  Buy-Out  Payment,  all
further  obligations of Buyer (or its  successors and assigns)  pursuant to this
Section 11 shall  immediately  cease,  and no further  payments shall be payable
hereunder to the Seller.

     (b) "Buy-Out  Payment" means (x) if the Buy-Out Event is consummated  prior
to  December 31,  2003, the sum of (i) the greater of (A) $1 million and (B) the
Present Value Payment  (defined below) and (ii) the Earn-Out  Payment that would
be owed to Seller if the then current  Earn-Out Year ended on the effective date
of the Buy-Out  Event or (y) if the  Buy-Out  Event is  consummated  on or after
December 31,  2003,  the sum of (i) the  Present  Value  Payment  and  (ii)  the
Earn-Out  Payment that would be owed to Seller if the then current Earn-Out Year
ended on the effective date of the Buy-Out Event.

     (c) "Present  Value  Payment"  means the aggregate  Earn-Out  Payments that
would be payable from the date of the Buy-Out Event  through the final  Earn-Out
Year if the highest  Earn-Out Payment prior to the Buy-Out Event were duplicated
for each remaining  Earn-Out Payment for each remaining Earn-Out Year (including
the portion of the Earn-Out  Year from the date of the Buy-Out Event to December
31 of such Earn-Out  Year),  discounted to the date of the Buy-Out Event using a
10%  discount  factor.  In the event  that the  Buy-Out  Event  occurs  prior to
December  31, 2001,  the highest  Earn-Out  Payment  (for  purposes of the first
sentence  of this  Section  11.6(c))  shall be  determined  by  multiplying  the
Earn-Out  Payment  for  2001  that  would  be due and  owing  if  there  were no
additional Eligible Products in 2001 after the Buy-Out Event by a fraction,  the
numerator of which shall be 365 and the denominator of which shall be the number
of days that have  expired in such  Earn-Out  Year upon the date of the  Buy-Out
Event.

     (d) Any dispute  between Buyer and Seller with respect to the amount of any
Buy-Out  Payment shall be resolved in accordance  with the same  procedures  set
forth in Section 11.4(D);  it being understood that so long as Buyer delivers to
Seller  an  irrevocable  statement  agreeing  to  pay  the  Buy-Out  Payment  in
accordance  with procedures set forth in Section  11.4(D),  Buyer may consummate
the Earn-Out Event without the consent of Seller.

     12. Prorations and Allocations.

     (A) The adjustments  referred to in this  Section 12(A)  shall reflect,  in
accordance with generally accepted accounting principles, the principle that all
expenses  (other than those expenses  which are a part of the  liabilities to be
assumed or  retained by Seller in  accordance  with this  Agreement)  and income
arising out of the Assets or the Acquired Business which are attributable to the
period after August 31, 2000 (the "Cut-Off  Date") are for the account of Buyer,
and all expenses and income  arising out of the Assets or the Acquired  Business
which are  attributable  to the period on or before the Cut-Off Date are for the
account of Seller. To the extent possible at Closing,  Seller shall pay to Buyer
or Buyer to Seller,  as the case may be, the amount  calculated  as being due to
one party by the other after netting all of the adjustments necessary to reflect
the foregoing principle.

     (B) Any of the foregoing adjustments which is not capable of calculation at
the Closing shall be finally adjusted and payable ninety (90) days following the
Closing Date.

     (C) For purposes of this Agreement,  any liability for any tax attributable
to a period  which  begins  before  and ends  after the  Cut-Off  Date  shall be
apportioned  between the portion of such period  ending on the Cut-Off  Date and
the portion  beginning on the day after the Cut-Off Date (x) in the case of real
and personal  property taxes, by apportioning such taxes on a per diem basis and
(y) in the case of all other taxes, on the basis of the actual activities of the
Acquired  Business,  as  determined  from the books and records of the  Acquired
Business for such partial period.

     13. Costs and Expenses.

     Seller shall pay all fees and expenses  incurred by it in  connection  with
the transactions  provided for hereunder  including the fees and expenses of its
counsel  and  accountants;  and Buyer shall pay all  expenses  incurred by it in
connection with the transactions provided for hereunder,  including the fees and
expenses of its counsel and accountants.

