VERDANT BRANDS INC, S-4/A, 1998-10-21

VERDANT BRANDS INC
S-4/A, 1998-10-21
AGRICULTURAL CHEMICALS

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<PAGE>

REGISTRATION NO. 333-65113

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 21, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

---------------

AMENDMENT NO. 1

TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
VERDANT BRANDS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

MINNESOTA 2870 41-0848688
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)

MARK G. EISENSCHENK
9555 JAMES AVENUE SOUTH 9555 JAMES AVENUE SOUTH
BLOOMINGTON, MINNESOTA 55431 BLOOMINGTON, MINNESOTA 55431
(612) 703-3300 (612) 703-3300
(ADDRESS, INCLUDING ZIP CODE, AND (NAME, ADDRESS, INCLUDING ZIP CODE,
TELEPHONE NUMBER, INCLUDING AND TELEPHONE NUMBER,
AREA CODE, OF REGISTRANT'S PRINCIPAL INCLUDING AREA CODE, OF AGENT FOR
EXECUTIVE OFFICES) SERVICE)

---------------
COPIES TO:
MICHAEL TRUCANO MICHAEL W. SHACKELFORD
DORSEY & WHITNEY LLP ATER WYNNE LLP
PILLSBURY CENTER SOUTH 222 S.W. COLUMBIA
220 SOUTH SIXTH STREET SUITE 1800
MINNEAPOLIS, MINNESOTA 55402 PORTLAND, OREGON 97201

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As promptly as practicable after this Registration Statement becomes
effective.

If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED(1) REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par
value................. 10,152,069(2) $.9375 $9,517,564.69 $2,807.71(3)
</TABLE>
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(1) This Registration Statement relates to securities of the Registrant
issuable to holders of common stock of Consep, Inc. ("Consep") in
connection with the merger as described in the accompanying Joint Proxy
Statement-Prospectus (the "Merger").
(2) Based on the maximum number of shares of common stock of Consep that may
be outstanding immediately prior to the Merger (10,127,069 shares) and the
number of shares issuable to Piper Jaffray Inc., financial advisor to the
Registrant, as part of its fee (25,000).

---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

LOGO

October 26, 1998

Dear Shareholder:

You are cordially invited to attend the Special Meeting of Shareholders of
Verdant Brands, Inc., a Minnesota corporation ("Verdant"), to be held at 11:00
a.m. local time, on December 7, 1998, at the offices of Verdant at 9555 James
Avenue South, Suite 200, Bloomington, Minnesota 55431. At the meeting, you
will be asked to vote upon a proposal to approve an Agreement and Plan of
Merger dated as of September 8, 1998 (the "Merger Agreement") pursuant to
which Consep Acquisition, Inc., an Oregon corporation and wholly-owned
subsidiary of Verdant will be merged (the "Merger") with and into Consep,
Inc., an Oregon corporation ("Consep"), and Consep will become a wholly-owned
subsidiary of Verdant. In connection with the Merger, each outstanding share
of Consep common stock will be converted into the right to receive 0.95 of one
share of Verdant common stock (the "Exchange Ratio").

In addition, at the meeting you will be asked to vote upon a proposal to
amend the Restated Articles of Incorporation of Verdant to increase the number
of authorized shares of Verdant common stock from 25,000,000 to 50,000,000
(the "Charter Amendment").

Consummation of the Merger is subject to certain conditions, including
obtaining the requisite approvals of the Merger Agreement by Verdant's and
Consep's shareholders and approval of the Charter Amendment by Verdant's
shareholders.

THE BOARD OF DIRECTORS OF VERDANT HAS APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT AND THE CHARTER AMENDMENT
AND BELIEVES THAT THESE ACTIONS ARE IN THE BEST INTERESTS OF VERDANT AND ITS
SHAREHOLDERS. THE BOARD RECOMMENDS THAT YOU VOTE FOR EACH PROPOSAL. Verdant's
financial advisor, Piper Jaffray Inc., has rendered its written opinion to the
Verdant Board of Directors that, as of September 8, 1998, the consideration to
be paid by Verdant for the Consep common stock in connection with the Merger
was fair to Verdant.

VERDANT'S SHAREHOLDERS ARE URGED TO READ CAREFULLY THE ACCOMPANYING NOTICE
OF VERDANT SPECIAL MEETING AND JOINT PROXY STATEMENT-PROSPECTUS, INCLUDING THE
APPENDICES THERETO, WHICH CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER.

Whether or not you personally attend the meeting, it is important that your
shares are represented at the Special Meeting. Failure to vote will have the
same effect as a vote against the Merger Agreement and may prevent a vote with
respect to the Charter Amendment. Please complete, sign, date and return the
accompanying proxy card as soon as possible, even if you plan to attend the
Special Meeting. This procedure will not prevent you from voting in person,
but will ensure that your vote is counted if you are unable to attend.

On behalf of the Verdant's Board of Directors, I thank you for your support
and again urge you to vote FOR the approval of the Merger Agreement and
approval of the Charter Amendment.

Very truly yours,

/s/ Stanley Goldberg

Stanley Goldberg
Chairman, President and
Chief Executive Officer
<PAGE>

LOGO

October 26, 1998

Dear Shareholder:

You are cordially invited to attend a Special Meeting of the Shareholders of
Consep, Inc., an Oregon corporation ("Consep"), to be held at 9:00 a.m. local
time, on December 7, 1998, at the offices of Consep at 213 Southwest Columbia
Street, Bend, Oregon 97702. At the meeting, Consep's shareholders will be
asked to vote on a proposal to approve an Agreement and Plan of Merger dated
as of September 8, 1998 (the "Merger Agreement"), pursuant to which Consep
Acquisition, Inc., an Oregon corporation and wholly-owned subsidiary of
Verdant Brands, Inc., a Minnesota corporation ("Verdant"), will merge (the
"Merger") with and into Consep and Consep will become a wholly-owned
subsidiary of Verdant. In connection with the Merger, each outstanding share
of Consep common stock will be converted into the right to receive 0.95 of one
share of Verdant common stock (the "Exchange Ratio").

THE BOARD OF DIRECTORS OF CONSEP HAS APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, AND BELIEVES THAT THIS ACTION IS IN THE
BEST INTERESTS OF CONSEP SHAREHOLDERS. THE BOARD RECOMMENDS THAT YOU VOTE FOR
THE PROPOSAL. Consep's financial advisor, Pacific Crest Securities Inc., has
rendered its written opinion to the Consep Board of Directors, dated September
8, 1998, that, as of such date, the Exchange Ratio was fair to the holders of
Consep Common Stock.

CONSEP'S SHAREHOLDERS ARE URGED TO READ CAREFULLY THE ACCOMPANYING NOTICE OF
CONSEP SPECIAL MEETING AND JOINT PROXY STATEMENT-PROSPECTUS, INCLUDING THE
APPENDICES THERETO, WHICH CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER.

Whether or not you personally attend the meeting, it is important that your
shares are represented at the Special Meeting. Failure to vote will have the
same effect as a vote against the Merger Agreement. Please complete, sign,
date and return the accompanying proxy card as soon as possible, even if you
plan to attend the Special Meeting. This procedure will not prevent you from
voting in person, but will ensure that your vote is counted if you are unable
to attend.

On behalf of the Consep Board of Directors, I thank you for your support and
again urge you to vote FOR the approval of the Merger Agreement.

Very truly yours,

/s/ Volker G. Oakey

Volker G. Oakey
Chairman, President and
Chief Executive Officer
<PAGE>

VERDANT BRANDS, INC.

9555 JAMES AVENUE SOUTH, SUITE 200
BLOOMINGTON, MINNESOTA 55431

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON DECEMBER 7, 1998

NOTICE IS HEREBY GIVEN that a special meeting (including any adjournments or
postponements thereof, the "Verdant Special Meeting") of holders of the common
stock, $0.01 par value ("Verdant Common Stock"), of Verdant Brands, Inc.
("Verdant"), will be held at 11:00 a.m. local time, on December 7, 1998, at
the offices of Verdant at 9555 James Avenue South, Suite 200, Bloomington,
Minnesota 55431. The Joint Proxy Statement-Prospectus for the Verdant Special
Meeting is attached and a Proxy Card is enclosed.

The Verdant Special Meeting is for the purpose of considering and acting
upon the following proposals:

1. A proposal to approve an Agreement and Plan of Merger, dated as of
September 8, 1998 (the "Merger Agreement"), among Consep, Inc., an Oregon
corporation ("Consep"), Verdant and Consep Acquisition, Inc., an Oregon
corporation and wholly-owned subsidiary of Verdant ("Merger Subsidiary"),
providing for the merger (the "Merger") of Merger Subsidiary with and into
Consep. After the Merger, each outstanding share of common stock, $0.01 par
value ("Consep Common Stock"), of Consep will become the right to receive
0.95 of one share of Verdant Common Stock and Consep will become a wholly-
owned subsidiary of Verdant. A copy of the Merger Agreement is attached as
Appendix A to the accompanying Joint Proxy Statement-Prospectus.

2. A proposal to approve an amendment to the Verdant Restated Articles of
Incorporation to increase the number of authorized shares of Verdant Common
Stock from 25,000,000 to 50,000,000 shares (the "Charter Amendment").

3. Such other matters as may properly come before the Verdant Special
Meeting or any adjournment or postponement thereof.

Approval and adoption of the Merger Agreement requires the affirmative vote
of the holders of a majority of the outstanding shares of Verdant Common
Stock. Approval of the Charter Amendment requires the affirmative vote of a
majority of the shares of Verdant Common Stock represented at the Verdant
Special Meeting, provided that a quorum of holders of at least a majority of
the outstanding shares is present at the meeting. The approval of the Merger
Agreement and the consummation of the Merger are contingent upon approval of
the Charter Amendment. The approval of the Charter Amendment is contingent
upon consummation of the Merger. The Board of Directors of Verdant is not
aware of any other business to come before the Verdant Special Meeting.

THE BOARD OF DIRECTORS OF VERDANT RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
APPROVAL OF THE MERGER AGREEMENT AND APPROVAL OF THE CHARTER AMENDMENT.

The close of business on October 15, 1998 has been fixed as the record date
for determination of the holders of Verdant Common Stock entitled to notice of
and to vote at the Verdant Special Meeting.
<PAGE>

It is important that your shares be represented at the Verdant Special
Meeting. You are urged to complete and sign the accompanying Proxy Card, which
is solicited by the Board of Directors of Verdant, and mail it promptly in the
enclosed envelope. All proxies are important, so please complete each Proxy
Card sent to you and return it in the envelope provided. Your proxy will not
be used if you attend and vote at the Special Meeting in person.

By Order of the Board of Directors,

/s/ Stanley Goldberg

Stanley Goldberg
Chairman, President and Chief
Executive Officer

Bloomington, Minnesota

October 26, 1998

IMPORTANT: PLEASE RETURN EACH PROXY CARD SENT TO YOU. THE PROMPT RETURN OF
PROXIES WILL SAVE VERDANT THE EXPENSE OF FURTHER REQUESTS FOR PROXIES. AN
ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF
MAILED IN THE UNITED STATES.

2
<PAGE>

CONSEP, INC.
213 SOUTHWEST COLUMBIA STREET
BEND, OREGON 97702

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON DECEMBER 7, 1998

Notice is hereby given that a special meeting (including any adjournments or
postponements thereof, the "Consep Special Meeting") of holders of the common
stock, $.01 par value ("Consep Common Stock"), of Consep, Inc., an Oregon
corporation ("Consep"), will be held at 9:00 a.m. local time, on December 7,
1998, at the offices of Consep at 213 Southwest Columbia Street, Bend, Oregon
97702. The Joint Proxy Statement-Prospectus for the Consep Special Meeting is
attached and a Proxy Card is enclosed.

The Consep Special Meeting is for the purpose of considering and acting upon
the following proposals:

1. A proposal to approve an Agreement and Plan of Merger, dated as of
September 8, 1998 (the "Merger Agreement"), among Consep, an Oregon
corporation, Verdant Brands, Inc. ("Verdant"), a Minnesota corporation and
Consep Acquisition, Inc., an Oregon corporation and wholly-owned subsidiary
of Verdant ("Merger Subsidiary"), providing for the merger (the "Merger")
of Merger Subsidiary with and into Consep. After the Merger, each
outstanding share of Consep Common Stock will become the right to receive
0.95 of one share of common stock, $.01 par value, of Verdant. A copy of
the Merger Agreement is attached as Appendix A to the accompanying Joint
Proxy Statement-Prospectus.

2. Such other matters as may properly come before the Consep Special
Meeting.

Approval of the Merger Agreement requires the affirmative vote of the
holders of a majority of the outstanding shares of Consep Common Stock. The
Board of Directors of Consep is not aware of any other business to come before
the Consep Special Meeting.

THE BOARD OF DIRECTORS OF CONSEP RECOMMENDS THAT SHAREHOLDERS VOTE FOR
APPROVAL OF THE MERGER AGREEMENT.

The close of business on October 15, 1998 has been fixed as the record date
for determination of the holders of Consep Common Stock entitled to notice of
and to vote at the Consep Special Meeting.

Holders of Consep Common Stock do not have appraisal rights under the Oregon
Business Corporation Act (the "OBCA") with respect to the Merger.

It is important that your shares be represented at the Consep Special
Meeting. You are urged to complete and sign the accompanying Proxy Card, which
is solicited by the Board of Directors of Consep, and mail it promptly in the
enclosed envelope. All proxies are important, so please complete each Proxy
Card sent to you and return it in the envelope provided. Your proxy will not
be used if you attend and vote at the Special Meeting in person.

For the Board of Directors,

/s/ Volker G. Oakey

Volker G. Oakey
Chairman, President and Chief
Executive Officer

Bend, Oregon

October 26, 1998

IMPORTANT: PLEASE RETURN EACH PROXY CARD SENT TO YOU. THE PROMPT RETURN OF
PROXIES WILL SAVE CONSEP THE EXPENSE OF FURTHER REQUESTS FOR PROXIES. AN
ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF
MAILED IN THE UNITED STATES.
<PAGE>

JOINT PROXY STATEMENT

CONSEP, INC.
VERDANT BRANDS, INC.

Special Meeting of Shareholders To be
Special Meeting of Shareholders To held on December 7, 1998
be held on December 7, 1998

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PROSPECTUS OF VERDANT BRANDS, INC.

----------------

This Joint Proxy Statement-Prospectus is being furnished to shareholders
(the "Verdant Shareholders") of Verdant Brands, Inc., a Minnesota corporation
("Verdant"), in connection with the solicitation of proxies by the Board of
Directors of Verdant (the "Verdant Board") for use at a special meeting of
shareholders of Verdant (including any adjournment or postponement thereof,
the "Verdant Special Meeting") to be held at 11:00 a.m. local time, on
December 7, 1998, at the offices of Verdant at 9555 James Avenue South, Suite
200, Bloomington, Minnesota 55431. At the Verdant Special Meeting, holders of
the common stock, $.01 par value ("Verdant Common Stock"), of Verdant are
being asked to vote upon a proposal to approve an Agreement and Plan of
Merger, dated as of September 8, 1998 (the "Merger Agreement"), among Consep,
Inc., an Oregon corporation ("Consep"), Verdant and Consep Acquisition, Inc.,
an Oregon corporation and wholly-owned subsidiary of Verdant ("Merger
Subsidiary"), providing for the merger of Merger Subsidiary with and into
Consep (the "Merger"). A copy of the Merger Agreement is attached hereto as
Appendix A and is incorporated herein by reference. Holders of Verdant Common
Stock will also vote upon a proposal to amend the Restated Articles of
Incorporation of Verdant to increase the number of authorized shares of
Verdant Common Stock from 25,000,000 to 50,000,000 (the "Charter Amendment").

This Joint Proxy Statement-Prospectus also is being furnished to
shareholders of Consep (the "Consep Shareholders") in connection with the
solicitation of proxies by the Board of Directors of Consep (the "Consep
Board") for use at a special meeting of shareholders of Consep (including any
adjournment or postponement thereof, the "Consep Special Meeting") to be held
at 9:00 a.m. local time, on December 7, 1998, at the offices of Consep at 213
Southwest Columbia Street, Bend, Oregon 97702. At the Consep Special Meeting,
holders of the common stock, $.01 par value ("Consep Common Stock"), of Consep
will vote upon a proposal to approve the Merger Agreement.

This Joint Proxy Statement-Prospectus also constitutes a prospectus of
Verdant with respect to the Verdant Common Stock issuable to holders of Consep
Common Stock and to Verdant's financial advisor upon consummation of the
Merger.

Upon consummation of the Merger, Consep will merge with and into Merger
Subsidiary, with Consep as the surviving corporation. Each outstanding share
of Consep Common Stock will be converted into the right to receive 0.95 of one
share of Verdant Common Stock (the "Exchange Ratio").

(continued on following page)

----------------

SEE "RISK FACTORS" ON PAGE 22 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY HOLDERS OF SHARES OF VERDANT COMMON STOCK AND HOLDERS
OF SHARES OF CONSEP COMMON STOCK IN CONNECTION WITH EVALUATION OF THE MERGER.

----------------

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT-PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this Joint Proxy Statement-Prospectus is October 26, 1998.
<PAGE>

Verdant Common Stock is listed on the Nasdaq National Market under the
symbol "VERD" and Consep Common Stock is listed on the Nasdaq National Market
under the symbol "CSEP." The Verdant Common Stock issued in connection with
the Merger will be listed on the Nasdaq National Market under the symbol
"VERD." The last reported sale price of Verdant Common Stock as reported by
the Nasdaq National Market on September 9, the last trading day before Verdant
and Consep publicly announced the execution of the Merger Agreement, was
$1.25, and on October 20, 1998, the last trading date prior to the printing of
this Joint Proxy Statement-Prospectus, such price was $1.25 per share. The
last reported sale price of Consep Common Stock as reported by the Nasdaq
National Market on October 20, 1998 was $0.875 per share. Because the Exchange
Ratio is fixed, a change in the market price of Verdant Common Stock before
the consummation of the Merger would affect the market value as of the
Effective Time of the Verdant Common Stock to be received in the Merger in
exchange for Consep Common Stock. THERE CAN BE NO ASSURANCE AS TO THE MARKET
PRICE OF THE VERDANT COMMON STOCK AT ANY TIME PRIOR TO THE EFFECTIVE TIME OR
AT ANY TIME THEREAFTER. Shareholders are urged to obtain current market
quotations for Verdant Common Stock and Consep Common Stock.

Based on (1) the 9,667,357 shares of Consep Common Stock outstanding on
October 15, 1998 (the "Consep Record Date"), (2) the 992,716 shares of Consep
Common Stock issuable upon the exercise of outstanding stock options and
warrants on such date and (3) the Exchange Ratio of 0.95, approximately
10,127,069 shares of Verdant Common Stock are expected to be issued in the
Merger or to be issuable following the Merger upon the exercise of the Verdant
options and warrants into which outstanding Consep options and warrants will
be converted in connection with the Merger.

This Joint Proxy Statement-Prospectus is first being mailed to holders of
Verdant Common Stock ("Verdant Shareholders") and holders of Consep Common
Stock ("Consep Shareholders") on or about October 26, 1998.

AVAILABLE INFORMATION

Verdant and Consep are each subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, file reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). The reports,
proxy statements and other information filed by Verdant and Consep with the
Commission may be inspected and copied at the Commission's public reference
room located at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the public reference facilities in the
Commission's regional offices located at 7 World Trade Center, 13th Floor, New
York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, IL 60661. Copies of such material may be obtained at prescribed
rates by writing to the Commission, Public Reference Section, 450 Fifth
Street, N.W., Washington, D.C. 20549. Certain of such reports, proxy
statements and other information are also available from the Commission over
the Internet at http://www.sec.gov. The shares of Verdant Common Stock are
traded over the counter on the Nasdaq National Market. The shares of Consep
Common Stock are also traded over the counter on the Nasdaq National Market.
Reports, proxy statements and other information concerning Verdant and Consep
may also be inspected at the offices of the National Association of Securities
Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.

This Joint Proxy Statement-Prospectus is included as part of a registration
statement on Form S-4 (together with all amendments and exhibits thereto, the
"Registration Statement") filed with the Commission by Verdant, relating to
the registration under the Securities Act of 1933, as amended (the "Securities
Act"), of the shares of Verdant Common Stock offered hereby. This Joint Proxy
Statement-Prospectus does not contain all of the information set forth in the
Registration Statement, certain portions of which have been omitted pursuant
to the rules and regulations of the Commission, to which reference is hereby
made for further information with respect to Verdant and Consep and the
Verdant Common Stock offered hereby. Statements contained herein concerning
any documents are not necessarily complete and, in each instance, reference is
made to the copies of such documents filed as exhibits to the Registration
Statement. Each such statement is qualified in its entirety by such reference.

2
<PAGE>

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS JOINT PROXY
STATEMENT-PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY CONSEP OR
VERDANT. THIS JOINT PROXY STATEMENT-PROSPECTUS DOES NOT CONSTITUTE THE
SOLICITATION OF A PROXY OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
PURCHASE ANY SECURITIES BY ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER
TO SELL OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.

NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT-PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL IMPLY THAT THERE HAS BEEN NO
CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF CONSEP OR
VERDANT SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE. CONSEP HAS SUPPLIED ALL INFORMATION CONTAINED
IN THIS JOINT PROXY STATEMENT-PROSPECTUS RELATING TO CONSEP AND ITS
SUBSIDIARIES, AND VERDANT HAS SUPPLIED ALL INFORMATION CONTAINED IN THIS JOINT
PROXY STATEMENT-PROSPECTUS RELATING TO VERDANT AND ITS SUBSIDIARIES.

THIS JOINT PROXY STATEMENT-PROSPECTUS DOES NOT COVER ANY RESALES OF SHARES
OF VERDANT COMMON STOCK OFFERED HEREBY TO BE RECEIVED BY SHAREHOLDERS OF
VERDANT DEEMED TO BE "AFFILIATES" OF VERDANT OR CONSEP UPON THE CONSUMMATION
OF THE MERGER. NO PERSON IS AUTHORIZED TO MAKE USE OF THIS JOINT PROXY
STATEMENT-PROSPECTUS IN CONNECTION WITH ANY SUCH RESALES.

NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT-PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF VERDANT
OR CONSEP SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO ITS DATE.

3
<PAGE>

QUESTIONS AND ANSWERS
ABOUT THE MERGER

THIS SUMMARY HIGHLIGHTS CERTAIN INFORMATION FROM THIS DOCUMENT, IS QUALIFIED
BY REFERENCE THERETO AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. TO UNDERSTAND THE MERGER MORE FULLY AND FOR A MORE COMPLETE
DESCRIPTION OF THE LEGAL TERMS OF THE MERGER, YOU SHOULD READ CAREFULLY THIS
ENTIRE DOCUMENT AND THE APPENDICES HERETO. THE SUMMARY DOES NOT CONTAIN A
COMPLETE STATEMENT OF MATERIAL INFORMATION RELATING TO THE MERGER AGREEMENT,
THE MERGER, OR OTHER MATTERS DISCUSSED IN THIS DOCUMENT.

Q: WHY IS CONSEP PROPOSING TO BE ACQUIRED BY VERDANT?

A: The Consep Board determined to recommend approval of the Merger Agreement
and the Merger based on number of factors, including:

. the Consep Board's belief that a combination of Verdant and Consep would
achieve an immediate critical mass of revenues and have a greater chance
of continuing to increase revenues and become a self-sufficient
operation;

. the potential for increased sales to existing customers and new customers
as a result of offering a larger product line that better satisfies
customer needs;

. the Consep Board's belief that a combination of Verdant and Consep would
have greater opportunities to develop strategic partnerships and funding
sources needed to fund ongoing liquidity and capital needs;

. the opportunity to leverage research and development, field development
and marketing capabilities and to share technologies;

. the opportunity to achieve increased marketing strength in the consumer
pest control market;

. the opportunity to achieve lower costs and expenses than the aggregate of
the two separate companies through elimination or reduction of
duplicative infrastructure and personnel expenses;

. the absence of any available alternative transactions to fund Consep's
liquidity and capital needs, including any that would be likely to offer
immediate and long-term economic benefits to Consep Shareholders
comparable or superior to the Merger;

. the terms and provisions of the Merger Agreement and related agreements;

. the fairness opinion of Consep's financial advisor, Pacific Crest
Securities Inc.; and

. historical market prices and recent trading activity of the Consep Common
Stock.

The Consep Board also considered certain countervailing factors such as:

. the risk that the benefits sought in the Merger would not be fully
achieved;

. the risk that the Merger would not be consummated, and the effect of the
public announcement of the Merger on Consep's sales and operating
results;

. Consep's ability to attract and retain key management, marketing and
technical personnel;

. the risk that the pending governmental action and certain legal
proceedings involving subsidiaries of Verdant's wholly-owned subsidiary,
Southern Resources, Inc. ("SRI"), relating to environmental contamination
discovered on or near the manufacturing site operated by a subsidiary of
SRI, could result in material loss to Verdant and its subsidiaries,
including SRI, taken as a whole; and

. other risks described in this Joint Proxy Statement-Prospectus under
"Risk Factors."

Q: WHY IS VERDANT PROPOSING TO ACQUIRE CONSEP?

A: The Verdant Board determined to recommend approval of the Merger Agreement
and the Merger based on a number of factors, including:

. the strategic benefits of expanding Verdant's market position in the area
of biorational pest control products;

4
<PAGE>

. the benefits that the critical mass realized from the acquisition will
provide to Verdant;

. the potential for increased sales to existing customers and new customers
as a result of offering a larger product line that better satisfies
customer needs;

. the Verdant Board's belief that a combination of Verdant and Consep would
have greater opportunities to develop strategic partnerships and funding
sources needed to fund ongoing liquidity and capital needs;

. the opportunity to leverage research and development, field development
and marketing capabilities and to share technologies;

. the opportunity to achieve increased marketing strength in the consumer
pest control market;

. the opportunity to achieve lower costs and expenses than the aggregate of
the two separate companies through elimination or reduction of
duplicative infrastructure and personnel expenses; and

. the terms and provisions of the Merger Agreement and related agreements.

The Verdant Board also considered certain countervailing factors such as:

. the risk that the benefits sought in the Merger would not be fully
achieved;

. the risk that the Merger would not be consummated, and the effect of the
public announcement of the Merger on Verdant's sales and operating
results; o Verdant's's ability to attract and retain key management,
marketing and technical personnel; and

. Verdant's ability to attract and retain key management, marketing and
technical personnel; and

. other risks described in this Joint Proxy Statement-Prospectus under
"Risk Factors."

Q: WHY IS VERDANT PROPOSING TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF
VERDANT COMMON STOCK?

A: The Verdant Board is recommending approval of the Charter Amendment to
increase the number of authorized shares of Verdant Common Stock from
25,000,000 shares to 50,000,000 shares. The proposed amendment is intended
to create a sufficient number of authorized shares of Verdant Common Stock
for issuance to Consep Shareholders in connection with the Merger and to
ensure that a sufficient number of shares of Verdant Common Stock remain
available for general corporate purposes, including issuances pursuant to
employee stock plans, stock dividends, and possible future acquisitions and
issuances for the purpose of raising additional capital. There are no
present plans, understandings or agreements for issuing a material number
of additional shares of Verdant Common Stock. However, if such plans,
understandings or agreements were formulated or reached in the future in
connection with an action or transaction which would not otherwise require
approval by holders of Verdant Common Stock, it could become necessary for
the Verdant Board to call a special meeting of shareholders in order to
authorize an increase in the number of authorized shares of Verdant Common
Stock. The Verdant Board believes that it would not be in shareholders'
best interests for Verdant to bear the expense and inconvenience of such a
special meeting, and accordingly is recommending that such an increase be
approved at the Verdant Special Meeting, which must be held in any event in
order to consider and act upon the Merger. Consummation of the Merger is
conditioned upon approval of the Charter Amendment.

Q: WHAT DO I NEED TO DO NOW?

A: After you have carefully read this Joint Proxy Statement-Prospectus, just
indicate on your proxy card how you want to vote, and sign and mail it in
the enclosed prepaid return envelope as soon as possible, so that your
shares of Consep Common Stock or Verdant Common Stock may be represented at
the Consep Special Meeting or the Verdant Special Meeting, as the case may
be. The Consep Special Meeting will take place at 9:00 a.m., local time, on
December 7, 1998, at the offices of Consep at 213 Southwest Columbia
Street, Bend, Oregon 97702. The Verdant Special Meeting will take place at
11:00 a.m., local time, on December 7, 1998, at the offices of Verdant at
9555 James Avenue South, Suite 200, Bloomington, Minnesota 55431.

The Verdant Board recommends that Verdant Shareholders vote FOR the
approval of the

5
<PAGE>

Merger Agreement and FOR the approval of the Charter Amendment. The Consep
Board recommends that Consep Shareholders vote FOR the approval of the
Merger Agreement.

Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?

A: Your broker will vote your shares only if you provide instructions on how
to vote. You should follow the directions provided by your broker regarding
how to instruct your broker to vote your shares. Without instructions, your
shares will not be voted. For purposes of voting on the proposed Merger by
Consep Shareholders, failure to give instructions will have the same effect
as voting against the proposed Merger. In the case of Verdant Shareholders,
failure to give instructions could result in preventing a vote from being
taken with respect to the Charter Amendment and will have the same effect
as a vote against the proposed Merger.

Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?

A: Yes. You can change your vote at any time before your proxy is voted at the
Consep Special Meeting or the Verdant Special Meeting, as applicable. You
can do this in one of three ways. First, you can send a written notice
stating that you would like to revoke your proxy. Second, you can complete
and submit a new proxy card. If you choose either of these two methods, you
must submit your notice of revocation or your new proxy card to Consep or
Verdant, as applicable, at the address on the cover page of this Joint
Proxy Statement-Prospectus prior to December 7, 1998. Third, you can attend
the Consep Special Meeting or the Verdant Special Meeting, as applicable,
and vote in person. Simply attending the meeting, however, will not revoke
your proxy. If you have instructed a broker to vote your shares, you must
follow directions received from your broker to change your vote.

Q: SHOULD I SEND IN MY CONSEP STOCK CERTIFICATES AT THIS TIME?

A: No. Consep Shareholders should not send in their Consep stock certificates
until they receive transmittal materials from the Exchange Agent. This will
occur promptly following consummation of the Merger.

Q: WHAT WILL HOLDERS OF CONSEP COMMON STOCK RECEIVE IN THE MERGER?

A: Each outstanding share of Consep Common Stock will be converted into the
right to receive 0.95 of one share of Verdant Common Stock. For example, a
holder of 100 shares of Consep Common Stock would receive 95 shares of
Verdant Common Stock.

Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?

A: We are working towards completing the Merger as quickly as possible.
Assuming approval of the Merger and the Charter Amendment, we expect to
complete the Merger on December 7, 1998, and in any event prior to December
31, 1998.

Q: WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER?

A: The Merger is expected to qualify for federal income tax purposes as a tax-
free reorganization. Provided that the Merger does qualify as a tax-free
reorganization, the following federal income tax consequences will
generally result: (i) no gain or loss will be recognized by Verdant, Consep
or Merger Subsidiary as a result of the Merger, (ii) no gain or loss will
be recognized by any Consep Shareholder upon the exchange of Consep Common
Stock for Verdant Common Stock in the Merger (except to the extent of any
cash received in lieu of fractional shares) and (iii) the basis of the
Verdant Common Stock received by a Consep Shareholder who exchanges Consep
Common Stock for Verdant Common Stock will be the same as the basis of the
Consep Common Stock surrendered in exchange therefor reduced by the amount
of cash received for fractional shares. See "THE MERGER--Certain Federal
Income Tax Consequences."

Q: ARE THERE ANY RISKS ASSOCIATED WITH THE MERGER?

A: The Merger does involve risks. For a discussion of certain risk factors
that should be considered in evaluating the Merger, see "RISK FACTORS."

6
<PAGE>

Q: WHAT OTHER MATTERS WILL BE VOTED ON AT THE SPECIAL MEETINGS?

A: Consep does not expect to ask Consep Shareholders to vote on any matter
other than the Merger at the Consep Special Meeting. Verdant does not expect
to ask Verdant Shareholders to vote on any matter other than the Merger and
the Charter Amendment at the Verdant Special Meeting.

Q: WHO CAN HELP ANSWER YOUR QUESTIONS ABOUT THE MERGER AND PROVIDE ADDITIONAL
COPIES OF THE JOINT PROXY STATEMENT-PROSPECTUS?

A: With respect to Verdant, please contact:

VERDANT BRANDS, INC.
9555 James Avenue South, Suite 200
Bloomington, Minnesota 55431
Attention: Mark G. Eisenschenk, Secretary
Telephone Number: (612) 703-3300

With respect to Consep, please contact:

CONSEP, INC.
213 Southwest Columbia Street
Bend, Oregon 97702
Attention: Volker G. Oakey
President and Chief Executive Officer
Telephone Number: (503) 388-3688

7
<PAGE>

CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS

This Joint Proxy Statement-Prospectus (including information included or
incorporated by reference herein) contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995 that
involve risks and uncertainties, including statements about the financial
condition, results of operations, plans, objectives, future performance and
business of each of Verdant and Consep. These forward looking statements
include, (1) statements relating to the impact on revenues of the Merger; (2)
statements relating to the restructuring charges expected to be incurred in
connection with the Merger; and (3) statements preceded by, followed by or
that include the words "believes," "expects," "anticipates," "intends," "will
likely result," "estimates," or other similar expressions. See "THE MERGER--
Reasons of Consep for the Merger" "--Opinion of Consep's Financial Advisor,"
"--Reasons of Verdant for the Merger," "--Opinion of Verdant's Financial
Advisor," "Management and Operations After the Merger," "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
VERDANT," AND "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF CONSEP," including any forecasts, projections and
descriptions of anticipated cost savings or other synergies referred to
therein, and any statements contained herein regarding the development of
possible or assumed future results of operations of Verdant's and Consep's
businesses, the markets for Verdant's and Consep's services and products,
anticipated capital expenditures, regulatory developments, competition or the
effect of the Merger.

Because such statements are subject to risks and uncertainties, and actual
results may differ materially from those expressed or implied by such forward-
looking statements, Verdant Shareholders and Consep Shareholders are cautioned
not to place undue reliance on such statements, which speak only as of the
date hereof.

All subsequent written and oral forward-looking statements attributable to
Verdant or Consep or persons acting on its or their behalf are expressly
qualified in their entirety by the cautionary statements contained or referred
to in this section. Neither Verdant nor Consep undertakes any obligation to
release publicly any revisions to such forward-looking statements to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

8
<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION...................................................... 2
QUESTIONS AND ANSWERS ABOUT THE MERGER..................................... 4
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.................. 8
SUMMARY.................................................................... 11
General................................................................... 11
The Companies............................................................. 11
Verdant Special Meeting and Vote Required................................. 12
Consep Special Meeting and Vote Required.................................. 12
The Merger................................................................ 13
Conditions to the Merger.................................................. 13
Recommendations of Boards of Directors.................................... 13
Opinions of Financial Advisors............................................ 14
Effective Time of the Merger.............................................. 14
Waiver, Amendment; Termination............................................ 14
Certain Federal Income Tax Consequences................................... 15
Interests of Certain Persons in the Merger................................ 15
Management and Operations After the Merger................................ 16
Expenses and Termination Fees............................................. 16
Appraisal Rights.......................................................... 16
Accounting Treatment...................................................... 16
Markets and Market Prices................................................. 16
Comparative Rights of Shareholders........................................ 17
Comparative Unaudited Per Share Data...................................... 17
SELECTED HISTORICAL FINANCIAL DATA......................................... 19
UNAUDITED PRO FORMA SELECTED COMBINED FINANCIAL DATA....................... 21
RISK FACTORS............................................................... 22
VERDANT SPECIAL MEETING.................................................... 25
General................................................................... 25
Solicitation, Voting and Revocability of Proxies.......................... 26
Recommendation of Verdant Board........................................... 27
</TABLE>

<TABLE>
<S> <C>
CONSEP SPECIAL MEETING...................................................... 28
General.................................................................... 28
Solicitation, Voting and Revocability of Proxies........................... 28
Recommendation of Consep Board............................................. 29
THE MERGER.................................................................. 30
Description of the Merger.................................................. 30
Background of the Merger................................................... 30
Reasons of Verdant for the Merger.......................................... 32
Opinion of Verdant's Financial Advisor..................................... 34
Reasons of Consep for the Merger........................................... 37
Opinion of Consep's Financial Advisor...................................... 39
Effective Time............................................................. 41
Exchange of Certificates................................................... 41
Certain Representations and Warranties..................................... 43
Covenants and Agreements................................................... 43
Conditions................................................................. 45
Termination................................................................ 45
Termination Fees........................................................... 46
Waiver and Amendment....................................................... 46
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Certain Federal Income Tax Consequences................................. 47
Interests of Certain Persons in the Merger.............................. 48
Conflicts of Interest................................................... 48
Accounting Treatment.................................................... 49
Resale of Verdant Common Stock Received by Consep Shareholders.......... 49
Appraisal Rights........................................................ 49
MANAGEMENT AND OPERATIONS AFTER THE MERGER............................... 50
Board of Directors...................................................... 50
Management.............................................................. 51
Operations.............................................................. 51
Costs Incurred in Connection with the Merger............................ 52
Corporate Headquarters.................................................. 52
MARKET PRICES AND DIVIDEND INFORMATION................................... 53
Verdant................................................................. 53
Consep.................................................................. 54
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS.............. 55
BUSINESS OF VERDANT...................................................... 59
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF VERDANT................................................ 67
Recent Developments..................................................... 67
Results of Operations................................................... 69
Liquidity and Capital Resources......................................... 76
Effects of Inflation.................................................... 77
Year 2000 Concerns...................................................... 77
New Accounting Pronouncements........................................... 78
BUSINESS OF CONSEP....................................................... 79
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF CONSEP................................................. 90
Overview................................................................ 90
Results of Operations................................................... 91
Liquidity and Capital Resources......................................... 97
Year 2000 Issues........................................................ 98
New Accounting Pronouncements........................................... 98
</TABLE>

<TABLE>
<S> <C>
DESCRIPTION OF VERDANT CAPITAL STOCK........................................ 99
General.................................................................... 99
Common Stock............................................................... 99
Preferred Stock............................................................ 99
Minnesota Business Corporation Act......................................... 99
Transfer Agent and Registrar............................................... 100
COMPARISON OF SHAREHOLDER RIGHTS............................................ 101
Number of Directors, Vacancies and Classification of Board................. 101
Removal of Directors....................................................... 101
Cumulative Voting.......................................................... 102
Special Meetings of Shareholders........................................... 102
Quorums for Shareholder Meetings........................................... 102
Action by Written Consent of Shareholders.................................. 102
Amendments to Articles of Incorporation.................................... 103
Amendments to Bylaws....................................................... 103
Indemnification............................................................ 103
</TABLE>

9
<PAGE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Preemptive Rights....................................................... 104
Mergers, Consolidations and Other Business Combinations................. 104
Transactions with Related Party......................................... 105
Shareholders' Dissenters' Rights........................................ 105
PROPOSAL TO APPROVE AMENDMENT TO VERDANT RESTATED ARTICLES OF
INCORPORATION........................................................... 106
OWNERSHIP OF COMMON STOCK................................................ 107
Verdant Common Stock.................................................... 107
Consep Common Stock..................................................... 108
MANAGEMENT OF VERDANT AND CONSEP......................................... 110
Management of Verdant................................................... 110
Management of Consep.................................................... 111
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
LEGAL OPINIONS........................................................... 113
EXPERTS.................................................................. 113
SHAREHOLDER PROPOSALS.................................................... 114
OTHER MATTERS............................................................ 114
Appendix A
AGREEMENT AND PLAN OF MERGER............................................. A-1
Appendix B
OPINION OF PIPER JAFFRAY INC............................................. B-1
Appendix C
OPINION OF PACIFIC CREST SECURITIES INC.................................. C-1
</TABLE>

10
<PAGE>

SUMMARY

The information below is qualified in its entirety by, and reference is made
to, the more detailed information appearing elsewhere in this Joint Proxy
Statement-Prospectus, including the accompanying Appendices. Each shareholder
is urged to read this Joint Proxy Statement-Prospectus and the Exhibits hereto
in their entirety and with care.

GENERAL

At the Verdant Special Meeting, Verdant Shareholders are being asked to vote
upon (1) a proposal to approve a Merger Agreement providing for the merger of
Merger Subsidiary with and into Consep and the conversion of each outstanding
share of Consep Common Stock into the right to receive 0.95 of one share of
Verdant Common Stock and (2) a proposal to amend the Verdant Restated Articles
of Incorporation to increase the number of authorized shares of Verdant Common
Stock from 25,000,000 to 50,000,000. The approval of the Merger Agreement and
the consummation of the Merger are contingent upon approval of the Charter
Amendment. The approval of the Charter Amendment is contingent on approval of
the Merger Agreement. The Board of Directors of Verdant is not aware of any
other business to come before the Verdant Special Meeting.

At the Consep Special Meeting, Consep Shareholders will vote upon a proposal
to approve the Merger Agreement.

THE COMPANIES

Verdant Brands, Inc. Verdant is a developer, manufacturer and marketer of a
variety of nationally-branded lawn, garden, turf, ornamental, structural and
specialty agricultural products for the retail consumer and specialty
commercial and professional markets. Verdant's product lines include
environmentally sensitive patented, proprietary pesticides and fertilizers sold
under the Safer(R) and Ringer(R) brand names, as well as traditional pesticides
sold under the Dexol(R), Black Leaf(R), AllPro(R) and various private label
brand names. Sales for the fiscal year ended September 30, 1997 were
approximately $18.5 million and are expected to be approximately $45 to $50
million for its fiscal year ending December 31, 1998.

The principal executive office of Verdant is located at 9555 James Avenue
South, Suite 200, Bloomington, Minnesota 55431, and Verdant's telephone number
is (612) 703-3300.

For further information concerning Verdant, see "SELECTED HISTORICAL
FINANCIAL DATA," "BUSINESS OF VERDANT" AND "MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION OF VERDANT" herein.

Consep, Inc. Consep develops, manufactures and markets environmentally
sensitive pest control products for the commercial agriculture and consumer
home, lawn and garden markets. Consep also owns and operates full-line
agrichemical distributors located principally in California. Products
manufactured by Consep employ proprietary controlled release technologies to
enhance the effectiveness and duration of biorational pest control products,
which use naturally occurring agents and biochemicals, such as pheromones, to
control pest populations. Specifically, Consep develops, manufactures and
markets three lines of non-toxic pest control products: (i) pheromone-based
mating disruption products, marketed under the CheckMate(R) label, used to
control insect populations in commercial agriculture; (ii) pheromone-based
traps, marketed under the BioLure(R) label, used to monitor and trap insects in
commercial agriculture; and (iii) consumer products, marketed under the
SureFire(TM) and Insectigone(R) labels, used to trap or otherwise control pests
in homes, lawns and gardens. Unlike most conventional toxic insecticides,
Consep's products are non-toxic to humans and animals, leave no harmful
residues, do not contaminate soil or groundwater and do not disrupt beneficial
insect populations. Consep also sells a line of insect repellent products based
on natural oils, which are manufactured by, and are the proprietary products
of, a third party, and are being marketed on an exclusive basis in the United
States under the Blocker(TM) label.

11
<PAGE>

The principal executive offices of Consep are located at 213 Southwest
Columbia Street, Bend, Oregon 97702, and Consep's telephone number is (541)
388-3688.

For further information concerning Consep, see "SELECTED HISTORICAL FINANCIAL
DATA," "BUSINESS OF CONSEP" and "MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION OF CONSEP" herein.

VERDANT SPECIAL MEETING AND VOTE REQUIRED

The Verdant Special Meeting will be held at 11:00 a.m. local time, on
December 7, 1998, at the offices of Verdant at 9555 James Avenue South, Suite
200, Bloomington Minnesota 55431, at which time the Verdant Shareholders will
be asked to vote to approve the Merger Agreement and the Charter Amendment. The
approval of the Merger Agreement and the consummation of the Merger are
contingent upon approval of the Charter Amendment. The approval of the Charter
Amendment is contingent on approval of the Merger Agreement.

Only the record holders of Verdant Common Stock at the close of business on
October 15, 1998 (the "Verdant Record Date") are entitled to notice of and to
vote at the Verdant Special Meeting. On the Verdant Record Date, there were 228
holders of record of Verdant Common Stock and 16,705,261 shares of Verdant
Common Stock outstanding. Each share of Verdant Common Stock entitles its
holder to one vote.

Approval of the Merger Agreement requires the affirmative vote of the holders
of a majority of the outstanding shares of Verdant Common Stock. Approval of
the Charter Amendment requires the affirmative vote of a majority of the shares
of Verdant Common Stock represented at the Verdant Special Meeting, provided
that a quorum of holders of at least a majority of the outstanding shares is
present or represented by proxy at the meeting. As of the Verdant Record Date,
directors and executive officers of Verdant beneficially owned and were
entitled to vote 2,596,866 shares of Verdant Common Stock, or approximately
15.55% of the shares entitled to vote at the Verdant Special Meeting. It is
currently expected that each such director and executive officer of Verdant
will vote the shares of Verdant Common Stock he or she is entitled to vote for
approval and adoption of the Merger Agreement and the other proposals described
above. As of the Verdant Record Date, directors and executive officers of
Consep did not beneficially own any shares of Verdant Common Stock. See
"VERDANT SPECIAL MEETING."

CONSEP SPECIAL MEETING AND VOTE REQUIRED

The Consep Special Meeting will be held at 9:00 a.m. local time, on December
7, 1998, at the offices of Consep at 213 Southwest Columbia Street, Bend,
Oregon 97702, at which time the Consep Shareholders will be asked to approve
the Merger Agreement. Only the record holders of Consep Common Stock at the
close of business on October 15, 1998 (the "Consep Record Date") are entitled
to notice of and to vote at the Consep Special Meeting. On the Consep Record
Date, there were 171 holders of record of Consep Common Stock and 9,667,357
shares of Consep Common Stock outstanding.

The affirmative vote of the holders of a majority of the outstanding shares
of Consep Common Stock entitled to vote is required to approve the Merger
Agreement. As of the Consep Record Date, directors and executive officers of
Consep beneficially owned and were entitled to vote 729,270 shares of Consep
Common Stock, or approximately 7.54% of the shares entitled to vote at the
Consep Special Meeting. It is currently expected that each such director and
executive officer of Consep will vote the shares of Consep Common Stock he or
she is entitled to vote for approval of the Merger Agreement. As of the Consep
Record Date, directors and executive officers of Verdant did not beneficially
own any shares of Consep Common Stock. See "CONSEP SPECIAL MEETING."

12
<PAGE>

THE MERGER

The Merger Agreement provides that, upon the satisfaction or waiver of
certain conditions, Merger Subsidiary will be merged with and into Consep,
Consep will continue as the surviving corporation, and the separate existence
of Merger Subsidiary will cease. Following the Merger, Consep will be a wholly-
owned subsidiary of Verdant. Pursuant to the Merger Agreement, each share of
Consep Common Stock issued and outstanding at the Effective Time will be
converted into 0.95 of one validly issued, fully paid and nonassessable share
of Verdant Common Stock, with cash to be paid in lieu of any fractional shares
of Verdant Common Stock. Each share of Verdant Common Stock outstanding prior
to the Merger will continue to be outstanding after the Effective Time. Holders
of Verdant Common Stock immediately prior to the Merger as a group will own
approximately 65%, and holders of Consep Common Stock immediately prior to the
Merger as a group will own approximately 35%, of the Verdant Common Stock to be
outstanding immediately following the Effective Time, based on shares
outstanding as of the respective Record Dates. The shares of Verdant Common
Stock issued to Consep Shareholders in connection with the Merger are sometimes
referred to herein as the "Merger Consideration."

Upon consummation of the Merger, each option or warrant to purchase shares of
Consep Common Stock issued by Consep pursuant to any of its stock option plans,
currently outstanding stock purchase warrants or otherwise (each, a "Consep
Stock Option") that is outstanding and unexercised immediately prior to the
Effective Time will be converted automatically into an option or warrant, as
the case may be, to purchase shares of Verdant Common Stock. The number of
shares of Verdant Common Stock purchasable upon the exercise of such Consep
Stock Options will be equal to the product of the number of shares of Consep
Common Stock underlying the Consep Stock Options multiplied by the Exchange
Ratio and rounded down to the nearest whole share, and the exercise price per
share of Verdant Common Stock under each such Consep Stock Option will be
adjusted by dividing the per share exercise price of each such Consep Stock
Option by the Exchange Ratio and rounding upward to the nearest full cent. See
"THE MERGER--Description of the Merger."

CONDITIONS TO THE MERGER

The Merger is subject to the satisfaction of certain conditions, including
among others, the approval of the Merger Agreement and the Merger by the
holders of a majority of the outstanding shares of Consep Common Stock entitled
to vote at the Consep Special Meeting, the approval of the Merger Agreement and
the Merger by the holders of a majority of the outstanding shares of Verdant
Common Stock entitled to vote at the Verdant Special Meeting, the approval of
the Charter Amendment by a majority of the shares of Verdant Common Stock
represented at the Verdant Special Meeting, provided that a quorum of at least
a majority of the votes entitled to be cast at the meeting is present, and the
receipt of applicable authorizations, consents, orders or approvals from third
parties. See "THE MERGER--Conditions to the Merger."

For additional information relating to the Merger, see "THE MERGER."

RECOMMENDATIONS OF BOARDS OF DIRECTORS

THE BOARD OF DIRECTORS OF VERDANT HAS APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY AND THE CHARTER AMENDMENT. THE VERDANT BOARD
BELIEVES THAT THE MERGER AND THE CHARTER AMENDMENT ARE IN THE BEST INTERESTS OF
VERDANT AND ITS SHAREHOLDERS AND RECOMMENDS THAT VERDANT SHAREHOLDERS VOTE
"FOR" APPROVAL OF THE MERGER AGREEMENT AND APPROVAL OF THE CHARTER AMENDMENT.
FOR A DISCUSSION OF THE FACTORS CONSIDERED BY THE VERDANT BOARD IN REACHING ITS
CONCLUSIONS, SEE "THE MERGER--BACKGROUND OF THE MERGER" AND "--REASONS OF
VERDANT FOR THE MERGER."

13
<PAGE>

THE BOARD OF DIRECTORS OF CONSEP (THE "CONSEP BOARD") HAS APPROVED THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY. THE CONSEP BOARD BELIEVES
THAT THE MERGER IS IN THE BEST INTERESTS OF CONSEP SHAREHOLDERS AND RECOMMENDS
THAT CONSEP SHAREHOLDERS VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT. FOR A
DISCUSSION OF THE FACTORS CONSIDERED BY THE CONSEP BOARD IN REACHING ITS
CONCLUSIONS, SEE "THE MERGER--BACKGROUND OF THE MERGER" AND "--REASONS OF
CONSEP FOR THE MERGER."

OPINIONS OF FINANCIAL ADVISORS

Piper Jaffray Inc. ("Piper") is the financial advisor to Verdant. Piper
rendered to the Verdant Board a written opinion, dated September 30, 1998 to
the effect that, as of September 8, 1998, and based upon and subject to certain
matters stated in such opinion, the consideration to be paid by Verdant for the
Consep Common Stock in connection with the Merger is fair to Verdant from a
financial point of view. A copy of the opinion of Piper is attached hereto as
Appendix B and should be read carefully in its entirety with respect to the
procedures followed, assumptions made, matters considered and limitations on
the review undertaken in connection with such opinion. The opinion is directed
to the Verdant Board and relates only to the fairness from a financial point of
view, of the consideration to be paid by Verdant for the Consep Common Stock
and does not address any other aspect of the proposed Merger or any related
transaction and does not constitute a recommendation to any shareholder as to
how such shareholder should vote at the Verdant Special Meeting. See "THE
MERGER--Opinion of Verdant's Financial Advisor."

Pacific Crest Securities Inc. ("PCS") is the financial advisor to Consep. PCS
rendered to the Consep Board a written opinion, dated September 8, 1998, to the
effect that, as of such date and based upon and subject to certain matters
stated in such opinion, the Exchange Ratio was fair to the holders of Consep
Common Stock from a financial point of view. A copy of the opinion of PCS is
attached hereto as Appendix C and should be read carefully in its entirety with
respect to the procedures followed, assumptions made, matters considered and
limitations on the review undertaken in connection with such opinion. The
opinion of PCS is directed to the Consep Board, and relates only to the
fairness of the Exchange Ratio from a financial point of view, does not address
any other aspect of the proposed Merger or any related transaction and does not
constitute a recommendation to any shareholder as to how such shareholder
should vote at the Consep Special Meeting. See "THE MERGER--Opinion of Consep's
Financial Advisor."

EFFECTIVE TIME OF THE MERGER

As soon as practicable after satisfaction or, to the extent permitted in the
Merger Agreement, waiver of all conditions set forth below, the parties will
cause the Merger to be consummated by filing the articles of merger (the
"Articles of Merger") with the Secretary of State of the State of Oregon and
make all other filings or recordings required by Oregon Law in connection with
the Merger and the transactions contemplated by the Merger Agreement. The
Merger will become effective at such time as the Articles of Merger are duly
filed with the Secretary of State of the State of Oregon or at such later time
as may be agreed by the parties in writing and specified in the Articles of
Merger (the "Effective Time"). See "THE MERGER--Effective Time."

WAIVER, AMENDMENT; TERMINATION

The Merger Agreement may be changed or modified by the parties only by action
taken by or on behalf of the respective boards of directors, reflected in a
written amendment signed by the parties, at any time prior to the Effective
Time; provided, however, that, after the approval of the Merger Agreement and
the Merger by the shareholders of Consep, no amendment may be made which would
reduce the amount or change the type of consideration into which each share of
Consep Common Stock will be converted upon consummation of the Merger. See "THE
MERGER--Waiver and Amendment."

14
<PAGE>

The Merger Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time, notwithstanding any requisite approval of the
Merger Agreement and the Merger by the shareholders of Consep or of Verdant:
(1) by mutual written consent of each of Verdant, Merger Subsidiary and Consep;
(2) by either Verdant, Merger Subsidiary or Consep if either (a) the Effective
Time has not occurred on or before December 31, 1998 (except that this right to
terminate the Merger Agreement is not available to any party whose failure to
fulfill any obligation under the Merger Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before such date)
or (b) there is a law that makes consummation of the Merger illegal or
otherwise prohibited or if any court or governmental entity shall have issued
an order, decree, ruling, or has taken any action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other action
shall have become final and unappealable; (3) by either Verdant or Merger
Subsidiary if the board of directors of Consep withdraws, modifies or changes
its recommendation of the Merger Agreement or the Merger in a manner adverse to
Verdant or Merger Subsidiary, for any reason other than the occurrence of an
event or the discovery of a falsity of a representation or warranty relating to
Verdant that has a Parent Material Adverse Effect (as defined in the Merger
Agreement) or recommends to the shareholders of Consep any competing
transaction, or resolves to do so; (4) by Consep if the Verdant Board
withdraws, modifies or changes its recommendation of the Merger Agreement or
the Merger in a manner adverse to Consep, for any reason other than the
occurrence of an event or the discovery of a falsity of a representation or
warranty relating to Consep that has a Company Material Adverse Effect (as
defined in the Merger Agreement) or resolves to do so; (5) by either Verdant,
Merger Subsidiary or Consep if the shareholders of Consep fail to approve the
Merger Agreement or the Merger; (6) by either Verdant, Merger Subsidiary or
Consep, if shareholders of Verdant fail to approve the Merger Agreement, the
Merger or the Charter Amendment; (7) by Consep, in the event of a material
breach by Verdant or Merger Subsidiary of any representation, warranty,
covenant or agreement contained in the Merger Agreement (other than a breach of
Verdant or Merger Subsidiary due to the occurrence of a Parent Material Adverse
Effect arising solely due to the public announcement of the Merger) which has
not been cured or is not curable by December 31, 1998; or (8) by Verdant, in
the event of a material breach by Consep of any representation, warranty,
covenant or agreement contained in the Merger Agreement (other than a breach of
Consep due to the occurrence of a Company Material Adverse Effect arising
solely due to the public announcement of the Merger) which has not been cured
or is not curable by December 31, 1998. See "THE MERGER--Termination" and "--
Termination Fees."

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The Merger is expected to qualify for federal income tax purposes as a tax-
free reorganization. Consep has received an opinion from Ater Wynne LLP,
counsel to Consep, to the effect that the Merger will be treated as a tax-free
reorganization within the meaning of Section 368 of the Internal Revenue Code,
as amended (the "Code"), subject to customary assumptions and representations.
Consummation of the Merger by Consep is conditioned upon such opinion not
having been withdrawn or modified in any material respect prior to such
consummation. Such opinion is not, however, binding on the Internal Revenue
Service. If the Merger qualifies as a tax-free reorganization, holders of the
Consep Common Stock will generally recognize no gain or loss for federal income
tax purposes as a result of the exchange of their shares of Consep Common Stock
for shares of Verdant Common Stock. Each Consep Shareholder is urged to consult
his or her own tax advisor concerning the federal income tax consequences of
the Merger, as well as any applicable state, local, foreign or other tax
consequences, based on such shareholder's own particular facts and
circumstances. See "THE MERGER--Certain Federal Income Tax Consequences."

INTERESTS OF CERTAIN PERSONS IN THE MERGER

Each of Volker G. Oakey, Steven R. Hartmeier and Kenneth C. Rymer, officers
and managers of Consep, as well as eight other manager level employees of
Consep, are parties to change of control agreements that could provide them
with certain benefits in the event of involuntary termination or voluntary
termination preceded by changes in their current job responsibilities, their
job titles, their reporting relationships or their job locations after the
Merger. In addition, the Merger Agreement provides for indemnification
arrangements for Consep directors and officers. See "THE MERGER--Interests of
Certain Persons in the Merger. "

15
<PAGE>

MANAGEMENT AND OPERATIONS AFTER THE MERGER

Management officials of Consep are expected to be retained, and the Verdant
Chief Executive Officer, Chief Financial Officer and Vice President and General
Manager-Retail Sales are expected to continue in their current capacities with
Verdant. Consep will become a wholly-owned subsidiary of Verdant with a board
of directors consisting of Stanley Goldberg, Volker G. Oakey and Mark G.
Eisenschenk. See "MANAGEMENT AND OPERATIONS AFTER THE MERGER."

EXPENSES AND TERMINATION FEES

Each party to the Merger Agreement will bear all expenses incurred by it in
connection with the Merger Agreement and the transactions contemplated thereby,
except for the Termination Fee described above and except that printing,
mailing and filing expenses related to the Registration Statement and the Joint
Proxy Statement--Prospectus will be shared equally between Consep and Verdant.

APPRAISAL RIGHTS

Holders of Verdant Common Stock do not have appraisal rights under the
Minnesota Business Corporation Act (the "MBCA") with respect to the Merger.
Holders of Consep Common Stock do not have appraisal rights under the Oregon
Business Corporation Act (the "OBCA") with respect to the Merger. See "THE
MERGER--No Appraisal Rights."

ACCOUNTING TREATMENT

It is intended that the Merger will be accounted for as a "purchase" under
generally accepted accounting principles ("GAAP"). See "THE MERGER--Accounting
Treatment."

MARKETS AND MARKET PRICES

The Verdant Common Stock is listed on the Nasdaq National Market under the
symbol "VERD" and the Consep Common Stock is traded on the Nasdaq National
Market under the symbol "CSEP." See "MARKET PRICES AND DIVIDEND INFORMATION--
Verdant" and "--Consep." The following table sets forth the closing price per
share of Verdant Common Stock and the closing price per share of Consep Common
Stock as reported on the Nasdaq National Market and the "equivalent per share
price" (as defined below) of Consep Common Stock as of September 9, 1998, the
last trading day before Verdant and Consep publicly announced the

16
<PAGE>

execution of the Merger Agreement, and on October 20, 1998, the last trading
day prior to the printing of this Joint Proxy Statement-Prospectus. The
"equivalent per share price" of Consep Common Stock as of each such date equals
the closing price per share of Verdant Common Stock on such date multiplied by
the Exchange Ratio.

<TABLE>
<CAPTION>
MARKET PRICE PER SHARE
-------------------------
VERDANT CONSEP EQUIVALENT
COMMON COMMON PER SHARE
STOCK STOCK PRICE
------- ------ ----------
<S> <C> <C> <C>
September 9, 1998.................................. $1.25 $0.875 $1.187
October 20, 1998................................... $1.25 $0.875 $1.187
</TABLE>

Verdant Shareholders and Consep Shareholders are urged to obtain current
market quotations for Verdant Common Stock and Consep Common Stock. Because the
Exchange Ratio is fixed, a change in the market price of Verdant Common Stock
before the consummation of the Merger would affect the market value as of the
Effective Time of the Verdant Common Stock to be received in the Merger in
exchange for Consep Common Stock. THERE CAN BE NO ASSURANCE AS TO THE MARKET
PRICE OF VERDANT COMMON STOCK AT ANY TIME BEFORE THE EFFECTIVE DATE OR AT ANY
TIME FOLLOWING THE EXCHANGE OF CONSEP COMMON STOCK FOR VERDANT COMMON STOCK
PURSUANT TO THE MERGER.

COMPARATIVE RIGHTS OF SHAREHOLDERS

Upon consummation of the Merger, holders of Consep Common Stock will become
holders of Verdant Common Stock. Consep is organized under the OBCA and the
laws of the State of Oregon, while Verdant is organized under the MBCA and laws
of the State of Minnesota. Because of differences between the OBCA and the MBCA
and between the provisions that are included in their charter documents, there
are differences in the rights of the holders of Consep Common Stock, on one
hand, and the holders of Verdant Common Stock, on the other. For a discussion
of certain similarities and differences between the rights of holders of Consep
Common Stock and the rights of holders of Verdant Common Stock, see "COMPARISON
OF SHAREHOLDER RIGHTS."

COMPARATIVE UNAUDITED PER SHARE DATA

The following table sets forth selected comparative unaudited basic and
diluted per share data for Verdant on a historical and pro forma combined
basis, and for Consep on a historical and pro forma equivalent basis, giving
effect to the Merger using the purchase method of accounting. For a description
of the effect of purchase accounting on the historical financial statements of
Verdant, see "THE MERGER--Accounting Treatment." The information set forth
below is based on and derived from the consolidated historical financial
statements of Verdant and Consep and the unaudited pro forma condensed combined
financial statements, including the respective notes thereto appearing
elsewhere in this Joint Proxy Statement-Prospectus. This information should be
read in conjunction with such historical financial statements and pro forma
financial statements and the related notes thereto. See "AVAILABLE
INFORMATION," "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS" and
"INDEX TO FINANCIAL STATEMENTS."

The per share data set forth herein are presented for comparative purposes
only and are not necessarily indicative of the future combined financial
position, the results of the future operations or the actual results or
combined financial position of Verdant that would have been achieved had the
Merger been consummated as of the dates or for the periods indicated.

While no assurance can be given, Verdant and Consep expect that, following
the Merger, the combined operations will achieve substantial benefits from the
Merger including operating cost savings and revenue enhancements. However, the
pro forma comparative unaudited per share data do not reflect any direct costs,

17
<PAGE>

potential savings or revenue enhancements which are expected to result from the
consolidation of operations of Verdant and Consep, and therefore, do not
purport to be indicative of the results of future operations of Verdant
following the Merger.

<TABLE>
<CAPTION>
VERDANT CONSEP
COMMON STOCK(1) COMMON STOCK
BASIC ---------------------- ------------------------
PRO FORMA PRO FORMA
HISTORICAL COMBINED(3) HISTORICAL EQUIVALENT(3)
BOOK VALUE:(2) ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
June 30, 1998................ $ 0.91 $ 1.03(2) $ 1.58 $0.58(2)
INCOME (LOSS) FROM OPERATIONS
(3):
Six Months Ended June 30,
1998........................ $ 0.09 $ 0.06 $ 0.01 $ 0.00
October 1, 1997 to December
31, 1997.................... $(0.09) $(0.22) $(0.22) $ (0.08)
Year Ended:
September 30, 1997 (Verdant);
December 31, 1997 (Consep).. $(0.05) $(0.15) $(0.19) $ (0.07)
<CAPTION>
VERDANT CONSEP
COMMON STOCK COMMON STOCK
DILUTED ---------------------- ------------------------
PRO FORMA PRO FORMA
HISTORICAL COMBINED(3) HISTORICAL EQUIVALENT(3)
BOOK VALUE:(2) ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
June 30, 1998................ $ 0.90 $ 1.02(2) $ 1.57 $ 0.58(2)
INCOME (LOSS) FROM OPERATIONS
(3):
Six Months Ended June 30,
1998........................ $ 0.09 $ 0.06 $ 0.01 $ 0.00
October 1, 1997 to December
31, 1997.................... $(0.09) $(0.22) $(0.22) $ (0.08)
Year Ended:
September 30, 1997 (Verdant);
December 31, 1997 (Consep).. $(0.05) $(0.15) $(0.19) $ (0.07)
</TABLE>
- --------
(1) In February 1998, management of Verdant announced the decision to change
Verdant's fiscal year end from September 30 to December 31. In connection
therewith, Verdant filed a Transition Report on Form 10-Q for the period
from October 1, 1997 through December 31, 1997 to transition to the
beginning of its new fiscal year which began on January 1, 1998.

(2) The pro forma combined book value per share of Verdant Common Stock is
based upon the pro forma total common equity for Verdant and Consep,
divided by the total pro forma shares of Verdant Common Stock assuming
conversion of Consep Common Stock at the Exchange Ratio of 0.95 of one
share of Verdant Common Stock for each share of Consep Common Stock. The
pro forma equivalent book value per share of Consep Common Stock was
determined by dividing the historical shareholders' equity of Consep by the
total pro forma shares of Verdant Common Stock assuming conversion of
Consep Common Stock at the Exchange Ratio. See "THE MERGER--Description of
the Merger."

(3) The pro forma combined income (loss) per share from continuing operations
is computed based on the average number of outstanding shares and common
equivalent shares of Verdant, and the average number of outstanding shares
and common equivalent shares of Consep, adjusted for the Exchange Ratio.
The pro forma equivalent income per share of Consep stock represents the
pro forma combined income per share divided by the average number of
outstanding shares and common equivalent shares of Verdant, and the average
number of outstanding shares and common equivalent shares of Consep,
adjusted for the Exchange Ratio. See "THE MERGER--Description of the
Merger."

18
<PAGE>

SELECTED HISTORICAL FINANCIAL DATA

The following tables set forth certain selected historical consolidated
financial data for Verdant and Consep. The interim financial data is unaudited;
however, in the opinion of each of the companies, the interim data includes all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair statement of the results for the interim periods. The selected historical
financial data of Verdant for the years ended September 30, 1995 through 1997
and the selected historical financial data of Consep for the years ended
December 31, 1995 through 1997 were derived from the audited consolidated
historical financial statements of Verdant and Consep, respectively. The
selected historical financial data for the six months ended June 30, 1998 and
1997, for the three month period from October 1 to December 31, 1997 and 1996
of Verdant and the selected historical financial data for the six months ended
June 30, 1998 and 1997 of Consep were derived from the unaudited historical
financial statements of Verdant and Consep, respectively. The selected
historical financial data for Verdant and Consep as of December 31, 1998 was
derived from audited consolidated historical financial information which is not
included herein. This information should be read in conjunction with the
audited consolidated historical financial statements of Verdant and Consep, the
pro forma selected historical financial data, and the unaudited pro forma
condensed combined financial statements, including the respective notes
thereto, appearing elsewhere in this Joint Proxy Statement-Prospectus. See
"AVAILABLE INFORMATION," "PRO FORMA SELECTED HISTORICAL FINANCIAL DATA,"
"UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS" and "INDEX TO
FINANCIAL STATEMENTS."

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF
VERDANT BRANDS, INC.
(in thousands except per share data)

<TABLE>
<CAPTION>
SIX MONTHS OCTOBER 1 TO
ENDED JUNE 30, DECEMBER 31, YEAR ENDED SEPTEMBER 30,
---------------- --------------- ----------------------------
1998 1997 1997 1996 1997 1996 1995
------- ------- ------- ------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... $31,745 $12,197 $ 4,767 $3,481 $ 18,821 $ 14,673 $ 14,194
Gross profit............ 11,696 5,686 1,636 1,774 8,565 7,025 7,204
Operating expenses...... 9,596 5,488 2,768 1,748 9,090 7,371 9,503
------- ------- ------- ------ -------- -------- --------
Income (loss) before
other income (loss).... 2,100 198 (1,132) 26 (525) (346) (2,300)
Other income (expense),
net.................... (586) (68) (65) 33 (21) (222) 127
------- ------- ------- ------ -------- -------- --------
Net (loss) income....... $ 1,514 $ 130 $(1,197) $ 60 $ (546) $ (568) $ (2,173)
======= ======= ======= ====== ======== ======== ========
Income (loss) per
share--basic........... $ .09 $ .01 $ (.09) $ (.01) $ (.05) $ (.05) $ (.20)
======= ======= ======= ====== ======== ======== ========
Income (loss) per
share--diluted......... $ .09 $ .00 $ (.09) $ (.01) $ (.05) $ (.05) $ (.20)
======= ======= ======= ====== ======== ======== ========
Shares uses in
calculating basic
income (loss) per
share.................. 16,689 11,526 13,313 10,922 11,541 10,922 10,898
======= ======= ======= ====== ======== ======== ========
Shares used in
calculating diluted
income (loss) per
share.................. 16,870 11,555 13,313 10,922 11,541 10,922 10,898
======= ======= ======= ====== ======== ======== ========
<CAPTION>
JUNE 30, DECEMBER 31, SEPTEMBER 30,
---------------- --------------- ----------------------------
1998 1997 1997 1996 1997 1996 1995
BALANCE SHEET DATA: ------- ------- ------- ------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and cash
equivalents............ $ 159 $ 1,614 $ 423 $1,391 $ 3,264 $ 3,289 $ 2,756
Accounts receivable..... 14,702 4,354 4,437 3,543 1,153 992 1,200
Inventories............. 11,069 3,530 8,804 1,834 2,806 1,520 2,027
Total current assets.... 26,678 9,743 14,845 7,038 7,444 5,934 6,116
Total assets............ 42,737 17,051 31,423 12,520 14,615 11,470 11,999
Current liabilities..... 20,359 3,828 14,344 2,526 2,385 1,531 1,478
Long-term debt.......... 7,123 1,451 3,307 0 1,459 0 0
Shareholders' equity.... 15,255 11,771 13,773 9,995 10,772 9,939 10,520
</TABLE>

19
<PAGE>

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF
CONSEP, INC.
(in thousands except per share data)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------- -------------------------
1998 1997 1997 1996 1995
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues......................... $ 22,778 $ 24,606 $39,204 $33,229 $30,844
Net income (loss)................ 61 914 (1,822) (2,483) (1,286)
Net income (loss) per share
(basic and diluted)............. 0.01 0.10 (0.19) (0.31) (0.19)
<CAPTION>
JUNE 30, DECEMBER 31,
----------------- -------------------------
1998 1997 1997 1996 1995
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.................. $ 8,063 $ 11,118 $ 8,272 $10,433 $ 8,785
Total assets..................... 30,541 33,237 25,678 23,411 21,559
Long-term debt, excluding current
maturities...................... 2,062 2,395 2,168 1,191 951
Shareholders' equity............. 15,147 17,946 15,217 17,010 14,681
</TABLE>

20
<PAGE>

UNAUDITED PRO FORMA SELECTED COMBINED FINANCIAL DATA
REFLECTING THE MERGER OF VERDANT BRANDS, INC. AND CONSEP, INC.
(in thousands except per share data)

The following unaudited pro forma selected combined financial data gives
effect to the merger of Verdant and Consep, accounted for as a purchase. The
unaudited pro forma condensed combined balance sheet data is based upon
combining the balance sheet of Verdant as of June 30, 1998 with the balance
sheet of Consep as of June 30, 1998. The unaudited pro forma condensed combined
statement of operations data give effect to the proposed merger of Verdant and
Consep by combining the results of operations of Verdant for the six months
ended June 30, 1998 with the results of operations of Consep for the six months
ended June 30, 1998, by reflecting the results of operations of Verdant for the
three month period from October 1 to December 31, 1997, with the historical
operations of Consep for the three month period from October 1, 1997 through
December 31, 1997, and by combining the results of operations of Verdant for
the year ended September 30, 1997 with the results of operations of Consep for
the year ended December 31, 1997. Consep's operations for the three month
period from October 1, 1997 to December 31, 1997 are included in the pro forma
selected condensed combined financial data in both the three month period from
October 1, 1997 to December 31, 1997 and the fiscal year ended September 30,
1997. The unaudited pro forma selected combined financial data should be read
in conjunction with the historical financial statements and notes thereto of
Verdant and Consep. See "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS" and "INDEX TO FINANCIAL STATEMENTS."

The pro forma data is presented for illustrative purposes only and is not
necessarily indicative of the operating results or financial position that
would have been achieved if the Merger had been consummated as of the beginning
of the periods indicated, nor is it necessarily indicative of future financial
position or results of operations. The pro forma statement of operations items
and related per share amounts do not include anticipated revenue enhancements,
operating cost savings or the after-tax impact of merger-related costs expected
as a result of the Merger.

<TABLE>
<CAPTION>
SIX MONTHS OCTOBER 1 TO YEAR ENDED
ENDED JUNE 30, DECEMBER 31, SEPTEMBER 30,
1998 1997 1997
-------------- ------------ -------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................ $54,523 $11,062 $85,964
Gross margin........................ 17,551 1,620 23,172
Operating expenses.................. 15,184 7,210 26,051
------- ------- -------
Income (loss) from operations....... 2,367 (5,590) (2,879)
Other income (expense).............. (793) (313) (963)
------- ------- -------
Income (loss) before taxes........ 1,574 (5,903) (3,842)
Provision for taxes............... -- -- --
------- ------- -------
Income (loss) from operations
after taxes...................... $ 1,574 $(5,903) $(3,842)
======= ======= =======
Income (loss) per share--basic and
diluted............................ $ 0.06 $ (0.22) $ (0.15)
======= ======= =======
Shares used in calculating basic
income (loss) per share............ 25,873 26,997 25,225
======= ======= =======
Shares used in calculating diluted
income (loss) per share............ 26,124 26,997 25,225
======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1998
-------------
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......................................... $ 665
Accounts receivable............................................... 24,628
Inventory......................................................... 20,907
Total current assets.............................................. 47,821
Total assets...................................................... 71,070
Current liabilities............................................... 35,151
Long-term debt.................................................... 7,123
Shareholders' equity.............................................. 26,374
</TABLE>

21
<PAGE>

RISK FACTORS

The following factors should be considered carefully by Verdant Shareholders
and Consep Shareholders in connection with voting on the Merger. These factors
should be considered in conjunction with the other information included
elsewhere in this Joint Proxy Statement-Prospectus. The statements contained
in this Joint Proxy Statement-Prospectus concerning Verdant include forward-
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. The following discussion contains cautionary statements
regarding Verdant's business and results of operations. See "CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS."

Absence of Profitable Operations. Verdant has reported losses during each
year since it became a public company in 1990. As of June 30, 1998, Verdant
reported an accumulated deficit of $22,295,666. Losses may continue if Verdant
is unable to achieve its projected sales, gross margins and expense levels.

Seasonality; Weather Conditions. Verdant's business is highly seasonal, with
over 65% of sales occurring in the first and second fiscal quarters.
Unexpected production or transportation difficulties occurring at the time of
peak production could cause sales losses which could not readily be reversed.
In addition, Verdant's business is affected by the weather. Poor weather has
resulted in the past and may in the future result in reduced purchases of
Verdant's products.

Manufacturing. Verdant relies upon third parties for a significant portion
of its product manufacturing, formulation and packaging. Although Verdant
believes that most of its manufacturing does not require specialized technical
expertise and that it currently has arrangements with suppliers adequate for
its requirements, failure of a third party supplier to perform could cause
short-term supply interruptions. Such supply interruptions could adversely
affect Verdant's ability to deliver product and, during a period of peak
production, could adversely affect results of operations.

Market Acceptance. Verdant's business has historically been based on
environmentally sensitive fertilizers and pesticides. Recently, Verdant has
expanded its strategic objectives to include the acquisition of traditional
synthetic pesticide product lines. While Verdant intends to utilize its
acquired synthetic product lines as vehicles to develop, manufacture and
market products based upon its patented, hybrid fatty acid/traditional
pesticide technologies, its future success depends upon its ability to
successfully develop and manufacture products incorporating such technologies
and upon market acceptance of such hybrid products. Verdant's success is also
dependent upon its ability to successfully market the synthetic pesticide
product lines it has acquired or may acquire in the future as well as its
environmentally sensitive lines of pesticides and fertilizers.

Competition. Verdant faces significant competition from numerous
manufacturers and marketers participating in the pesticide and fertilizer
industries, several of which significantly dominate their respective markets
and many of which have substantially greater financial, technical, marketing
and other resources than Verdant. Verdant's environmentally sensitive products
generally cost more than those of their conventional chemical counterparts
and, therefore, Verdant is generally not able to compete on pricing alone.

Acquisition Strategy. Verdant has in the past and intends to continue in the
future to pursue acquisitions of companies with related or complementary
product lines. Future acquisitions by Verdant may result in potentially
dilutive issuances of equity securities, the incurrence of additional debt and
amortization expenses related to goodwill and intangible assets that could
adversely affect Verdant's results of operations. In addition, acquisitions
involve numerous risks, including difficulties in the assimilation of the
operations and products of the acquired company, the diversion of management's
attention from other business concerns and the potential loss of key employees
of the acquired company.

Management of Growth. If Verdant is successful in further executing its
acquisition strategy, Verdant may experience rapid growth which may place a
significant strain on Verdant's limited personnel and other resources.
Verdant's ability to manage its growth effectively will require it to continue
to improve its operational, financial

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and management systems, and to successfully train, motivate and manage its
employees. If Verdant's management is unable to manage growth effectively,
Verdant's financial condition could be adversely affected.

Government Regulation; Product Approval. Government regulation in the United
States and other countries is a significant factor in the research,
development, production and marketing of pesticides and, to a lesser extent,
fertilizers. To develop and sell a pesticide product, federal and state
product registration must be obtained for each pest and plant for which the
product is used. In the United States, pesticides are regulated by the EPA
under the Federal Insecticide, Fungicide and Rodenticide Act, as amended
("FIFRA"), which requires extensive efficacy, toxicology and environmental
testing to substantiate product performance and safety prior to registration.
In addition, many states have additional registration requirements that go
beyond FIFRA. There can be no assurance that any testing approvals or
registrations will be granted on a timely basis, if at all, or that Verdant
resources will be adequate to meet the costs of regulatory compliance. Any or
all of those approvals may be the subject of disputes that could postpone or
prevent research, development, production and/or marketing of Verdant's
products. Verdant cannot predict the effect of future legislation and
regulation on Verdant's operations.

In addition, some states have laws imposing liability on certain parties for
the release of pesticides and/or fertilizers into the environment in a manner
or in concentrations not permitted by law. The Comprehensive Environment
Response, Compensation and Liability Act, commonly known as the federal
Superfund law, imposes liability on certain parties for the release into the
environment of hazardous substances, which might include fertilizers and
pesticides under certain circumstances. There can be no assurance that Verdant
will not be subject to claims under such statutes. See "Environmental Matters"
below.

Environmental Matters. Owners of property in the vicinity of the Fort
Valley, Georgia offices of Verdant's wholly owned subsidiary, Southern
Resources, Inc. ("SRI"), initiated civil actions against, among others, SRI's
subsidiaries, SureCo, Inc. and Peach County Property, Inc., alleging bodily
injury and property damage arising out of chemical formulation activities
conducted on or about the site prior to Peach County Property, Inc.'s purchase
of the property from Canadyne-Georgia Corporation (formerly Woolfolk Chemical
Works, Inc.). Certain cases relating to this matter have been settled, with
Canadyne-Georgia Corporation agreeing to pay all settlement amounts to the
plaintiffs. Verdant believes the actions are without merit as they relate to
SRI and its subsidiaries since the environmental claims relate to
circumstances caused by the prior owner of the property. Accordingly, SRI's
subsidiaries are vigorously defending the lawsuits, but there can be no
assurance that liability will not be imposed on SRI or Verdant as a result of
such lawsuits.

In addition, the United States Environmental Protection Agency ("EPA") has
issued a Unilateral Administrative Order regarding certain environmental
matters associated with the Fort Valley site in which it outlined the course
of action that should be undertaken to remediate the site. The EPA has named,
among others, SureCo, Inc. and Peach County Property, Inc. as potentially
responsible parties for contamination of the site. However, Canadyne-Georgia
Corporation, in a 1986 agreement covering the sale of the property, agreed to
provide SRI's subsidiaries indemnification for environmentally related losses
that might arise with respect to the site. There is no assurance that Verdant
will not be subjected to material liabilities in connection with remediation
at the site. The EPA estimates that the total present value of remediating the
site is $9,570,000.

All of the former shareholders of SRI, in a separate 1993 agreement between
the SRI shareholders and SRI, and in separate agreement entered into on
December 8, 1997 in connection with the merger of SRI with Verdant, have
agreed to indemnify SRI and Verdant for any losses, liabilities, deficiencies,
damages, expenses or costs (including reasonable legal expenses), resulting
from litigation relating to environmental matters on and near the real
property on which SRI's subsidiary's manufacturing facility is located or any
other property alleged to be affected in connection with environmental matter
relating to the property. The indemnity provided by the former shareholders of
SRI is not limited in dollar amount and Verdant will permit the indemnity to
terminate only when litigation has terminated and cleanup of the property has
been approved by the Environmental Protection Agency.

Advertising Regulation. The labeling, packaging and advertising of all
products is subject to regulation by individual states and by the Federal
Trade Commission ("FTC"). The EPA restricts the use of such terms as

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"non-toxic," "biodegradable," "natural," "safe" and others covering product
safety and the FTC more generally supervises these and other claims to make
certain advertising is not misleading. Such restrictions and regulation may
affect the manner in which Verdant markets its pest control products. While
Verdant's pest control product labels have been accepted by the EPA and
Verdant believes the efficacy claims in its advertising materials are
consistent with EPA guidelines and FTC regulation, there can be no assurance
that EPA or FTC regulations or interpretations may not change in the future or
that the EPA, the FTC, other regulatory bodies or competitors of Verdant will
not challenge Verdant's advertising claims.

Patent Protection. Verdant's success depends in part on its ability to
protect its patents and other intellectual property rights. Verdant owns over
30 patents, which expire at various times during the years 2006 through 2014
and also licenses two patents. There can be no assurance that Verdant's
existing or any future patents will be of sufficient scope or strength to
provide meaningful protection or any commercial advantage to Verdant. Verdant
may be subject to or may initiate interference proceedings in the patent
office or may be made a party to, or may initiate, litigation or other
disputes regarding intellectual property rights, which can demand significant
financial and management resources. After the expiration of Verdant's patents,
competitors may be subject to fewer restrictions on duplicating its
technology. Verdant is not aware of any issued patents that would prohibit the
use of any technology Verdant currently has under development, but cannot be
certain that its products do not infringe upon proprietary rights held by
others.

Reliance on Commodities. Many of Verdant's fertilizer products contain
materials, such as feather, blood and bone meal, which may be subject to price
fluctuation or supply shortages and are generally not traded in established
commodities markets. There can be no assurance that price fluctuations,
weather or other factors will not adversely affect the ability of Verdant to
obtain these materials on a favorable basis.

Product Liability. Like most producers of consumer goods, Verdant faces the
risk of exposure to product liability claims and unfavorable publicity in the
event the use of its products results in adverse effects. Although Verdant has
not been subject to any material claims for products liability, and although
it believes that its products do not represent any significant risk if used as
directed, there can be no assurance that it will be able to avoid product
liability exposure. Although Verdant believes that it has adequate products
liability insurance, there can be no assurance that such insurance will be
adequate to cover potential future claims.

Possible Volatility of Stock Price. Verdant believes factors such as new
product announcements by Verdant or its competitors, announcements of
acquisitions, and quarter-to-quarter variances in financial results could
cause the market price of the Verdant Common Stock to fluctuate substantially.
In addition, the stock market in general has experienced significant price and
volume fluctuations. These fluctuations have often been unrelated to the
operating performance of individual companies. Broad market fluctuations as
well as general economic or political conditions may adversely affect the
market price of the Verdant Common Stock.

Nasdaq Stock Listing. Shares of Verdant Common Stock are listed for trading
on the Nasdaq National Market System, and are currently in compliance with the
requirements for such listing, including the requirement that stock trade at a
minimum bid price of $1.00. If the Verdant Common Stock were to fail to comply
with the minimum bid price requirement, and did not regain compliance within
the time alloted by Nasdaq, it is possible it would be delisted from the
Nasdaq Stock Market, in which event trading in Verdant Common Stock would
occur on the Over The Counter Bulletin Board and be subject to certain "Penny
Stock Rules." Under Exchange Act Rule 15g-9, broker-dealers must take certain
steps prior to selling a "penny stock," including: (i) obtaining financial and
investment information from the investor; (ii) obtaining a written suitability
questionnaire and purchase agreement signed by the investor; (iii) providing
the investor a written identification of the shares being offered and in what
quantity; and (iv) delivering to the investor a written statement setting
forth the basis on which the broker-dealer approved the investor's account for
the transaction. Accordingly, delisting from the Nasdaq Stock Market and the
application of the foregoing Penny Stock Rules may make it more difficult for
broker-dealers to sell the Company's securities. In addition, purchasers of
the Company's securities may have difficulty in selling such securities in the
future in secondary trading markets and the price of such securities may be
reduced.

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Integration of Operations following the Merger. The financial performance of
Verdant following the Merger will depend in part on Verdant's ability to
integrate the operations of Consep with those of Verdant and to realize the
synergies and cost savings anticipated from the Merger. The operations to be
integrated include the corporate, management marketing, and other functions,
as well as Verdant's and Consep's information systems. Cost savings
anticipated from the Merger are expected to result from the elimination of
duplicative functions, personnel and facilities as operations are integrated.

Verdant expects to incur non-operating costs of approximately $1.2 million
in connection with the Merger, including Merger-related costs and the
estimated expenses and charges associated with the elimination of duplicative
functions, personnel and facilities. These costs will be incurred in the
period in which the Merger is consummated. If unforeseen difficulties or
expenses were to arise in connection with the integration of Verdant's and
Consep's operations, these costs could be exceeded and could result in
additional Merger-related costs being expensed in subsequent periods.

Verdant has estimated that the annual cost savings resulting from the
integration of Consep's operations with Verdant will be approximately $1.1
million and that a portion of these annual savings will begin to be realized
in 1999. If unforeseen difficulties were to arise in connection with the
integration of Verdant's and Consep's operations, realization of the cost
savings anticipated from the Merger could be delayed, or such cost savings
might not be realized in full. Such unforeseen difficulties also could have a
disruptive effect on the ability of the combined companies to service their
current business and to pursue new opportunities.

Although Verdant has integrated the operations of other acquired companies
in the past, there is no assurance that significant unforeseen difficulties or
expenses will not arise in connection with its integration of Consep's
operations following the Merger. For the reasons set forth above, such
difficulties or expenses could have a material adverse effect on Verdant's
revenues and results of operations following the Merger.

Capital Adequacy and Liquidity. Funding of Verdant's business activities is
highly dependent upon financial resources provided by its lending sources and
trade creditors. If Verdant is unable to obtain continued financing from these
sources or from other sources, Verdant's operations and financial condition
could be significantly and adversely affected. See "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF VERDANT--
Liquidity and Capital Resources."

Year 2000. Verdant and Consep are aware of the issues associated with the
programming of existing computer systems as the year 2000 approaches. The
issue is whether computer systems will properly recognize data-sensitive
information when the year changes to 2000. Verdant and Consep believe that any
costs incurred related to year 2000 compliance will not have a material impact
on its or the combined company's business, operations or financial condition.
See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF VERDANT--Year 2000" and "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF CONSEP--Year 2000"

VERDANT SPECIAL MEETING

GENERAL

This Joint Proxy Statement-Prospectus is being furnished to holders of
Verdant Common Stock as part of the solicitation of proxies by the Verdant
Board for use at the Verdant Special Meeting to be held at 11:00 a.m., local
time, on December 7, 1998 at the offices of Verdant at 9555 James Avenue
South, Suite 200, Bloomington, Minnesota 55431. This Joint Proxy Statement-
Prospectus and the accompanying Proxy Card are first being mailed to holders
of Verdant Common Stock on or about October 26, 1998.

The purpose of the Verdant Special Meeting is to vote upon (i) a proposal to
approve the Merger Agreement and (ii) a proposal to amend the Restated
Articles of Incorporation of Verdant to increase the number of authorized
shares of common stock from 25,000,000 to 50,000,000.

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<PAGE>

The Merger is subject to a number of conditions, including the receipt of
shareholder approvals. See "THE MERGER--Conditions."

SOLICITATION, VOTING AND REVOCABILITY OF PROXIES

Holders of Verdant Common Stock as of the Verdant Record Date are entitled
to notice of and to vote at the Verdant Special Meeting and any adjournments
or postponements thereof. Accordingly, only holders of record of shares of
Verdant Common Stock at the close of business on such date will be entitled to
vote at the Verdant Special Meeting and any adjournments or postponements
thereof, with each share entitling its owner to one vote on all matters
properly presented at the Verdant Special Meeting and any adjournments or
postponements thereof. On the Verdant Record Date, there were 228 holders of
record of the 16,705,261 shares of Verdant Common Stock then outstanding.
Under Minnesota law, the Merger Agreement must be approved by the holders of a
majority of outstanding shares of Verdant Common Stock. A majority of the
shares of Verdant Common Stock represented at the Verdant Special Meeting may
approve the Charter Amendment, provided that a quorum of at least a majority
of the votes entitled to be cast at the meeting is present.

If an executed Proxy Card is returned and the shareholder has explicitly
abstained from voting on any matter, the shares represented by such proxy will
be considered present at the Verdant Special Meeting for purposes of
determining the presence of a quorum and for purposes of calculating the vote,
but will not be considered to have been voted in favor of such matter. In
addition, brokers who hold shares in street name for customers who are the
beneficial owners of such shares are prohibited from giving a proxy to vote
shares held for such customers on matters other than the election of directors
without specific instructions from such customers. Given that the MBCA
requires the affirmative vote of the holders of a majority of the outstanding
shares of Verdant Common Stock entitled to vote on the proposal to approve the
Merger Agreement, if such customers fail to provide specific instructions with
respect to their shares of Verdant Common Stock to their broker or such
shareholders explicitly abstain from voting on the proposals, the effect will
be the same as a vote against the approval of the Merger Agreement. FAILURE TO
RETURN A PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE VERDANT SPECIAL
MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER AGREEMENT AND
MAY PREVENT A VOTE WITH RESPECT TO THE CHARTER AMENDMENT.

It is currently expected that all of the shares of Verdant Common Stock
which the directors and executive officers of Verdant beneficially owned and
were entitled to vote as of the Verdant Record Date ( 15.55% of the total
number of outstanding shares of Verdant Common Stock as of such date) will be
voted for approval of the Merger Agreement. As of the Verdant Record Date,
directors and executive officers of Consep did not beneficially own any shares
of Verdant Common Stock entitled to be voted at the Verdant Special Meeting.

If the accompanying Proxy Card is properly executed and returned to Verdant
in time to be voted at the Verdant Special Meeting, the shares represented
thereby will be voted in accordance with the instructions marked thereon.
EXECUTED BUT UNMARKED PROXIES WILL BE VOTED FOR APPROVAL OF THE MERGER
AGREEMENT AND FOR APPROVAL OF THE CHARTER AMENDMENT. The Verdant Board does
not know of any matters other than those described in the notice of the
Verdant Special Meeting that are to come before the Verdant Special Meeting.
If any other matters are properly brought before the Verdant Special Meeting,
including, among other things, a motion to adjourn or postpone the Verdant
Special Meeting to another time or place for the purpose of soliciting
additional proxies in favor of the proposal to approve the Merger Agreement
and the Charter Amendment or to permit dissemination of information regarding
material developments relating to the Merger or otherwise germane to the
Verdant Special Meeting, one or more of the persons named in the Proxy Card
will vote the shares represented by such proxy upon such matters as determined
in their discretion; provided, however, that no proxy that is voted against
the proposal to approve the Merger Agreement or the Charter Amendment will be
voted in favor of any such adjournment or postponement for the purpose of
soliciting additional proxies.

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<PAGE>

The presence of a shareholder at the Verdant Special Meeting will not
automatically revoke such shareholder's proxy. Any proxy given pursuant to
this solicitation may be revoked by the person giving it by giving written
notice of such revocation to the Secretary of Verdant at any time before it is
voted, by delivering to Verdant a duly executed, later-dated proxy, by
delivering to any other person a duly executed, later dated proxy that such
other person uses to vote at the Verdant Special Meeting or by attending the
Verdant Special Meeting and voting in person. All written notices of
revocation and other communications with respect to revocation of Verdant
proxies should be addressed to Mark G. Eisenschenk, Secretary, Verdant Brands,
Inc., 9555 James Avenue South, Suite 200, Bloomington, Minnesota 55431-2543.

The cost of soliciting proxies for the Verdant Special Meeting will be borne
by Verdant, except that the cost of preparing and mailing this Joint Proxy
Statement-Prospectus (except legal and accounting fees, which will be borne by
the respective parties) will be borne equally by Verdant and Consep. In
addition to use of the mails, proxies may be solicited personally or by
telephone, facsimile or other means of communication by directors, officers
and employees of Verdant, who will not be specially compensated for such
activities, but who may be reimbursed for reasonable out-of-pocket expenses in
connection with such solicitation. Verdant also will request persons, firms
and companies holding shares in their names or in the name of their nominees,
which are beneficially owned by others, to send proxy materials to and obtain
proxies from such beneficial owners. Verdant will reimburse such persons for
their reasonable expenses incurred in that connection.

RECOMMENDATION OF VERDANT BOARD

The Verdant Board has approved the Merger Agreement and the transactions
contemplated thereby and the Charter Amendment. The Verdant Board believes
that the Merger Agreement and the Charter Amendment are in the best interests
of Verdant and its shareholders and recommends that Verdant Shareholders vote
"FOR" approval of the Merger Agreement and the Charter Amendment. See "THE
MERGER--Reasons of Verdant for the Merger" and "PROPOSAL TO APPROVE AMENDMENT
TO VERDANT RESTATED ARTICLES OF INCORPORATION."

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<PAGE>

CONSEP SPECIAL MEETING

GENERAL

This Joint Proxy Statement-Prospectus is being furnished to holders of
Consep Common Stock as part of the solicitation of proxies by the Consep Board
for use at the Consep Special Meeting to be held at 9:00 a.m., on December 7,
1998, at the offices of Consep at 213 Southwest Columbia Street, Bend, Oregon
97702. This Joint Proxy Statement-Prospectus and the accompanying Proxy Card
are first being mailed to holders of Consep Common Stock on or about October
26, 1998.

The purpose of the Consep Special Meeting is to vote upon a proposal to
approve the Merger Agreement.

The Merger is subject to a number of conditions, including the receipt of
shareholder approvals. See "THE MERGER--Conditions."

SOLICITATION, VOTING AND REVOCABILITY OF PROXIES

Consep Shareholders as of the Consep Record Date are entitled to notice of
and to vote at the Consep Special Meeting and any adjournment or postponement
thereof. Accordingly, only holders of record of shares of Consep Common Stock
at the close of business on such date will be entitled to vote at the Consep
Special Meeting and any adjournment or postponement thereof, with each share
entitling its owner to one vote on all matters properly presented at the
Consep Special Meeting and any adjournment or postponement thereof. On the
Consep Record Date, there were 171 holders of record of the 9,667,357 shares
of Consep Common Stock then outstanding.

Under Oregon law, the Merger Agreement must be approved by the holders of a
majority of the outstanding shares of Consep Common Stock.

If an executed Proxy Card is returned and the shareholder has explicitly
abstained from voting on any matter, the shares represented by such proxy will
be considered present at the Consep Special Meeting for purposes of
determining a quorum and for purposes of calculating the vote, but will not be
considered to have been voted in favor of such matter. Under the rules of the
Nasdaq National Market, brokers who hold shares in street name for customers
who are the beneficial owners of such shares are prohibited from giving a
proxy to vote shares held for such customers without specific instructions
from such customers. Given that the OBCA requires the affirmative vote of the
holders of a majority of the outstanding shares of Consep Common Stock to
approve the Merger Agreement, any abstention and any failure of such customers
to provide specific instructions with respect to their shares of Consep Common
Stock to their broker will have the same effect as a vote against the approval
of the Merger Agreement. FAILURE TO RETURN A PROPERLY EXECUTED PROXY CARD OR
TO VOTE AT THE CONSEP SPECIAL MEETING WILL HAVE THE SAME EFFECT AS A VOTE
AGAINST THE MERGER AGREEMENT.

It is currently expected that all of the 729,270 shares of Consep Common
Stock which the directors and executive officers of Consep beneficially owned
and were entitled to vote as of the Consep Record Date (7.54% of the total
number of outstanding shares of Consep Common Stock as of such date) will be
voted for approval of the Merger Agreement. As of the Consep Record Date,
directors and executive officers of Verdant did not beneficially own any
shares of Consep Common Stock entitled to be voted at the Consep Meeting.

If the accompanying Proxy Card is properly executed and returned to Consep
in time to be voted at the Consep Special Meeting, the shares represented
thereby will be voted in accordance with the instructions marked thereon.
EXECUTED BUT UNMARKED PROXIES WILL BE VOTED FOR APPROVAL OF THE MERGER
AGREEMENT. The Consep Board does not know of any matters other than those
described in the notice of the Consep Special Meeting that are to come before
the Consep Special Meeting. If any other matters are properly brought before
the Consep Special Meeting, including, among other things, a motion to adjourn
or postpone the Consep Special Meeting to another time and/or place for the
purpose of soliciting additional proxies

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in favor of the proposal to approve the Merger Agreement or to permit
dissemination of information regarding material developments relating to the
Merger or otherwise germane to the Consep Special Meeting, one or more of the
persons named in the Proxy Card will vote the shares represented by such proxy
upon such matters as determined in their discretion; provided, however, that
no proxy that is voted against the proposal to approve the Merger Agreement
will be voted in favor of any such adjournment or postponement for the purpose
of soliciting additional proxies.

The presence of a shareholder at the Consep Special Meeting will not
automatically revoke such shareholder's proxy. Any proxy given pursuant to
this solicitation may be revoked by the person giving it by giving written
notice of such revocation to the Secretary of Consep at any time before it is
voted, by delivering to Consep a duly executed, later-dated proxy or by
attending the Consep Special Meeting and voting in person. All written notices
of revocation and other communications with respect to revocation of Consep
proxies should be addressed to Volker G. Oakey, Secretary, Consep, Inc., 213
Southwest Columbia Street, Bend, Oregon 97702.

The cost of soliciting proxies for the Consep Special Meeting will be borne
by Consep, except that the cost of preparing and mailing this Joint Proxy
Statement-Prospectus (except legal and accounting fees, which will be borne by
the respective parties) will be borne equally by Verdant and Consep. In
addition to use of the mails, proxies may be solicited personally or by
telephone, facsimile or other means of communication by directors, officers
and employees of Consep, who will not be specially compensated for such
activities, but who may be reimbursed for reasonable out-of-pocket expenses in
connection with such solicitation. Consep will also request persons, firms and
companies holding shares in their names or in the name of their nominees,
which are beneficially owned by others, to send proxy materials to and obtain
proxies from such beneficial owners. Consep will reimburse such persons for
their reasonable expenses incurred in that connection.

RECOMMENDATION OF CONSEP BOARD

The Consep Board has approved the Merger Agreement and the transactions
contemplated thereby. The Consep Board believes that the Merger is in the best
interests of Consep shareholders and recommends that Consep Shareholders vote
"FOR" approval of the Merger Agreement. See "THE MERGER--Reasons of Consep for
the Merger."

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THE MERGER

The following summary of certain terms and provisions of the Merger
Agreement, which describes all material terms and provisions thereof, is
qualified in its entirety by reference to the other information contained
elsewhere in this Joint Proxy Statement-Prospectus including the Appendices
hereto. A copy of the Merger Agreement (excluding the Exhibits and Schedules
thereto) is set forth in Appendix A to this Joint Proxy Statement-Prospectus
and is incorporated herein by reference, and reference is made thereto for a
complete description of the terms of the Merger. Shareholders are urged to
read the Merger Agreement and each of the other Appendices hereto carefully.

DESCRIPTION OF THE MERGER

The Merger Agreement provides that, upon the satisfaction or waiver of
certain conditions, Merger Subsidiary will be merged with and into Consep,
Consep will continue as the surviving corporation, and the separate existence
of Merger Subsidiary will cease. Pursuant to the Merger Agreement, (1) each
share of Consep Common Stock issued and outstanding immediately prior to the
Effective Time will be converted into the right to receive 0.95 of one share
of Verdant Common Stock; (2) each share of Consep Common Stock issued and
outstanding immediately prior to the Effective Time and owned by Verdant,
Merger Subsidiary or Consep or any direct or indirect subsidiary of Verdant,
Merger Subsidiary or Consep will be canceled and extinguished without any
conversion thereof and no payment will be made with respect thereto; and (3)
each share of common stock of Merger Subsidiary issued and outstanding
immediately prior to the Effective Time will be converted into one validly
issued, fully paid and nonassessable share of the surviving corporation.

BACKGROUND OF THE MERGER

Verdant regularly reviews candidates for potential merger, acquisition and
other strategic purposes. During the summer of 1995, Stanley Goldberg,
President and Chief Executive Officer of Verdant contacted Volker Oakey,
President and Chief Executive Officer of Consep to discuss strategic business
opportunities. Stanley Goldberg and Mark Eisenschenk, Executive Vice President
and Chief Financial Officer of Verdant, met with Volker Oakey and Howard
Allred, former Chief Financial Officer of Consep, at Consep's offices and
discussed a variety of business possibilities, including proceeding toward a
merger of the two companies. Mr. Goldberg made a presentation to Verdant's
Board of Directors describing Consep and the potential benefits of merging
with Consep. Mr. Oakey later met with Verdant management and its directors in
Minneapolis. After additional meetings and telephonic conversations, Verdant
and Consep determined they were unable to reach agreement regarding relative
valuations for their respective companies and regarding certain organizational
structure issues. As a result, each of Consep and Verdant decided at that time
to discontinue merger discussions and to continue to carry on their respective
business activities in the ordinary course. Business relations between the
companies remained positive thereafter.

In May 1998, David Vansant, Executive Vice President of Corporate
Development for Verdant, contacted Volker Oakey to discuss the potential for
strategic business opportunities. On June 9 and 10, 1998, Mr. Vansant met with
Mr. Oakey and Larry Katz, former Consep Chief Financial Officer, and discussed
the possibility of Verdant acquiring Consep's Canadian business or merging
Verdant and Consep. They agreed there were important strategic and financial
reasons for completing a merger of Verdant and Consep. Telephonic
conversations ensued between Mr. Vansant, Stanley Goldberg, Mark Eisenschenk
and Messrs. Oakey and Katz which lead to a formal meeting at Consep's offices
to further discuss more detailed merger possibilities.

On June 29 and 30, 1998, Stanley Goldberg, David Vansant and Mark
Eisenschenk met with Volker Oakey and Larry Katz at Consep's offices. They
each made extensive presentations regarding the backgrounds and current status
of each company's respective business. The representatives of Verdant and
Consep discussed strategic business opportunities and clarified the reasons
for potentially combining the two companies. They reviewed historical
financial results, possible synergistic benefits resulting from a business
combination, potential cost savings, possible organizational structures,
historical and current stock prices and potential ranges of relative

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business valuation. It was generally agreed that, given a variety of factors,
the parties would be willing to continue their merger discussions, assuming a
merger were completed on a one-for-one stock swap basis.

Telephonic conversations between the parties continued on July 1, 1998
regarding the potential merger. On July 2, 1998, a meeting of the Board of
Directors of Verdant was held in Minneapolis, Minnesota. Mark Eisenschenk and
Stanley Goldberg presented an overview and update of Consep, including
financial information, benefits arising from a business combination,
organizational structure matters, historical stock values, potential cost
savings and the proposed transaction structure, which would include exchanging
one share of Verdant common stock for each share of Consep common stock
outstanding and provide for adding Volker Oakey and Walter C. Babcock to
Verdant's board of directors. Verdant's board of directors authorized
management to issue a letter of intent to Consep incorporating these basic
terms.

A letter of intent regarding a proposed merger of Verdant and Consep was
prepared by Verdant and delivered to Consep on July 6, 1998.

On July 8, 1998, the Consep Board held a special meeting to review and
discuss the proposed letter of intent prepared by Verdant to enter into
negotiations between the two companies with a view towards executing a
definitive merger agreement. During the meeting, Volker Oakey made a brief
presentation to the Consep Board regarding the strategic and market potential
of the combination with Verdant. Based upon this presentation, and following a
review and discussion of the terms of the proposed letter of intent with
Verdant, the Consep Board authorized Volker Oakey to execute the letter of
intent with Verdant.

On July 9 and 10, 1998, William DeMare, Vice President of Technology and
Professional Products Division of Verdant and Patrick McGinnity, Vice
President of Product Development for Verdant, met with Volker Oakey and key
employees in Consep's technology, agricultural products and regulatory groups
to better understand the relevance, opportunities and organizational
capabilities of each company's respective technologies. They also exchanged
detailed information regarding each company's operating activities.

A letter of intent to acquire all outstanding stock of Consep in a one-for-
one stock exchange was executed on July 10, 1998 and Consep retained Pacific
Crest Securities Inc. to act as its financial advisor for the proposed
transaction. Both parties then issued press releases on July 14, 1998
announcing their intent to merge.

A definitive Agreement and Plan of Merger to merge Verdant and Consep was
drafted by Verdant and presented to Consep on July 14, 1998. Between July 16,
1998 and September 3, 1998, several meetings and telephone calls between
Volker Oakey, Stanley Goldberg and their respective advisors resulted in
agreement on the terms of the Merger Agreement.

Detailed due diligence activities began on July 16, 1998 and continued
through September 3, 1998. Verdant's due diligence investigation was performed
by Verdant employees responsible for finance, accounting, sales, marketing,
technology and operations. The investigation included, among other things,
onsite reviews at Consep's headquarters in Bend, Oregon, visits to Consep's
distribution facilities in California, onsite reviews of Consep's Canadian
subsidiary's operations and meetings with Consep's key vendors and customers.
Verdant also engaged Deloitte & Touche, LLP to review certain of Consep's
external auditor's workpapers, to make certain due diligence inquiries of
Consep personnel and to document certain accounting policies and financial
statement components. In addition, Verdant engaged GE Capital Services to
perform audits of significant portions of Consep's assets. During this same
period of time, management personnel of Consep obtained confidential
information regarding financial, employment, legal and general operational
matters of Verdant. A meeting of Verdant's Board of Directors was held on
August 4, 1998 at which the board of directors was provided an update on the
due diligence review.

On August 11, 1998, as part of a regularly scheduled meeting of the Consep
Board, Volker Oakey presented alternative strategies, the risks and benefits
of continued operations as an independent company, and the strategic and
market potential of a combination with Verdant. In addition, Consep's
financial advisor presented its financial analysis of the terms and conditions
of the Merger, and at the conclusion of its presentation, the

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<PAGE>

financial advisor delivered to the Consep Board its opinion as to the
fairness, as of such date, from a financial point of view, to Consep's
shareholders of the consideration to be paid pursuant to the Merger. Based on
the information provided by Verdant, a review by Consep management of the
strategic considerations of a combination, the presentation and oral opinion
of Consep's financial advisor, and other information, the Consep Board
authorized Mr. Oakey to continue due diligence and negotiations regarding a
merger with Verdant. Subsequently, members of Consep's management team met
with their Verdant counterparts to perform further due diligence work in their
respective areas of responsibility and exchanged relevant documents and other
information.

On August 31, 1998, at a special meeting of the Consep Board, Volker Oakey
and Consep's legal counsel made further presentations to the Consep Board
regarding the results of their continuing due diligence investigation,
including Verdant's financial condition, operational status, legal affairs and
future prospects. Based on the information provided by Mr. Oakey and Consep's
legal counsel, the Consep Board authorized Mr. Oakey to continue due diligence
and negotiations regarding a merger with Verdant.

In the course of Verdant's due diligence review, certain issues relating to
contingencies and inventory-related valuation matters were addressed with
Volker Oakey. As a result, Verdant and Consep renegotiated the exchange ratio
from one share of Verdant common stock for each share of Consep common stock
to 0.95 of one share of Verdant common stock for each share of Consep common
stock.

A meeting of the Board of Directors of Verdant was held on September 8, 1998
to obtain an update on matters relating to Consep merger, its renegotiated
terms and key provisions of the merger agreement. The directors reviewed and
discussed a variety of factors regarding the amount of consideration Verdant
would provide to consummate the Merger. It reviewed historical and current
market prices of Consep common stock. It reviewed the purchase prices of
Verdant's previous transactions as a percentage of the acquired company's
sales, as well as similar statistics for other transactions in the industry.
The directors also reviewed the net book value of Consep and its net tangible
book value in relation to the consideration being provided by Verdant, as well
as the expected combined financial performance if the Merger is completed. The
Board of Directors then authorized Verdant officers to execute the merger
agreement and indicated it would recommend to the Verdant shareholders that
they vote for completion of the merger. The Verdant Board also directed
management to retain the services of a qualified financial advisor to Verdant,
and to obtain from such financial advisor and opinion as to whether, as of the
date of the meeting, the terms of the Merger were fair to Verdant.

On September 8, 1998, a special meeting of the Consep Board was held with
Consep's legal advisors to consider approval of the Merger Agreement. Consep's
financial advisor, Pacific Crest Securities Inc., presented its updated
financial analysis of the terms and conditions of the Merger, and at the
conclusion of its presentation, the financial advisor delivered to the Consep
Board its oral opinion, confirmed by a subsequent written opinion dated
September 8, 1998, as to the fairness, as of such date, from a financial point
of view, to Consep's shareholders of the consideration to be paid pursuant to
the Merger. See "Opinion of Consep's Financial Advisor." Following the
presentation of Consep's financial advisor, the Consep Board approved the
Merger Agreement and the Merger.

A press release was issued on September 9, 1998 to announce that the Merger
Agreement had been signed by both Verdant and Consep.

REASONS OF VERDANT FOR THE MERGER

In reaching its determination to approve the Merger Agreement and the
transactions contemplated thereby and to recommend that the Verdant
Shareholders approve the Merger Agreement and the Charter Amendment, the
Verdant Board considered a variety of factors, including the following:

Terms of Merger Agreement. The Verdant Board took into consideration the
terms of the Merger Agreement and the transactions contemplated thereby. See
"--Covenants and Agreements" and "--Interests of Certain Persons in the
Merger."

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<PAGE>

Due Diligence Review. The Verdant Board considered its knowledge and review
of the financial condition, results of operations and business operations and
prospects of Verdant and Consep, as well as the results of Verdant's due
diligence review of Consep.

Directors and Management of Verdant after the Merger. The Verdant Board took
into account that the new Verdant Board would initially consist of eight of
the current directors of Verdant and two of the current board members of
Consep, and that the current management of Verdant would have a significant
influence in the management of the combined company, with Stanley Goldberg
continuing as Chief Executive Officer and President of the combined entity.
See "--Interests of Certain Persons in the Merger" and "MANAGEMENT AND
OPERATIONS AFTER THE MERGER."

Tax and Accounting Treatment of the Merger. The Verdant Board considered
that the Merger was expected to be tax-free to Verdant and its shareholders
for federal income tax purposes and be accounted for under the purchase method
of accounting. See "--Accounting Treatment" and "--Certain Federal Income Tax
Consequences."

Other. Certain other key reasons for the Merger are as follows:

(i) The potential for increased sales to existing customers and to new
customers as a result of a larger product line that better satisfies
customer needs for integrated pest management across a broader spectrum
of pest control.

(ii) The opportunity to leverage research, field development and marketing
capabilities and to share technology and technological expertise.

(iii) The opportunity to achieve lower costs and expenses than the
aggregate costs and expenses of Verdant and Consep if they were to
continue to operate separately through elimination of duplicate
facilities and infrastructure, reductions in staff and consolidation
of research and development expenditures.

(iv) Improved potential for the combined companies to raise additional
capital through debt or equity financing and thereby satisfy the
funding needs of Verdant and Consep.

Charter Amendment. The proposed Charter Amendment is intended to create a
sufficient number of authorized shares of Verdant Common Stock for issuance to
Consep Shareholders in connection with the Merger and to ensure that a
sufficient number of shares of Verdant Common Stock remain available for
general corporate purposes, including issuances pursuant to employee stock
plans, stock dividends, and possible future acquisitions and issuances for the
purpose of raising additional capital. There are no present plans,
understandings or agreements for issuing a material number of additional
shares of Verdant Common Stock. However, if such plans, understandings or
agreements were formulated or reached in the future in connection with an
action or transaction which would not otherwise require approval by holders of
Verdant Common Stock, it could become necessary for the Verdant Board to call
a special meeting of shareholders in order to authorize an increase in the
number of authorized shares of Verdant Common Stock. The Verdant Board
believes that it would not be in shareholders' best interests for Verdant to
bear the expense and inconvenience of such a special meeting, and accordingly
is recommending that such an increase be approved at the Verdant Special
Meeting, which must be held in any event in order to consider and act upon the
Merger. Consummation of the Merger is conditioned upon approval of the Charter
Amendment.

The foregoing discussion of the information and factors considered by the
Verdant Board is not intended to be exhaustive but is believed to include all
material factors considered by the Verdant Board. In reaching its
determination to approve the Merger and the transactions contemplated thereby
and the Charter Amendment, the Verdant Board did not assign any relative or
specific weights to the foregoing factors, and individual directors may have
given differing weights to differing factors. After deliberating with respect
to the Merger and other transactions contemplated by the Merger Agreement, and
considering, among other things, the matters discussed above, the Verdant
Board approved the Merger Agreement and the transactions contemplated thereby
as being fair to, and in the best interests of, Verdant and its shareholders.
There is no guarantee that the combined

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<PAGE>

company will achieve or receive any of the benefits, cost savings or synergies
described above. See "CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
INFORMATION."

BASED ON THE FOREGOING, THE VERDANT BOARD RECOMMENDS THAT VERDANT
SHAREHOLDERS VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT AND THE CHARTER
AMENDMENT.

OPINION OF VERDANT'S FINANCIAL ADVISOR

At the request of the Verdant Board at its September 8, 1998 meeting, at
which the Merger Agreement was approved, management of Verdant retained Piper
Jaffray Inc. ("Piper") on September 22, 1998 to render an opinion as to the
fairness to Verdant, from a financial point of view, of the consideration to
be paid by Verdant for the Consep Common Stock in connection with the Merger.

Piper was selected by Verdant on the basis of its experience in valuing
securities in connection with mergers and acquisitions, its knowledge of
Verdant and other manufacturers and marketers of lawn, garden and turf
products and its expertise in transactions involving such companies. Piper is
a nationally recognized investment banking firm and is regularly engaged in
the valuation of businesses and their securities in connection with mergers
and acquisitions, negotiated underwritings, secondary distributions of listed
and unlisted securities, private placements and valuations for estate,
corporate and other purposes. Piper has from time to time issued research
reports and recommendations on Verdant Common Stock, and in the ordinary
course of business makes a market in Verdant Common Stock. In the course of
its market making and other trading activities, Piper may, from time to time,
have a long or short position in, and buy and sell securities of, Verdant.
Piper also periodically publishes research reports regarding other companies
that develop, manufacture and market lawn, garden and turf products.

On September 30, 1998, Piper delivered to Verdant its written opinion to the
Verdant Board to the effect that, as of September 8, 1998, based upon and
subject to the assumptions, factors and limitations set forth in the opinion
and as described below, the consideration proposed to be paid to the holders
of outstanding Consep Common Stock in the Merger was fair, from a financial
point of view, to Verdant. A copy of the opinion of Piper is attached as
Appendix B to this Joint Proxy Statement-Prospectus and is incorporated herein
by reference. The Verdant Shareholders are urged to read the attached opinion
in its entirety.

Piper was not requested to, and did not, make any recommendation to the
Verdant Board as to the form or amount of the consideration to be paid in the
Merger, which was determined through negotiations between Verdant and Consep.
The opinion was rendered to the Verdant Board and does not constitute a
recommendation to any Verdant Shareholder as to how such Verdant Shareholder
should vote at the Verdant Special Meeting. The opinion does not address
Verdant's underlying business decision to proceed with or effect the Merger.

In arriving at its opinion, Piper reviewed (i) the Merger Agreement, (ii)
certain information relative to the business, financial condition and
operations of Consep, (iii) certain internal financial planning information of
Consep, (iv) certain financial and securities data relating to Consep and
companies deemed similar to Consep or representative of the business sector in
which Consep operates, (v) to the extent publicly available, the financial
terms of certain acquisition transactions deemed comparable to the Merger,
(vi) certain publicly available information relative to the business,
financial condition and operations of Verdant, (vii) certain publicly
available financial and securities data relating to Verdant and companies
deemed similar to Verdant or representative of the business sector in which
Verdant operates and (viii) certain internal financial information of Verdant
on a stand-alone basis and as consolidated with Consep prepared for financial
planning purposes. In addition, Piper engaged in discussions with members of
management of Verdant and Consep concerning the respective financial
conditions, current operating results and business outlook of Verdant and
Consep and the plans and business outlook for the companies on a consolidated
basis following the Merger.

Analysis of Selected Publicly Traded Companies. Piper compared Consep's
financial and stock market information to similar information for certain
publicly traded companies that develop, manufacture and/or market

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<PAGE>

lawn, garden and turf products. Companies reviewed by Piper included
AgriBioTech, Inc., U.S. Home and Garden, Inc., Ecogen, Inc., Central Garden &
Pet Co., Scotts Company, Eco Soil Systems, Inc., and Verdant Brands Inc. (the
"Comparable Companies"). Of the companies that produce these items, the
Comparable Companies were those public companies determined by Piper to be
most comparable to Consep based on a number of criteria. These criteria
included, but were not limited to, product offerings, size, sales growth rate,
relative profitability and earnings growth rates.

Piper calculated valuation ratios based on published stock prices for each
of the Comparable Companies. The valuation ratios were based upon several
variables, including sales, earnings before interest, taxes, depreciation and
amortization ("EBITDA"), operating income, net income for the latest twelve
month ("LTM") periods, and projected net income for both the current and
following fiscal years. The projections for net income were based upon
consensus earnings estimates for the Comparable Companies prepared by research
analysts from various investment firms.

After (i) examining the historical and expected performance for Consep and
the Comparable Companies and (ii) noting that Consep was not profitable for
the LTM period ended June 30, 1998 at the operating income, EBITDA or net
income levels, Piper determined that only LTM sales multiples were applicable
for valuing Consep Common Stock under this approach. For the Comparable
Companies, LTM sales multiples ranged from a high of 2.6 to a low of 0.6, with
a mean and median of 1.4 and 1.0, respectively. Based on the closing price of
Verdant common stock on September 8, 1998, the Exchange Ratio and Consep's
estimated permanent debt and cash totals as of June 30, 1998, Piper calculated
that the LTM sales multiple for the Merger (the "Merger LTM Sales Multiple")
was approximately equal to 0.4.

Analysis of Selected Merger and Acquisition Transactions. Piper reviewed
numerous acquisitions involving target companies engaged in the manufacturing
and/or marketing of agricultural and consumer lawn, garden and turf products
and summarized the terms of ten selected acquisitions. The following table
lists the transactions that Piper summarized (the "Comparable Acquisitions"):

<TABLE>
<CAPTION>
EFFECTIVE DATE
OF TRANSACTION ACQUIRING COMPANY ACQUIRED COMPANY
-------------- ----------------- ----------------
<S> <C> <C>
12/22/97...... IMC Global, Inc. Freeport-McMoRan, Inc.
12/16/97...... Ringer Corporation Southern Resources, Inc.
3/6/97........ Potash Corp. of Saskatchewan Arcadian Corp.
1/20/97....... Thermo Ecotek Biosys
8/21/96....... Crompton & Knowles Corp. Uniroyal Chemical Co.
3/1/96........ IMC Global, Inc. Vigoro Corp.
11/15/95...... Agrium Inc. Nu-West Industries, Inc.
8/9/95........ Arcadian Corp. Arcadian Partners L.P.
4/21/95....... Freeport-McMoRan, Inc. Freeport-McMoRan Resource Ptnrs.
3/31/95....... Biosys Crop Genetics International
</TABLE>

The Comparable Acquisitions were selected on the basis of the comparability
of the acquired companies to Consep with respect to several factors. These
factors included, but were not limited to, sales attributable to the
development, manufacture and/or marketing of agricultural and consumer lawn,
garden and turf products. In addition, Piper concentrated on transactions that
occurred since January 1, 1994, and those for which relevant financial data
were available.

For purposes of evaluating the Merger, valuation ratios were calculated for
each of the Comparable Acquisitions based upon several variables, including
sales, EBITDA, operating income and net income. Based upon a review of the
Comparable Acquisitions and Consep's historical financial performance, Piper
determined that, as with the Analysis of Selected Publicly Traded Companies,
only the Comparable Acquisitions' LTM sales multiples were applicable to the
valuation of Consep Common Stock under this approach. For the Comparable
Acquisitions, LTM sales multiples ranged from a high of 3.2 to a low of 0.1,
with a mean and median of 1.5 and

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<PAGE>

1.4, respectively. As noted previously, Piper calculated a Merger LTM Sales
Multiple equal to approximately 0.4.

Discounted Cash Flow Analysis. Piper assessed the present values of future
cash flows that Consep's business activities could be expected to generate
over a defined time period and the residual value of Consep at the end of the
projected period (the "DCF Analysis"). In preparing the DCF Analysis, Piper
used a set of projections prepared by Verdant and Consep management for
calendar years 1999 through 2003. These five-year projections (the
"Projections") formed the basis of the DCF Analysis.

The Projections were evaluated with respect to various assumptions regarding
discount rates and terminal operating income multiples used to calculate the
residual value of Consep following the projection period. The discount rates
that were considered ranged from 19% to 21% and the terminal operating income
multiples that were considered ranged from 5 to 7 times. The projected cash
flows and residual value were discounted to the present and adjusted for
Consep's estimated permanent debt and cash as of June 30, 1998 to determine a
range of values for Consep Common Stock. This range of values corresponded to
LTM sales multiples ranging from approximately 0.4 to 0.6.

Analysis of Merger & Acquisition Control Premiums. Piper also reviewed
certain data to determine premiums paid for the acquisition of public
companies in relation to their respective share prices prior to the
announcement of an acquisition. According to Securities Data Corporation,
average premiums for selected merger and acquisition transactions between
January 1, 1997 and the current date involving public companies and
transaction sizes between $10 million and $100 million were 31%, 37% and 47%
based on the acquired companies' share prices as of one day, one week and four
weeks prior to the acquisition announcements. This range of premiums was used
by Piper to calculate implicit values of Consep's common stock (based on the
last sale price of Consep common stock on July 14, 1998, the last trading day
prior to the announcement that Consep had entered into a letter of intent to
merge with Verdant) and corresponding LTM sales multiples, which ranged from
0.6 to 0.7.

Accretion and Dilution Analysis. Piper also calculated the expected
incremental earnings per share Verdant could expect to earn on the shares to
be issued to the Consep Shareholders in the Merger and compared the pro forma
combined results with Verdant's expectations for the future earnings on
Verdant Common Stock. Specifically, Piper utilized the Projections and Verdant
management's projections of (i) Verdant's own expected performance and (ii)
the cost synergies it expects to realize as a result of the Merger, and
determined that the Merger will be accretive to Verdant's earnings in both
1999 and 2000 if all of the estimated cost synergies are realized and both
Consep and Verdant achieve their expected stand-alone earnings. If none of the
expected synergies are realized but both companies' expected stand-alone
earnings are achieved, the Merger will be dilutive to Verdant's 1999 earnings
per share and approximately breakeven with respect to its fiscal year 2000
earnings per share.

Contribution Analysis. Piper analyzed the ownership percentage of the Consep
Shareholders in the consolidated entity post-transaction and compared such
percentage with the proportion of future sales and EBITDA expected to be
contributed to the consolidated entity by Consep. Based on this analysis,
Consep Shareholders will own approximately 35% of the consolidated entity
following the transaction, and Consep will be expected to contribute 45% of
fiscal 1999 sales and 38% of fiscal 1999 EBITDA (excluding anticipated cost
synergies) and 47% of fiscal 1999 EBITDA (including anticipated cost
synergies).

In reaching its conclusion as to the fairness of the consideration to be
paid by Verdant for the Consep Common Stock in the Merger, Piper did not rely
on any single analysis or factor described herein, assign relative weights to
the analyses or factors considered by it, or make any conclusion as to how the
results of any given analysis, taken alone, supported its opinion. The
preparation of a fairness opinion is a complex process and not necessarily
susceptible to partial analysis or summary description. Piper believes that
its analyses must be considered as a whole and that selecting portions of its
analyses and of the factors considered by it, without considering all factors
and analyses, would create a misleading view of the processes underlying its
opinion. The analyses of Piper are not necessarily indicative of actual values
or future results, which may be significantly more or less favorable than
suggested by such analyses. Analyses relating to the value of companies do not
purport to

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<PAGE>

be appraisals or valuations or necessarily reflect the price at which
companies may actually be sold. No company or transaction used in any
comparable analysis as a comparison is identical to Verdant, Consep or the
Merger. Accordingly, an analysis of the results is not mathematical; rather,
it involves complex considerations and judgments concerning differences in the
various characteristics of the comparable companies and other factors that
could effect the public trading value of the Comparable Companies to which
Verdant and Consep were compared.

For purposes of its opinion, Piper relied upon and assumed the accuracy and
completeness of the financial and other information made available to it and
did not assume responsibility independently to verify such information. Piper
relied upon the assurances of the respective managements of Verdant and Consep
that the information provided by Verdant and Consep had a reasonable basis
and, with respect to financial planning data, products and technologies under
development and other business outlook information, reflected the best
available estimates, and that they were not aware of any information or fact
that would make the information provided to Piper incomplete or misleading.
Financial planning data was prepared based on numerous variables and
assumptions that are inherently uncertain, including, without limitation,
factors relating to general economic and competitive conditions; and actual
results could vary significantly from those set forth in such financial
planning data.

In arriving at its opinion, Piper did not perform and was not provided any
appraisal or valuation of specific assets or liabilities (contingent or
otherwise) of Verdant or Consep and expressed no opinion regarding the
liquidation value of any entity. Piper did not make any physical inspection of
the properties or assets of Verdant or Consep. Piper expressed no opinion as
to the price at which shares of Verdant common stock have traded or at which
shares of Verdant common stock may trade at any future time. Piper's opinion
is based upon information available to Piper and the facts and circumstances
as they existed and were subject to evaluation on the date of the opinion.
Events occurring after such date could materially affect the assumptions used
in preparing the opinion.

Verdant will pay Piper a fixed fee of $75,000 in cash and 25,000 shares of
freely tradable Verdant common stock for the delivery of its written opinion
that is included in this Joint Proxy Statement-Prospectus. No portion of this
fee is contingent upon the consummation of the Merger. To date, Verdant has
paid Piper $25,000 of the above cash fee. Verdant has also agreed to reimburse
Piper for its reasonable out-of-pocket expenses and to indemnify Piper against
certain liabilities, including those arising under securities laws.

REASONS OF CONSEP FOR THE MERGER

In reaching its decision to approve the Merger Agreement and related
transactions, and to recommend that the Consep Shareholders approve the Merger
Agreement, the Consep Board considered several factors, including, but not
limited to the following benefits of the Merger which the Consep Board
believes will contribute to the success of the combined company:

(ii) The opportunity to leverage research, field development and marketing
capabilities and to share technology and technological expertise.

(iv) Improved potential for the combined company to raise additional
capital through debt or equity financing and thereby satisfy the
funding needs of Verdant and Consep.

In addition to the potential benefits summarized above, the Consep Board
believes that additional reasons for shareholders of Consep to vote for
approval of the Merger Agreement and the Merger include the absence of

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<PAGE>

available alternative transactions including any that appear likely to offer
the Consep Shareholders immediate or long-term economic benefits comparable or
superior to the Merger.

In particular, the Consep Board was influenced by a belief that a
combination of Verdant and Consep would achieve an immediate critical mass of
revenues from broader product offerings and have a greater chance of
continuing to increase revenues and become a self-sufficient operation, and
also had greater opportunities in the near-term to develop strategic
partnerships and funding sources needed to satisfy ongoing cash and funding
needs. The Consep Board also believes that the Merger will provide Consep with
the opportunity to achieve increased marketing strength in the consumer pest
control market.

The Consep Board also considered negative factors relating to the Merger,
including (i) the risk that the benefits sought in the Merger would not be
fully achieved; (ii) the risk that the Merger would not be consummated, and
the effect of the public announcement of the Merger on Consep's sales and
operating results; (iii) Consep's ability to attract and retain key
management, marketing and technical personnel; (iv) the risk that the pending
governmental action and certain legal proceedings involving Verdant's wholly-
owned subsidiary, Southern Resources, Inc. ("SRI"), and its subsidiaries
relating to environmental contamination discovered on or near the
manufacturing site operated by a subsidiary of SRI could result in material
loss to Verdant and its subsidiaries, including SRI, taken as a whole; and (v)
other risks described above under "Risk Factors." The Consep Board believed
that these risks were outweighed by the potential benefits of the Merger.

In the course of its deliberations during Board meetings held on August 11,
August 31 and September 8, 1998, the Consep Board reviewed with Consep
management a number of additional factors relevant to the Merger, including
the strategic overview and prospects for Consep, its products and its
finances. The Consep Board also considered, among other factors (i)
information concerning Consep's and Verdant's respective businesses,
prospects, financial performance and condition, operations, technology,
management and competitive position; (ii) the financial condition, results of
operation and businesses of Consep and Verdant before, and after, giving
effect to the Merger; and (iii) current financial market conditions and
historical market prices, volatility and trading information with respect to
the Verdant Common Stock and Consep Common Stock. In addition, the directors
reviewed the consideration to be received by Consep shareholders in the Merger
and the relationship between the market value of Verdant Common Stock to be
issued in exchange for each share of Consep Common Stock and the market value
of Consep Common Stock and certain other measures. The Consep Board also
considered the terms of the proposed Merger Agreement regarding Consep's
rights to consider and negotiate other acquisition proposals in certain
circumstances as well as the possible effects of the provisions regarding
termination fees payable to Verdant. In addition, the Consep Board noted that
the Merger is expected to be accounted for as a purchase transaction. The
Consep Board considered financial presentations by its financial advisor, PCS,
including the oral opinion of PCS delivered at the August 11, 1998 meeting of
the Consep Board and the updated oral opinion of PCS delivered at the
September 8, 1998 meeting of the Consep Board and the opinion of PCS dated
September 8, 1998, which concluded that, as of such date, the aggregate merger
consideration to be received by the shareholders of Consep as a whole was fair
from a financial point of view. The opinion of PCS and the analysis underlying
its opinion are summarized below, and a copy of the opinion dated September 8,
1998, setting forth the procedures followed, the matters considered, the scope
of the review undertaken and the assumptions made by PCS, is attached hereto
as Appendix C. See "--Opinion of Consep's Financial Advisor."

The foregoing discussion of the information and factors considered by the
Consep Board is not intended to be exhaustive but is believed to include all
materials factors considered by the Consep Board. In reaching its
determination to approve the Merger and the transactions contemplated thereby,
the Consep Board did not assign any relative or specific weights to the
foregoing factors, and the individual directors may have given differing
weights to differing factors. After deliberating with respect to the Merger
and other transactions contemplated by the Merger Agreement and considering,
among other things, the matters discussed above, the Consep Board approved the
Merger Agreement and the transactions contemplated thereby as being fair to,
and in the best interests of, Consep and the Consep shareholders. There is no
guarantee that the combined company will achieve

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<PAGE>

or receive any of the benefits, cost savings or synergies described above.
See: "CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION."

BASED ON THE FOREGOING, THE CONSEP BOARD RECOMMENDS THAT CONSEP SHAREHOLDERS
VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.

OPINION OF CONSEP'S FINANCIAL ADVISOR

Pacific Crest Securities, Inc. was retained by Consep to, among other
things, render an opinion as to the fairness, from a financial point of view,
to Consep Shareholders of the Exchange Ratio. On August 11, 1998, PCS
presented its financial analysis of the terms and conditions of the Merger,
and at the conclusion of its presentation, PCS delivered its oral opinion to
the Consep Board to the effect that, as of such date and based upon and
subject to the assumptions, objectives and qualifications stated in its
opinion, the Exchange Ratio was fair to Consep Shareholders from a financial
point of view. PCS subsequently updated and confirmed such oral opinion by
delivering a written opinion dated September 8, 1998 to the same effect.

A copy of PCS's opinion dated September 8, 1998 is attached hereto as
Appendix C. Consep Shareholders are urged to read PCS's opinion in its
entirety for assumptions made, procedures followed, other matters considered
and limits of the review by PCS.

PCS's opinion was prepared for the Consep Board and is directed only to the
fairness of the Exchange Ratio to the shareholders of Consep from a financial
point of view and does not constitute a recommendation to any Consep
Shareholder as to how such shareholder should vote at the Consep Special
Meeting. PCS was not retained as an advisor or agent to Consep Shareholders or
any other person, other than as an advisor to the Consep Board. PCS's opinion
does not constitute an opinion as to the price at which Verdant Common Stock
will actually trade at any time. The Exchange Ratio was determined in arm's-
length negotiations between Consep and Verdant. No restrictions or limitations
were imposed by Consep upon PCS with respect to the investigations made or the
procedures followed by PCS in rendering its opinion.

PCS relied upon, and assumed the accuracy and completeness of, all of the
financial and other information that was available to PCS from public sources,
or that was provided to PCS by Consep, Verdant, or their respective
representatives, or that was otherwise reviewed by PCS. PCS assumed also that
the financial projections supplied to it were reasonably prepared on the basis
reflecting the best currently available estimates and judgments of the
management of Consep and Verdant. PCS did not make an independent evaluation
of any assets or liabilities or any independent verification of any of the
information it reviewed. PCS also assumed that the Merger shall be accounted
for using the purchase method of accounting, and that the conversion of shares
pursuant to the Merger will take place as a tax-free exchange.

PCS's opinion was necessarily based on economic, market, financial and other
conditions as they existed on, and on the information made available as of,
the date of the opinion. PCS undertook no obligation to update the opinion.

PCS, as part of its investment banking services, is regularly engaged in the
valuation of businesses and securities in connection with mergers,
acquisitions, underwriting; sales and distributions of listed and unlisted
securities, private placements and valuations for corporate and other
purposes. PCS has performed investment banking and other services for Consep,
including co-managing Consep's follow-on public offering on September 13,
1995.

Consep paid PCS $65,000 for its services in providing the fairness opinions,
which payment is not contingent upon the closing of the Merger. Consep also
will provide PCS with reimbursement for PCS's out-of-pocket expenses,
including reasonable fees and disbursements of counsel. Consep has agreed to
indemnify PCS and its affiliates, and the directors, officers, agents, and
employees of PCS and its affiliates, against certain liabilities, including
certain liabilities under the federal securities laws, relating to or arising
out of its engagement.

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In conjunction with preparing its presentation to the Consep Board on August
11, 1998, and its written opinion dated September 8, 1998, PCS performed a
variety of financial and comparative analyses as summarized below:

Analysis of Comparable Publicly Traded Companies. PCS compared and projected
selected historical and projected earnings and historical operating and
financial ratios for both Consep and Verdant to corresponding data and ratios
of five broad categories including large agriculture chemical companies,
natural pesticide manufacturers, inorganic lawn and garden care products
manufacturers, specialty chemical consumer product manufacturers, and
specialty chemical distributors whose securities are publicly traded. In
conducting its analysis, PCS compared the ratios implied by the Exchange Ratio
based on closing market prices on August 31, 1998 and September 8, 1998 to the
ratios implied from the market valuation of publicly traded companies selected
by PCS for Consep and Verdant based upon qualitative factors which PCS deemed
relevant. Data and ratios considered included: the ratio of enterprise value
to last 12 months ("LTM") revenues, EBITDA and EBIT; and the ratio of market
price to fiscal 1997, 1998 and 1999 projected earnings per share ("EPS").

PCS obtained all projected information for the comparable companies from
IBES which summarizes the estimates made by analysts employed by several
investment banking firms and from the published reports of research analysts
employed by investment banking firms, including analysts employed by PCS. No
company utilized in this analysis is identical to Consep or Verdant.
Accordingly, an analysis of the results of the foregoing necessarily involves
complex considerations and judgments concerning differences in financial and
operating characteristics of companies, compared to Consep or Verdant, as well
as other factors that could affect the public trading value of the comparable
group.

Comparable Merger and Acquisition Analysis. PCS reviewed the implied
valuation multiples of 25 selected merger and acquisition transactions in the
comparable group. PCS compared the value implied by the Exchange Ratio based
on closing market prices to certain ratios implied by the mean of certain
ratios relating to the Transactions. The ratios were enterprise value implied
by the purchase price as a multiple of the LTM revenues at the time of
announcement or closing, the ratio of enterprise value to LTM EBITDA at the
time of announcement or closing, and the ratio of enterprise value to LTM EBIT
at the time of announcement or closing. No transaction utilized in this
analysis is identical to the Merger. Accordingly an analysis of the results of
the foregoing necessarily involves complex considerations and judgments
concerning differences in financial and operating characteristics of Consep
and the companies involved in the comparable group and other factors that
could affect the acquisition value of the companies to which it is being
compared. Mathematical analysis such as determining the mean is not in itself
a meaningful method of using comparable transactions data.

Discount Cash Flow Analysis. Discounted cash flow analysis derives the
enterprise value for a company by computing the net present value of a
company's future cash flows. For purposes of this analysis, PCS relied on
projected and historical data as provided by Consep. In addition PCS relied on
ratios from the comparable company analysis. From this analysis, PCS was able
to arrive at a range of values that are based on various sales and terminal
value growth rate scenarios.

Accretion/Dilution Analysis. PCS analyzed Verdant and Consep's current and
estimated income statements in order to determine whether the Merger would be
accretive or dilutive to the existing Consep Shareholders In conducting the
analysis, PCS considered two scenarios. In the first scenario PCS considered
slight revenue growth and operating expense savings as a result of savings
from the merger. In the second scenario PCS considered more aggressive revenue
growth along with the same cost savings. In both scenarios PCS assumed that
the Merger occurred in January 1998.

Relative Contribution Analysis. For the relative contribution analysis, PCS
determined what contributions Verdant and Consep have made and will make to
the newly combined company on an enterprise value, equity, revenue and total
asset basis. PCS then compared its results with the post-acquisition
allocation of shares between Verdant and Consep after the Merger so as to
determine fairness of the stock allocation. PCS's analysis of the Exchange
Ratio based on closing market prices on August 31, 1998 and September 4, 1988
using relative

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contribution analysis was based upon determining the average implied Exchange
Ratio based upon Consep's respective EPS for 1997, 1998 and 1999. In this
case, PCS relied on the average earnings estimates for 1998 and 1999 using
IBES and conservative-case internal management estimates for Consep.

Stock Trading Price History. PCS reviewed the history of the trading prices
for Consep Common Stock over the 52 weeks prior to the announcement of the
Merger. The Consep Common Stock traded between $.625 and $2.125 per share and
had a high price of $2.125 on October 15, 1997. Over the 90 days prior to the
announcement of the Merger, the Consep Common Stock traded between $.625 and
$1.8125 per share.

The summary set forth above does not purport to be a complete description of
the analyses performed by PCS, but describes, in summary form, the material
elements of the presentations made by PCS to the Consep Board in connection
with rendering its written opinions. The preparation of a fairness opinion
involves various determinations as to the most appropriate and relevant
methods of financial analysis and the application of these methods to the
particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Each of the analyses conducted by PCS was
carried out in order to provide a different perspective on the transaction and
add to the total mix of information available. PCS did not attribute any
particular weight to any analysis or factor considered by it, but rather
considered the results of the analysis in light of each other and concluded
that its analyses, taken as a whole, supported its determination. Accordingly,
notwithstanding the separate factors summarized above, PCS believes that its
analysis must be considered as a whole and that selecting portions of its
analysis and the factors considered by it, without considering all analyses
and factors, could create an incomplete view of the evaluation process
underlying its opinions. The analyses performed by PCS are not necessarily
indicative of actual values or future results, which may be significantly more
or less favorable than suggested by such analyses.

EFFECTIVE TIME

As soon as practicable after satisfaction or, to the extent permitted in the
Merger Agreement, waiver of all conditions set forth below, the parties will
cause the Merger to be consummated by filing Articles of Merger with the
Secretary of State of the State of Oregon and make all other filings or
recordings required by Oregon Law in connection with the Merger and the
transactions contemplated by the Merger Agreement. The Merger will become
effective at such time as the Articles of Merger is duly filed with the
Secretary of State of the State of Oregon or at such later time as may be
agreed by the parties in writing and specified in the Articles of Merger.

EXCHANGE OF CERTIFICATES

As of the Effective Time, Verdant will deposit with Norwest Bank Minnesota,
National Association or such other bank or trust company as may be designated
by Verdant and as is reasonably acceptable to Consep (the "Exchange Agent")
certificates representing the shares of Verdant Common Stock issuable for the
Merger Consideration (such shares of Verdant Common Stock, together with any
dividends or distributions with respect thereto, being hereinafter referred to
as the "Exchange Fund"). The Exchange Agent will hold the Exchange Fund for
the benefit of holders of shares of Consep Common Stock. The Exchange Agent
will distribute the Exchange Fund pursuant to provisions for the conversion of
the securities in exchange for outstanding shares of Consep Common Stock.
Except as contemplated by provisions for termination of the Exchange Fund, the
Exchange Fund will not be used for any other purpose.

As promptly as practicable after the Effective Time, Verdant will cause the
Exchange Agent to mail to each holder of record of certificates which
immediately prior to the Effective Time represented outstanding shares of
Consep Common Stock (the "Certificates") a letter of transmittal in customary
form. The letter of transmittal will specify that delivery of Certificates
will be effected, and risk of loss and title to the Certificates will pass,
only upon delivery of the Certificates to the Exchange Agent. The Exchange
Agent will accompany the letter of transmittal with instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Verdant Common Stock. Upon surrender of a Certificate
for cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, and such other documents as the Exchange Agent

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may reasonably require, the holder of such Certificate will be entitled to
receive a certificate representing that number of whole shares of Verdant
Common Stock which such holder has the right to receive pursuant to such
provisions of the Merger Agreement (after taking into account all the shares
of Consep Common Stock then held by such holder under all such Certificates so
surrendered), and any dividends or other distributions to which such holder is
entitled. If there is a transfer of Share ownership which is not registered in
the transfer records of Consep, a certificate representing the proper number
of shares of Verdant Common Stock may be issued to a person other than the
person in whose name the Certificate so surrendered is registered, if, upon
presentation to the Exchange Agent, such Certificate will be properly endorsed
or otherwise be in proper form for transfer and the person requesting such
payment will pay any transfer or other taxes required by reason of the
issuance of shares of Verdant Common Stock to a person other than the
registered holder of such Certificate or establish to the reasonable
satisfaction of Verdant that such tax has been paid or is not applicable.
Subject to certain exceptions, each Certificate will be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the Certificate representing shares of Verdant Common Stock, cash in
lieu of any fractional shares of Verdant Common Stock, and any dividends or
other distributions to which such holder is entitled.

No fractional shares of Verdant Common Stock will be issued upon the
surrender of Certificates. Each holder of shares of Consep Common Stock
exchanged for shares of Verdant Common Stock pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of Verdant
Common Stock (after taking into account all Certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an amount
equal to such fractional part of a share of Verdant Common Stock multiplied by
the closing price of Verdant Common Stock on the closing date of the Merger.

Verdant will not pay dividends or other distributions to the holder of any
unsurrendered Certificate, and Verdant will not make any cash payment for
fractional shares to any such holder until the holder of record of such
Certificate surrenders such Certificate. Such payments will be made, without
interest, only when the Certificate is surrendered.

The Exchange Agent will deliver any portion of the Exchange Fund that
remains undistributed to the holders of the Certificates for two years after
the Effective Time to Verdant, upon demand. After that time, any holders of
the Certificates who have not complied with the provisions for exchange of
Certificates will be required to look only to Verdant for payment of their
claim for Verdant Common Stock, any cash in lieu of fractional shares of
Verdant Common Stock, and any dividends or distributions with respect to
Verdant Common Stock.

None of Verdant, Merger Subsidiary, Consep or the Exchange Agent will be
liable to any person in respect of any shares of Verdant Common Stock (or
dividends or distributions with respect thereto) or cash in the Exchange Fund
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.

The Exchange Agent will invest any cash included in the Exchange Fund in
deposit accounts, as directed by Verdant, on a daily basis. The Exchange Agent
will pay any interest and other income resulting from such investments to
Verdant.

If any Certificate is lost, stolen, or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate to be lost,
stolen, or destroyed, and, if required by the surviving corporation, upon the
delivery to the Exchange Agent of a bond in such sum as the surviving
corporation may direct as indemnity against any claim that may be made against
it with respect to such Certificate, the Exchange Agent will issue in exchange
for such lost, stolen, or destroyed Certificate the shares of Verdant Common
Stock and any cash in lieu of fractional shares, and unpaid dividends and
distributions on shares of Verdant Common Stock deliverable in respect
thereof, pursuant to this Agreement.

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CERTAIN REPRESENTATIONS AND WARRANTIES

The Merger Agreement contains various representations and warranties of
Verdant, Merger Subsidiary and Consep, (which representations and warranties
are subject, in certain cases, to specified exceptions) to: (1) its
organization, existence and good standing; (2) its subsidiaries and their
corporate organization and existence; (3) its corporate power to consummate
the transactions contemplated by the Merger Agreement; (4) required
governmental or regulatory approvals to consummate the Merger; (5) the lack of
any conflict between the Merger and the charter, bylaw, laws or assets of the
parties; (6) its capitalization; (7) its compliance with securities law filing
requirements; (8) the absence of certain adverse events, occurrences or
developments; (9) its title to properties; (10) its accounts receivable; (11)
its inventory; (12) the filing of all tax returns and payment of all required
taxes; (13) its performance of material obligations in connection with
disclosed contracts and commitments; (14) its intellectual property rights;
(15) the absence of pending or threatened litigation; (16) its outstanding
claims, pending or threatened for breach of warranties and product warranties;
(17) its employees; (18) its employee benefit plans; (19) its insurance; (20)
the absence of certain affiliate transactions; (21) its customers and
suppliers; (22) its former distributors that were terminated; (23) its
officers and directors and the existence of bank accounts; (24) the absence of
any collective bargaining agreements or other labor union contract applicable
to persons employed by any of the parties; (25) its compliance with laws; (26)
except for fees payable to PCS by Consep, the absence of any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by the Merger Agreement; (27) tax treatment
of the Merger; (28) the absence of certain illegal activities; (29) certain
contract matters; (30) its compliance with environmental laws; (31) absence of
liens; and (32) the absence of any untrue statement of a material fact or
omission of a material fact with regard to the various representations and
warranties contained in the Merger Agreement.

COVENANTS AND AGREEMENTS

Pursuant to the Merger Agreement, each of Verdant, Merger Subsidiary and
Consep have agreed that, prior to the Effective Time, they will, among other
things, conduct their respective businesses in the ordinary course consistent
with past practice and use reasonable efforts to preserve intact their
business organizations and relationships with third parties. Prior to the
Effective Time, neither Consep nor any of its subsidiaries, without prior
written approval of Verdant, will (1) amend its articles of incorporation,
bylaws or other comparable charter documents; (2) (a) declare or pay
dividends, (b) split, combine or reclassify any of their capital stock, or
issue or authorize the issuance of any other securities, or (c) purchase,
redeem or otherwise acquire any shares of capital stock; (3) issue, grant,
award, sell, pledge or otherwise encumber any shares of their capital stock or
any other voting securities; (4) acquire or agree to acquire by merger,
consolidation, asset purchase or any other manner (a) any corporation,
partnership, joint venture, association or other business organization, or (b)
any assets that are material to Consep, except purchases of inventory in the
ordinary course of business; (5) sell, lease, license, mortgage, subject to
lien or otherwise dispose of any of its assets that are material individually
or in the aggregate, except sales of inventory in the ordinary course of
business; (6) incur any indebtedness or make any loans, advances or capital
contributions to any other person other than to Consep or its subsidiaries or
to employees consistent with past practice; (7) make or agree to make any new
capital expenditure or expenditures which individually is in excess of $5,000
or in the aggregate are in excess of $25,000; (8) make any tax election or
settle or compromise any tax liability, or make any change in any method of
accounting for taxes or accounting policy or practice with respect to taxes;
(9) pay, discharge, settle or satisfy any material claims, liabilities or
obligations other than payment, discharge, settlement or satisfaction in the
ordinary course of business consistent with past practice; (10) except in the
ordinary course of business, modify, amend or terminate any material contract
or agreement to which Consep is a party or waive, release or assign any
material rights or claims; (11) enter into any contract or agreement with
sales representative or distributor; (12) except as required by law or in the
ordinary course of business, change any bonus plan, compensation, fringe
benefit or grant any awards or take any action to fund any employee plan,
agreement or arrangement; (13) make any change in any method of accounting or
accounting practice or policy other than those required by generally accepted
accounting principles; (14) take any action that without regard to any action
taken by Consep or any of its affiliates that would prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the
Code; (15) pay any fees of any legal or tax advisor retained in connection
with the Merger calculated on a basis other

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than an hourly basis at the maximum agreed rates per hour (16) enter into any
written employment agreement with any employee or any verbal agreement
providing for benefits not equivalent to employees of similar position in
Consep; (17) accelerate the vesting of any of Consep's options; or (18)
authorize any of, or commit or agree to take any of, the foregoing actions.
Neither Verdant nor any of its subsidiaries, without the prior written
approval of Consep, will (1) except for the Charter Amendment, amend its
articles of incorporation, bylaws or other comparable charter or
organizational documents; (2) (a) declare or pay dividends, (b) split, combine
or reclassify any of their capital stock, or issue or authorize the issuance
of any other securities, or (c) purchase, redeem or otherwise acquire any
shares of capital stock; (3) issue more than 2,500,000 shares of Verdant
Common Stock any other voting securities, or any securities convertible into
or any rights, warranties or options to acquire such shares, voting securities
or convertible securities, at a price equivalent that is less than 75% of the
market price of the Parent Common Stock on the date of issuance; (4) make any
acquisition or take any other action which would materially adversely affect
its ability to consummate the transactions contemplated by the Merger
Agreement; (5) take any action that would prevent the Merger from qualifying
as a reorganization within the meaning of Section 368(a) of the Code; or (6)
authorize any of, or commit or agree to take any of, the foregoing actions.

Consep has covenanted that it will not, prior to the Effective Time,
participate in any discussions with, provide any information to, enter into
any agreement or understanding with, or otherwise cooperate in any other way
with any person concerning any Competing Transaction, or permit or authorize
any of their respective directors, officers, employees, shareholders or
representatives (including, without limitation, any financial advisor,
attorney or accountant) or any of their subsidiaries to take any such action.
Consep is required to provide Verdant notice of any inquiries, proposals or
requests for information concerning any Competing Transaction. For such
purposes, a "Competing Transaction" shall mean any of the following involving
Consep (1) any tender or exchange offer, proposal for a merger, consolidation
or other business combination involving Verdant or Consep, as the case may be,
or any proposal or offer to acquire in any manner 20% or more of their voting
equity securities in a single transaction or series of related transactions;
(2) any sale, lease, exchange, mortgage, pledge, transfer or other disposition
of 25% or more of their assets in a single transaction or a series of related
transactions; or (3) any agreement to, or public announcement of a proposal,
plan or intention to do any of the foregoing. Notwithstanding the foregoing,
nothing contained in the Merger Agreement shall prevent Consep or Consep's
Board from furnishing non-public information to, or entering into discussions
or negotiations with, any person or entity in connection with an unsolicited
bona fide written proposal or inquiry concerning a Competing Transaction by
such person or entity or recommending an unsolicited bona fide written
proposal concerning a Competing Transaction to the Consep Shareholders if and
only to the extent that (i) the Consep Board believes in good faith that such
Competing Transaction would, if consummated, result in a transaction more
favorable to Consep's shareholders from a financial point of view than the
transaction contemplated by the Merger Agreement and the Consep Board
determines in good faith after consultation with outside legal counsel that
such action is necessary for Consep to comply with its fiduciary duties to
Consep's Shareholders under applicable law, and (ii) prior to furnishing such
non-public information to, or entering into discussions or negotiations with,
such person or entity, the Consep Board receives from such person or entity an
executed confidentiality agreement with terms no more favorable to such party
than those contained in the Confidentiality Agreement dated June 30, 1998,
between Verdant and Consep.

Verdant and Consep have also agreed to take certain other actions,
including: (1) all actions necessary to convene meetings of shareholders to
vote on approval of the Merger Agreement, the Merger, the Charter Amendment
and certain other matters outlined in the Merger Agreement; (2) to cooperate
in the preparation of a registration statement on Form S-4 to be filed by
Verdant in connection with the issuance of Verdant Common Stock in the Merger;
(3) to provide to each other access to all information and documents which the
other may reasonably request regarding the business, assets, liabilities,
employees and other aspects of the other party, other than the information and
documents that in the opinion of such other party's legal counsel may not be
disclosed under applicable law; (4) to comply with all of their respective
obligations under the Confidentiality Agreement; (5) to consult with each
other before issuing any press release or making any public statement; (6) to
use reasonable efforts to (a) take all appropriate action necessary under
applicable law or required to be taken by any

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governmental entity to consummate the Merger, (b) obtain appropriate licenses,
waivers or approvals from any governmental entities, (c) give any notices to
non-governmental entities and obtain necessary third party consents, and (iv)
make necessary filings under the securities laws and any other applicable law;
(7) to indemnify, defend and hold harmless the present and former officers and
directors of Consep against certain losses and expenses arising out of actions
or omissions occurring at or prior to the Effective Time to the extent
permitted or required as of the Agreement Date (as defined in the Merger
Agreement) under the Consep Articles and the Consep Bylaws; (8) to deliver
certain information necessary to comply with Rule 145 under the Securities
Act; (9) to prepare and submit certain listing applications;(10) to file all
tax returns; and (11) to cause Volker G. Oakey and Walter C. Babcock to be
appointed and later nominated to the Verdant Board.

CONDITIONS

The respective obligations of Consep, Verdant and Merger Subsidiary to
consummate the Merger are subject to the satisfaction upon or prior to the
Closing of the following conditions: (1) the holders of a majority of shares
of outstanding Verdant Common Stock and Consep Common Stock must approve the
Merger Agreement in accordance with state law, and their respective charters
and bylaws; (2) all filings and approvals from governmental entities necessary
for the consummation of the transactions contemplated by the Merger Agreement
must have been filed and all applicable waiting periods must have run or
obtained; (3) the Form S-4 must have become effective under the Securities
Act, without stop orders or proceedings commenced or threatened by the
Commission; (4) there must be no legal restraint or prohibition preventing the
consummation of the Merger; and (5) the Charter Amendment must be approved by
the Verdant Shareholders and shall have been filed with the Secretary of State
of the State of Minnesota.

The obligations of Verdant and Merger Subsidiary to effect the Merger are
subject to the satisfaction prior to or upon the Closing of the following
conditions unless waived by Verdant: (1) the accuracy of the representations
and warranties of Consep as of the Closing Date; (2) the performance by Consep
of the obligations and covenants required to be performed by it prior to or as
of the Closing Date; (3) the receipt of certain consents, approvals and
authorizations; and (4) receipt of executed copies of affiliate letters.

The obligation of Consep to effect the Merger is subject to the satisfaction
prior to or upon the closing of the following conditions, unless waived by
Consep: (1) the accuracy of the representations and warranties of Verdant and
Merger Subsidiary as of the Closing Date; (2) the performance of all
obligations and covenants required to be performed by Verdant and Merger
Subsidiary prior to or as of the Closing Date; (3) the receipt of certain
consents, approvals and authorizations; (4) the listing of shares of Verdant
Common Stock constituting the Merger Consideration on the Nasdaq National
Market and (5) the receipt by Consep of an opinion in form and substance
satisfactory to Consep of Ater Wynne LLP as to certain tax matters.

TERMINATION

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to do so; (5) by either Verdant, Merger Subsidiary or Consep if the
shareholders of Consep fail to approve the Merger Agreement and the Merger;
(6) by either Verdant, Merger Subsidiary or Consep, if shareholders of Verdant
fail to approve the Merger Agreement, the Merger or the Charter Amendment; (7)
by Consep, in the event of a material breach by Verdant or Merger Subsidiary
of any representation, warranty, covenant or agreement contained in the Merger
Agreement (other than a breach of Verdant or Merger Subsidiary due to the
occurrence of a Material Adverse Effect arising solely due to the public
announcement of the Merger) which has not been cured or is not curable by
December 31, 1998; or (8) by Verdant, in the event of a material breach by
Consep of any representation, warranty, covenant or agreement contained in the
Merger Agreement (other than a breach of Consep due to the occurrence of a
Material Adverse Effect arising solely due to the public announcement of the
Merger) which has not been cured or is not curable by December 31, 1998.

In the event of termination of the Merger Agreement pursuant to the
termination provisions, the Merger Agreement will forthwith become void, there
will be no liability under the Merger Agreement on the part of Verdant, Merger
Subsidiary or Consep or any of their respective officers or directors and all
rights and obligations of any party will cease, subject to the provision for
Termination Fees.

TERMINATION FEES

The Merger Agreement provides that if the Merger Agreement is terminated
because (1) Consep withdraws, modifies, or changes its recommendation of the
Merger Agreement or the Merger in a manner adverse to Verdant or Merger
Subsidiary or shall have resolved to do any of the foregoing or, the Consep
Board shall have recommended to the Consep Shareholders any Competing
Transaction or resolved to do so, for any reason other than the occurrence of
an event or the discovery of a falsity or a representation or warranty
relating to Verdant that has a Parent Material Adverse Effect, (2) Consep's
Shareholders shall have failed to approve the Merger Agreement and the Merger
at the Consep Special Meeting (including any adjournment or postponement
thereof) and a Competing Transaction exists on the date of the Consep Special
Meeting, or (3) of a material breach by Consep of any representation,
warranty, covenant or agreement contained in the Merger Agreement (other than
a breach Consep due to the occurrence of a Material Adverse Effect arising
solely due to the public announcement of the Merger) which has not been cured
or is not curable by December 31, 1998 and the breach giving rise to such
termination is a result of a Competing Transaction, then Consep shall pay
Verdant a fee of $1,000,000 and shall reimburse Verdant and Merger Subsidiary
for all of their out-of-pocket costs and expenses incurred in connection with
the transactions contemplated by the Merger Agreement (such fee and expenses
being referred to herein as the "Termination Fee"). Such Termination Fee shall
be due and payable within thirty (30) days of termination of the Merger
Agreement; provided that, in no event shall Consep be required to pay the
Termination Fee to Verdant if, immediately prior to the termination of the
Merger Agreement, Verdant was in breach of any of its material obligations
under the Merger Agreement. In the event that Consep shall fail to pay the
Termination Fee when due, there shall also be paid the costs and expenses
actually incurred or accrued by Verdant or Merger Subsidiary (including,
without limitation, reasonable fees and expenses of counsel) in connection
with the collection under and enforcement of the Termination Fee, together
with interest on such unpaid Termination Fee, commencing on the date that such
Termination Fee becomes due, at a rate equal to the prime rate of interest
published in the Wall Street Journal plus 2%.

WAIVER AND AMENDMENT

The Merger Agreement may be changed or modified by the parties only by
action taken by or on behalf of their respective boards of directors,
reflected in a written amendment signed by the parties, at any time prior to
the Effective Time; provided, however, that, after the approval of the Merger
Agreement by the Consep Shareholders, no amendment may be made which would
reduce the amount or change the type of consideration into which each share of
Consep Common Stock will be converted upon consummation of the Merger.

At any time prior to the Effective Time, any party may (1) extend the time
for the performance of any obligation or other act of any other party, (2)
waive any inaccuracy in the representations and warranties contained in the
Merger Agreement or in any document delivered pursuant the Merger Agreement,
and (3) waive compliance with any agreement or condition contained in the
Merger Agreement.

46
<PAGE>

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

Consep and Verdant expect that the Merger will constitute a reorganization
within the meaning of Section 386(a) of the Code and that for federal income
tax purposes no gain or loss will be recognized by Consep Shareholders upon
the receipt solely of Verdant Common Stock for Consep Common Stock pursuant to
the Merger. The Internal Revenue Service (the "Service") has not been and will
not be asked to rule on the tax consequences of the Merger. Instead, Consep
will rely on the opinion of Ater Wynne LLP, legal counsel to Consep, dated
October 21, 1998, as to certain federal income tax consequences of the Merger.
Such opinion is based upon facts described therein and upon certain
assumptions and certain representations made by Consep and Verdant. The
opinion of Ater Wynne LLP is based on the Code, the Regulations promulgated
thereunder, current administrative rulings and practice and judicial
authority, all of which are subject to change. An opinion of counsel is not
binding on the Service and there can be no assurance, and none is hereby
given, that the opinion will be upheld by the courts if challenged by the
Service. Each holder of Consep Common Stock is urged to consult his or her own
tax and financial advisors as to the federal income tax consequences of the
Merger under such shareholder's own particular facts and circumstances and
also as to any state, local, foreign or other tax consequences arising out of
the Merger.

The opinion of Ater Wynne LLP, which is based upon facts and representations
provided to such firm, and subject to various assumptions, provides that the
Merger will qualify as a "reorganization" within the meaning of Section 368(a)
of the Code and that the following material federal income tax consequences
will result from the Merger:

(a) Verdant, Merger Subsidiary and Consep will each be a party to that
reorganization within the meaning of Code Section 368(b);

(b) No income, gain or loss will be recognized for federal income tax
purposes by Consep as a result of the consummation of the Merger; and

(c) No income, gain or loss will be recognized for federal income tax
purposes by the Consep Shareholders upon the exchange in the Merger of
shares of Consep Common Stock solely for shares of Verdant Common Stock
(except to the extent of any cash received in lieu of fractional shares).

The obligation of Consep to consummate the Merger is conditioned upon the
opinion of Ater Wynne LLP not having been withdrawn or modified in any
material respect prior to such consummation.

Provided that the Merger does qualify as a "reorganization," the tax basis
of Verdant Common Stock received by a Consep Shareholder who exchanges all of
such shareholder's Consep Common Stock solely for Verdant Common Stock in the
Merger will be the same as the tax basis of the Consep Common Stock
surrendered therefor reduced by the amount of cash received for fractional
shares.

Holders of warrants to purchase shares of Consep Common Stock should not
recognize taxable income, gain or loss as a result of the assumption of such
warrants by Verdant pursuant to the terms of the Merger Agreement. Holders of
options to acquire Consep Common Stock under Consep's 1992 Stock Incentive
Plan, 1993 Stock Incentive Plan, 1993 Stock Option Plan for Nonemployee
Directors, or 1997 Stock Incentive Plan, each as amended (the "Option Plans")
should not recognize income, gain or loss as a result of the assumption of the
Option Plans by Verdant pursuant to the terms of the Merger Agreement.

The foregoing is only a summary description of the material anticipated
federal income tax consequences of the Merger, without regard to the
particular facts and circumstances of each Consep Shareholder. It does not
discuss all of the consequences that may be relevant to Consep Shareholders
entitled to special treatment under the Code (such as banks, insurance
companies, dealers in securities, exempt organizations or foreign persons or
entities) or to Consep Shareholders who acquired their Consep Common Stock
pursuant to the exercise of employee stock options or otherwise as
compensation. The summary set forth above does not purport to be a complete
analysis of all potential tax effects of the transactions contemplated by the
Merger Agreement or the Merger itself, and does not purport to be a complete
analysis or listing of all potential tax effects relevant to a decision of
whether to vote in favor of the Merger. No information is provided herein with
respect to the tax consequences, if any, of the Merger or the exchange of
shares pursuant thereto under state, local, foreign or other tax laws.

47
<PAGE>

A successful challenge by the Service to the "reorganization" status of the
Merger would result in a Consep Shareholder recognizing gain or loss with
respect to each share of Consep Common Stock surrendered equal to the
difference between the shareholder's basis in such share and the fair market
value, at the Effective Time, of the Verdant Common Stock received in exchange
therefor. In such event, a shareholder's aggregate basis in the Verdant Common
Stock so received would equal its fair market value, and the holding period
for such stock would begin the day after consummation of the Merger.

INTERESTS OF CERTAIN PERSONS IN THE MERGER

Each of Volker G. Oakey, Steven R. Hartmeier and Kenneth C. Rymer, officers
and managers of Consep, as well as eight other manager level employees of
Consep (the "Consep Executives"), is a party to a Control Change Agreement
with Consep. Each Control Change Agreement provides that each of the Consep
Executives may receive certain severance benefits if the employment of such
Consep Executive is terminated, whether voluntarily or involuntarily, within
two (2) years after a "Change of Control" of Consep and a "Material Adverse
Change in Employment" with respect to Messrs. Oakey, Hartmeier and Rymer, and
within one year after a "Change of Control" of Consep and a "Material Adverse
Change in Employment" of the eight other manager level employees of Consep.
The Merger will constitute a Change of Control of Consep for purposes of such
agreements. A "Material Adverse Change in Employment" means, without the
employee's consent, a material adverse change in the employee's duties,
reporting responsibilities or title, any removal or failure to reelect or
reappoint the employee other than for cause or upon death, disability or
retirement, any reduction of the employee's base salary or a relocation of the
employee away from the principal executive offices of Consep. The severance
benefits include salary continuation benefits, plus continued life insurance,
health insurance, dental insurance and disability insurance benefits for a
period of two years after termination with respect to Messrs. Oakey, Hartmeier
and Rymer, and for a period of one year after termination with respect to the
eight other manager level employees of Consep.

Consep, and from and after the Effective Time, Verdant and Consep will,
indemnify, defend and hold harmless each person who is now, or has been at any
time prior to the Effective Time, a director or officer of Consep or any of
its subsidiaries against all losses, claims, damages, costs, expenses,
liabilities or judgments or amounts there paid in settlement with the approval
of Verdant in connection with any claim, action, suit, proceeding or
investigation based in whole or in part on or arising in whole or in part out
of acts or omissions occurring at or prior to the Effective Time (including,
without limitation, the transactions contemplated by the Merger Agreement).
Such indemnification is given in each case to the full extent a corporation is
permitted to do so under the Oregon Business Corporation Act and Consep's
Articles of Incorporation and Bylaws as in effect on the date of the Merger
Agreement.

CONFLICTS OF INTEREST

As of the Consep Record Date, non-employee members of the Consep Board
beneficially owned an aggregate of 351,389 shares of Consep Common Stock and
held options to acquire an aggregate of 26,250 shares of Consep Common Stock
exercisable at prices ranging from $4.625 to $1.313 per share. See "OWNERSHIP
OF CONSEP COMMON STOCK." Assuming a closing price per share of Verdant Common
Stock on the Closing Date (as defined in the Merger Agreement) of $1.1875, the
aggregate dollar value of Verdant Common Stock to be received by these non-
employee directors in respect of issued and outstanding shares of Consep
Common Stock would be approximately $396,411, representing approximately 3.6%
of the aggregate consideration to be received by all holders of Consep Common
Stock. Pursuant to the Merger Agreement, all outstanding options to purchase
shares of Consep Common Stock, including those held by the non-employee
directors of Consep, would be assumed by Verdant and automatically converted
into options to purchase shares of Verdant Common Stock. Assuming a closing
price per share of Verdant Common Stock on the Closing Date of $1.1875, the
options to purchase shares of Verdant Common Stock to be received by these
non-employee directors in respect of outstanding options to purchase Consep
Common Stock would initially have no value since the exercise price of such
options to purchase Verdant Common Stock would be greater than the assumed
closing price of $1.1875 per share.

48
<PAGE>

As of the Consep Record Date, the executive officers of Consep beneficially
owned an aggregate of 335,951 shares of Consep Common Stock and held options
to purchase an aggregate of 278,858 shares of Consep Common Stock exercisable
at prices ranging from $3.25 to $0.50 per share. See "OWNERSHIP OF CONSEP
COMMON STOCK." Assuming a closing price per share of Verdant Common Stock on
the Closing Date of $1.1875, the aggregate dollar value of Verdant Common
Stock to be received by these executive officers in respect of issued and
outstanding shares of Consep Common Stock would be approximately $378,995,
representing approximately 3.5% of the aggregate consideration to be received
by all holders of Consep Common Stock. Pursuant to the Merger Agreement, all
outstanding options to purchase shares of Consep Common Stock, including those
held by the executive officers of Consep, would be assumed by Verdant and
automatically converted into options to purchase shares of Verdant Common
Stock. Assuming a closing price of Verdant Common Stock on the Closing Date of
$1.1875, the aggregate dollar value of options to purchase Verdant Common
Stock to be received by these executive officers in respect of outstanding
options to purchase Consep Common Stock would be approximately $25,126,
representing approximately 80% of the aggregate consideration to be received
by all holders of options to purchase shares of Consep Common Stock.

ACCOUNTING TREATMENT

The Merger will be accounted for by Verdant under the purchase method of
accounting in accordance with Accounting Principles Board Opinion No. 16,
"Business Combinations," as amended. Under this method of accounting, the
purchase price will be allocated to assets acquired and liabilities assumed
based on their estimated fair values. Income of the combined company will not
include income or loss of Consep prior to the Effective Date.

RESALE OF VERDANT COMMON STOCK RECEIVED BY CONSEP SHAREHOLDERS

The shares of Verdant Common Stock issuable to Consep Shareholders upon
consummation of the Merger have been registered under the Securities Act. Such
securities may be traded freely without restriction by those shareholders who
are not deemed to be "affiliates" of Verdant or Consep, as that term is
defined in rules promulgated under the Securities Act.

Shares of Verdant Common Stock received by those Consep Shareholders who are
deemed to be "affiliates" of Consep at the time of the Consep Special Meeting
may be resold without registration under the Securities Act only as permitted
by Rule 145 under the Securities Act or as otherwise permitted under the
Securities Act.

Consep has agreed in the Merger Agreement to use its reasonable best efforts
to obtain and deliver to the other party, on or prior to the date of mailing
of this Joint Proxy Statement-Prospectus, signed representation letters from
each director, executive officer and other person who may reasonably be deemed
to be an "affiliate" of Consep to the effect that such persons will not, among
other things, offer to sell, transfer or otherwise dispose of any of the
shares of Verdant Common Stock distributed to them pursuant to the Merger
except, in compliance with Rule 145, or in a transaction that, in the opinion
of counsel reasonably satisfactory to Verdant, is otherwise exempt from the
registration requirements of the Securities Act, or in an offering which is
registered under the Securities Act. This Joint Proxy Statement-Prospectus
does not cover resales of Verdant Common Stock received by persons who are
deemed to be "affiliates" of Consep. No person is authorized to make use of
this Joint Proxy Statement-Prospectus in connection with any such resales.

APPRAISAL RIGHTS

No Appraisal Rights for Verdant Shareholders. Under the MBCA, holders of
Verdant Common Stock will have no appraisal rights in connection with the
Merger Agreement and the consummation of the transactions contemplated
thereby.

No Appraisal Rights for Consep Shareholders. Under the OBCA, holders of
Consep Common Stock will have no appraisal rights in connection with the
Merger Agreement and the consummation of the transactions contemplated
thereby.

49
<PAGE>

MANAGEMENT AND OPERATIONS AFTER THE MERGER

BOARD OF DIRECTORS

Immediately after the Effective Time, Verdant will cause Volker Oakey and
Walter C. Babcock to be appointed to the Verdant Board, and thereafter at the
next annual meeting of Verdant, the Verdant Shareholders will cause Volker
Oakey and Walter C. Babcock to be nominated and will use their best efforts to
cause them to be elected as directors of Verdant. In the event that the Merger
Agreement is not approved, each of the following directors, except Volker
Oakey and Walter C. Babcock, will remain and be continuing directors of
Verdant.

<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION AND
NAME AGE SINCE BUSINESS EXPERIENCE FOR PAST FIVE YEARS
---- --- --------- ---------------------------------------
<S> <C> <C> <C>
Stanley Goldberg 51 1992 Chairman of the Board of Directors of Verdant
(Verdant) since 1997; Chief Executive Officer of Verdant
since 1993, President of Verdant since September
1992. Vice President and General Manager of
Thomson, S.A., World Wide Audio Division, a
defense and electronics company from 1990 to
1992; General Manager of Thomson S.A., Audio
Americas Operations from 1988 to 1990; Manager of
Product Development for General Electric Company,
a consumer and industrial products and defense
company, from 1986 to 1988. Director of Destron-
Fearing Corporation.
Gordon F. Stofer 50 1985 President of Cherry Tree Investments, Inc. and
(Verdant) Managing General Partner of Cherry Tree Ventures
venture capital partnerships since 1980. Chairman
of the Board of Directors of Verdant from 1986 to
1997. Director of Coda Music Technology, Inc.,
Insignia Systems Incorporated and Harmony Brook,
Inc.
Robert W. Fischer 79 1981 President of R.W. Fischer & Company, Inc., a
(Verdant) corporate development and investment banking
services company, since 1979. Director of Apertus
Technologies Incorporated.
Donald E. Lovness 73 1965 Former Senior Scientist of Verdant until his
(Verdant) retirement in December 1988.
Franklin Pass, M.D. 61 1990 Chairman and Chief Executive Officer of Medi-Ject
(Verdant) Corporation, a manufacturer of needle-free
injection devices, since 1992; President of
International Agricultural Investments, Ltd., an
agricultural and consulting partnership from 1990
to 1993; Chairman and Chief Executive Officer of
Bioseeds International, Inc., an agricultural
seed company, from 1987 to 1990.
Frederick F. Yanni, Jr. 55 1993 President and Chief Executive Officer of Health
(Verdant) Services Medical Corporation of Central New York,
Inc., a network health maintenance organization,
since 1976; President and Chief Executive Officer
of Health Services Association, a provider of
ambulatory care, since 1972.
John F. Hetterick 52 1993 Independent consultant in the consumer products
(Verdant) industry since 1997; President and Chief
Executive Officer of Rollerblade, Inc., a
manufacturer of in-line skates, from 1992 to
1997; President of Tonka International, a
division of Tonka, Corporation, a toy
manufacturer, from 1989 to 1991; Vice President--
Marketing of Pepsi-Cola International, a
manufacturer and distributor of soft drinks from
1986 to 1989.
</TABLE>

50
<PAGE>

<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION AND
NAME AGE SINCE BUSINESS EXPERIENCE FOR PAST FIVE YEARS
---- --- --------- ---------------------------------------
<S> <C> <C> <C>
Richard Mayo 57 1987 President of Richard Mayo and Associates, a
(Verdant) consulting firm specializing in the lawn and
garden industry, since 1991; President of The
Chas. H. Lilly Company, a marketer of consumer
lawn and garden pesticides, fertilizers and
seeds, from 1990 to 1991; Executive Vice
President and Chief Operating Officer of the
Chas. H. Lilly Company from 1987 to 1990.
David K. Vansant 53 1998 Executive Vice President--Corporate Development
(Verdant) of the Verdant since 1997. Chairman and Chief
Executive Officer of Southern Resources, Inc.
from 1986 until Southern Resources, Inc. was
acquired by Verdant in 1997.
Volker G. Oakey 57 1984 Mr. Oakey has been a director of Consep since
(Consep) 1984 and was appointed President and Chief
Executive Officer of Consep in 1988. Mr. Oakey
was appointed Chief Financial Officer and
Secretary of Consep in September 1998. From 1986
to 1988, Mr. Oakey was a Manager with the
investment banking firm of Brown Brothers
Harriman. Prior to that, Mr. Oakey spent fifteen
years at Bethlehem Steel Corporation, serving
most recently as Assistant Treasurer of that
Company. Mr. Oakey is a member of the Board of
Directors of Bend Research, Inc. Mr. Oakey holds
an M.B.A. from The Wharton School of Business at
the University of Pennsylvania and a B.A. in
Economics from the University of Maryland.
Walter C. Babcock, Ph.D. 50 1984 Dr. Babcock has been a director of Consep since
(Consep) it was formed in 1984 and was appointed to the
Compensation Committee of the Board of Directors
of Consep in September 1996. Dr. Babcock is
President, Chief Executive Officer and Chairman
of the Board of Directors of Bend Research, Inc.,
where he has been employed since 1976. Dr.
Babcock holds a Ph.D. in Physical Chemistry from
the University of Oregon.
</TABLE>

MANAGEMENT

The executive officers of Verdant after the Merger will be comprised of
current members of Verdant's senior management. Specifically, it is expected
that Stanley Goldberg will continue to be President and Chief Executive
Officer of Verdant and, Mark G. Eisenschenk, David K. Vansant, William DeMare
and Scott Glatstein, each of Verdant, will remain Executive Vice President,
Chief Financial Officer and Secretary, Executive Vice President of Corporate
Development, Vice President of Technology and Commercial Products, and Vice
President and General Manager--Retail Sales, respectively, of Verdant. In
addition, it is expected that Volker G. Oakey will continue to be President,
Chief Executive Officer and Chief Financial Officer of Consep and, Kenneth C.
Rymer and Steven R. Hartmeier, each of Consep, will remain Vice President,
Consumer Products and Vice President, Commercial Agriculture Products,
respectively, of Consep. See "THE MERGER--Interests of Certain Persons in the
Merger."

OPERATIONS

Verdant and Consep expect to ultimately realize annual pre-tax cost savings
of approximately $1.1 million as a result of the Merger. Such cost savings are
expected to be realized by various means including reductions in staff,
consolidation of certain data processing and other back office operations, and
consolidation and elimination

51
<PAGE>

of certain duplicate or corporate overhead expenses. No adjustment has been
included in the unaudited pro forma condensed combined financial statements
included in this Joint Proxy Statement-Prospectus for the anticipated cost
savings.

The extent to which cost savings will be achieved is dependent upon various
factors beyond the control of Verdant or Consep, including regulatory factors,
economic conditions, and unanticipated changes in business conditions.
Therefore, no assurances can be given with respect to the ultimate level of
cost savings, if any, to be realized, or that such savings will be realized in
the time frame currently anticipated. See "SUMMARY--Selected Historical
Financial Data," "SUMMARY--Pro Forma Selected Historical Financial Data,"
"FINANCIAL STATEMENTS--Unaudited Pro Forma Condensed Combined Financial
Statements" and "CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION."

COSTS INCURRED IN CONNECTION WITH THE MERGER

Verdant and Consep also anticipate that they will incur Merger-related
expenses and restructuring charges in connection with the Merger, which costs
are estimated to be approximately $1.0 million (pre-tax) in the aggregate.
These items principally result from expenses to be incurred in connection with
the integration of operations and systems, elimination of redundancies, and
staff reductions and officer and employee retention arrangements. It is
anticipated that substantially all of these expenses and charges will be
incurred in the first year following the Merger.

The expenses and charges to be incurred in connection with the Merger are
dependent upon various factors beyond the control of Verdant and Consep. No
assurance can be given that such expenses and charges will not exceed the
amounts described above. See "SUMMARY--Selected Historical Financial Data,"
"SUMMARY--Pro Forma Selected Historical Financial Data," "FINANCIAL
STATEMENTS--Unaudited Pro Forma Condensed Combined Financial Statements" and
"CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION."

CORPORATE HEADQUARTERS

Verdant's corporate headquarters will remain in Bloomington, Minnesota. In
addition, it is expected that Verdant will continue to operate key portions of
its businesses from Consep's offices in Bend, Oregon.

For additional information regarding management and operations of the
combined company, see "BUSINESS OF VERDANT," "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND, RESULTS OF OPERATIONS OF VERDANT,"
"BUSINESS OF CONSEP" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF CONSEP.

52
<PAGE>

MARKET PRICES AND DIVIDEND INFORMATION

VERDANT

The Verdant Common Stock is traded on the Nasdaq National Market under the
symbol "VERD." The following table sets forth the range of high and low sales
prices as reported by the Nasdaq National Market during the periods indicated.

<TABLE>
<CAPTION>
PRICE RANGE
-------------
QUARTER HIGH LOW
------- ------ ------
<S> <C> <C>
Fiscal Year Ended September 30, 1996:
First....................................................... $2.125 $1.375
Second...................................................... 2.000 1.625
Third....................................................... 2.750 1.375
Fourth...................................................... 2.325 1.375
Fiscal Year Ended September 30, 1997:
First....................................................... $2.125 $1.250
Second...................................................... 1.688 1.031
Third....................................................... 1.750 1.000
Fourth...................................................... 1.813 1.063
Transition Period:
October 31, 1997 to December 31, 1997....................... 2.125 1.125
Fiscal Year Ending December 31, 1998:
First....................................................... 2.125 1.250
Second...................................................... 2.938 1.750
Third....................................................... 2.500 1.063
Fourth (through October 20, 1998)........................... 1.250 0.875
</TABLE>

On September 9, 1998, the last trading day before Verdant and Consep
publicly announced the execution of the Merger Agreement, the closing price
per share of Verdant Common Stock was $1.25. On October 20, 1998, the last
trading day prior to the printing of this Joint Proxy Statement-Prospectus,
such price was $1.25. Past price performance is not necessarily indicative of
likely future price performance. Holders of Verdant Common Stock and Consep
Common Stock are urged to obtain current market quotations for shares of
Verdant Common Stock.

Verdant has never declared or paid cash dividends on the Verdant Common
Stock and does not anticipate declaring or paying any such dividend in the
foreseeable future. The Credit Agreement restricts payment of dividends by
Verdant during the foreseeable future.

53
<PAGE>

CONSEP

Consep Common Stock is listed on the Nasdaq National Market under the symbol
"CSEP." The following table sets forth the range of high and low sales prices
as reported on the Nasdaq National Market during the periods indicated.

<TABLE>
<CAPTION>
PRICE RANGE
--------------
QUARTER HIGH LOW
------- ------- ------
<S> <C> <C>
Fiscal Year Ended December 31, 1996:
First Quarter.............................................. $3.750 $2.625
Second Quarter............................................. 5.125 2.375
Third Quarter.............................................. 4.000 2.625
Fourth Quarter............................................. 3.875 3.250
Fiscal Year Ended December 31, 1997:
First Quarter.............................................. $3.625 $2.875
Second Quarter............................................. 3.250 2.375
Third Quarter.............................................. 2.938 2.000
Fourth Quarter............................................. 2.125 1.313
Fiscal Year Ending December 31, 1998:
First Quarter.............................................. $1.875 $1.375
Second Quarter............................................. 1.5625 1.000
Third Quarter.............................................. 1.875 0.625
Fourth Quarter (through October 20, 1998).................. 1.063 0.656
</TABLE>

On September 9, 1998, the last trading day before Verdant and Consep
publicly announced the execution of the Merger Agreement, the closing price
per share of Consep Common Stock on the Nasdaq National Market was $0.875. On
October 20, 1998, the last trading day prior to the printing of this Joint
Proxy Statement- Prospectus, such price was $0.875. Past price performance is
not necessarily indicative of likely future price performance. Holders of
Consep Common Stock are urged to obtain current market quotations for shares
of Consep Common Stock.

Consep has been notified by the Nasdaq Stock Market that Consep's Common
Stock has failed to maintain the required closing minimum bid price for a
period of thirty consecutive trading days. Consep's Common Stock has 90
calendar days commencing October 7, 1998, in which to regain compliance with
the Nasdaq Stock Market's closing minimum bid price requirement, which would
be achieved if Consep's Common Stock trades at or above the minimum closing
bid requirement of $1.00 per share for at least ten consecutive trading days
during the period ending January 6, 1999. If Consep's Common Stock does not
regain compliance within such 90-day period, the Nasdaq Stock Market has
notified Consep that its Common Stock would be delisted from the Nasdaq Stock
Market at the opening of business on January 8, 1999, unless Consep requests a
hearing on the matter prior to January 6, 1999. If Consep's Common Stock is
delisted from the Nasdaq Stock Market, trading in Consep's Common Stock would
be expected to occur thereafter on the Over The Counter Bulletin Board and be
subject to certain "Penny Stock Rules." Under Exchange Act Rule 15g-9, broker-
dealers must take certain steps prior to selling a "Penny Stock," including:
(i) obtaining financial and investment information from the investor; (ii)
obtaining a written suitability questionnaire and purchase agreement signed by
the investor; (iii) providing the investor a written identification of the
shares being offered and in what quantity; and (iv) delivering to the investor
a written statement setting forth the basis on which the broker-dealer
approved the investor's account for the transaction. Accordingly, delisting
from the Nasdaq Stock Market and the application of the foregoing Penny Stock
Rules may make it more difficult for broker-dealers to sell Consep's Common
Stock. In addition, purchasers of Consep's Common Stock may have difficulty in
selling such securities in the future and the price of Consep's Common Stock
may be reduced.

Consep has never declared or paid any cash dividends on Consep Common Stock.
Consep currently intends to retain any earnings for future growth and,
therefore, does not anticipate declaring or paying any cash dividends in the
foreseeable future.

54
<PAGE>

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma condensed combined balance sheet as of
June 30, 1998, and the unaudited pro forma condensed combined statements of
operations for the six months ended June 30, 1998 and the three month
transition period ended December 31, 1997, combine the historical amounts of
Verdant and Consep for the periods after giving effect to certain adjustments
described in the notes to the unaudited pro forma condensed combined financial
information. The unaudited pro forma condensed combined statement of
operations for the fiscal year ended September 30, 1997 include the historical
statement of operations of Verdant for the twelve months ended September 30,
1997 and the historical statement of operations of Consep for the twelve
months ended December 31, 1997. The unaudited pro forma condensed combined
financial information presents the combined results of operations of Verdant
and Consep as if the Merger had been effective at the beginning of the
earliest period