     14. Absence Broker or Finder.
     Seller  represents  and  warrants  to Buyer  that,  except  as set forth on
Schedule  14  hereto,  no  broker or finder  acted or is  acting  for  Seller in
connection  with the  transactions  provided  for in this  Agreement,  and Buyer
represents  and  warrants to Seller that no broker or finder  acted or is acting
for it in connection therewith. Each party shall, without limitation, indemnify,
defend  and  hold the  others  harmless  from  and  against  any  cost,  expense
(including  reasonable  attorneys' fees) claim,  loss or liability in connection
with a claim by any broker, consultant or finder claiming to have dealt with the
indemnifying  party. The provisions of this Section 14 shall survive the Closing
indefinitely.

     15. Instruments of Further Assurance.

     Each of the  parties  hereto  agrees,  upon the  request of any other party
hereto,  from time to time to execute  and  deliver to such other party all such
instruments  and  documents  of  further  assurance  or  otherwise  as  shall be
reasonable under the  circumstances,  and to do any and all such acts and things
as may  reasonably be required to carry out the  obligations  of such  requested
party  hereunder  and  to  consummate  the  transactions  provided  for  herein,
including without  limitation,  all such instruments as may be necessary to vest
in Buyer  all  properties,  rights  and  assets  of  every  kind,  character  or
description which hereafter may become the property of Seller under the terms of
Seller's  Employment  Agreement  with Anthony N. Duryea  listed on Schedule 3.18
hereof.

     16. Right of Buyer to Nominate Related Company.

     Buyer  shall have the right to nominate  any  company  which is a direct or
indirect  wholly-owned  subsidiary  of Buyer,  to acquire all or any portion the
Acquired  Business  and the  Assets in  Buyer's  stead.  In the event that Buyer
nominates  such  subsidiary,  Buyer may assign the  Agreement and any and all of
Buyer's  rights  under  this  Agreement  to  such  subsidiary.   Upon  any  such
assignment,  such subsidiary shall be entitled to the same rights,  and shall be
subject to the same liabilities,  that Buyer has hereunder,  and Buyer covenants
and agrees that it will cause such  subsidiary to perform in accordance with the
provisions hereof.

     17. News Releases.

     No notices to third parties or other  publicity,  including press releases,
concerning  any of the  transactions  provided  for herein  shall be made unless
planned and  coordinated  jointly  between  Buyer and Seller,  unless  Seller is
advised by counsel that a news release or disclosure is required or  appropriate
and  Seller  is unable to comply  with the terms of this  Article  after  making
reasonable efforts to do so.  Notwithstanding  the foregoing,  the parties agree
that Seller may describe generally in press releases and periodic reports to the
Securities  Exchange Commission the assets transferred  hereunder,  the purchase
price paid for such  assets and the  identity  of the Buyer,  provided  that the
Buyer  and  Seller  shall  agree as to the  text of the  initial  press  release
describing the transaction contemplated by this Agreement.

     18. Successors and Assigns.

     This Agreement  shall be binding upon and shall inure to the benefit of the
respective successors and assigns of the parties hereto, but, except as provided
for in Sections 11.7(a) and 16 hereof, shall not be assigned by any party hereto
without the prior written consent of the other party.

     19. Governing Law.

     This Agreement  shall be interpreted  and construed in accordance  with the
laws of the Commonwealth of Pennsylvania.

     20. Execution in Counterparts.

     This Agreement may be executed in one or more  counterparts,  each of which
shall be deemed to be an original but all of which together shall constitute but
one and the same document.

     21. Miscellaneous.

     21.1.  Entire  Agreement.  This Agreement  constitutes the entire agreement
between  the  parties  hereto  pertaining  to the  subject  matters  hereof  and
supersedes   all   negotiations,   preliminary   agreements  and  all  prior  or
contemporaneous   discussions  and  understandings  of  the  parties  hereto  in
connection with the subject matters hereof.

     21.2. Amendments. No amendment, change or modification of any of the terms,
provisions  or conditions of this  Agreement  shall be effective  unless made in
writing and signed or  initialed  on behalf of the parties  hereto by their duly
authorized representatives.

     21.3.  Headings  and  Captions.  The titles or  captions  of  Articles  and
Sections in this Agreement are provided for convenient reference only, and shall
not be  considered a part hereof for purposes of  interpreting  or construing or
applying this  Agreement,  and such titles or captions shall not define,  limit,
extend,  explain or describe the scope or extent of this Agreement or any of its
terms or conditions.

     21.4. Gender and Number. Words and phrases herein shall be construed in the
singular or plural number and as masculine, feminine or neuter gender, according
to the context.

     21.5. Notices.  All notices or other  communications  required or permitted
hereunder  shall be in  writing  and shall be  deemed  given or  delivered  when
delivered  personally,  by  registered or certified  mail, by legible  facsimile
transmission or by overnight courier (fare prepaid) addressed as follows:

                  If to Buyer, to:
                         Fred Allardyce
                         Monitor Acquisition Co. LLC
                         c/o Kelso & Company
                         320 Park Avenue
                         New York, NY 10022
                         Telecopy: (212) 223-2379

                  with a copy to:
                         Stephen R. Hertz, Esq.
                         Debevoise & Plimpton
                         875 Third Avenue
                         New York, NY 10022
                         Telecopy: (212) 909-6836

                  If to Seller, to:
                         Lee B. Foster, II
                         Chairman and Chief Executive Officer
                         L.B. Foster Company
                         Foster Plaza
                         P.O. Box 2806
                         Pittsburgh, PA 15230
                         Telecopy: (412) 928-7891

                  with a copy to:
                         David L. Voltz, Esq.
                         General Counsel
                         L.B. Foster Company
                         Foster Plaza
                         P.O. Box 2806
                         Pittsburgh, PA 15230
                         Telecopy: (412) 928-7891

     or to such address as such party may indicate by a notice  delivered to the
other  parties  hereto.  Notice  shall be  deemed  received  the same day  (when
delivered  personally),  five (5) days after mailing (when sent by registered or
certified  mail),  the same business day (when sent by  facsimile)  and the next
business day (when delivered by overnight courier).  Any party to this Agreement
may change its  address to which all  communications  and notices may be sent by
addressing notices of such change in the manner provided.

     21.6.  Severability.  If any provision of this Agreement is held by a court
of competent jurisdiction to be invalid, void or unenforceable, the remainder of
the provisions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated unless such invalidity,  voidance
or  unenforceability  prevents the  conveyance,  transfer and  assignment of the
Acquired Business and the Assets to Buyer as contemplated in this Agreement.

     21.7. Bulk Sales.  Buyer,  on the one hand, and Seller,  on the other hand,
each  agree to waive  compliance  by the  other  with the bulk  sales law of any
jurisdiction in connection with the  transactions  contemplated  hereby.  Seller
hereby does  indemnify and hold Buyer  harmless from and against,  and shall pay
and reimburse  Buyer for, any cost,  expense  (including  reasonable  attorneys'
fees) or liability  resulting  from the claims of creditors with respect to such
bulk sales laws. This Section 21.7 shall survive the Closing indefinitely.

     21.8.  No Third Party  Beneficiaries.  The parties  hereto do not intend to
confer any benefit  hereunder on any person  (including  any employees or former
employees of Seller or employees hired by Buyer), firm or corporation other than
the parties hereto and their respective successors and assigns.

     21.9.  No Waiver.  No waiver of any breach of any  agreement  or  provision
contained  herein shall be deemed  effective  unless  specifically  set forth in
writing by the party so waiving and no such  waiver  shall be deemed a waiver of
any  preceding  or  succeeding  breach  thereof  or of any  other  agreement  or
provision  contained  herein.  No  extension  of  time  for  performance  of any
obligations or acts shall be deemed an extension of the time for  performance of
any other obligations or acts.

     21.10. Schedules and Exhibits.  Each of the Schedules and Exhibits attached
hereto are incorporated herein by reference and made a part of this Agreement.

     21.11.  Knowledge.  As used herein, Seller's knowledge shall be interpreted
to mean the actual knowledge of the executive officers of Seller.

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

IN WITNESS  WHEREOF,  the parties  hereto have caused this Agreement of Purchase
and Sale to be executed on the day and year first written above.


                                  L.B. FOSTER COMPANY


                                  /s/Lee B. Foster
                                  By:Lee B. Foster II
                                  Title: Chief Executive Officer


                                  MONITOR ACQUISITION CO. LLC


                                  /s/Fred A. Allardyce
                                  By:Fred A. Allardyce
                                  Title: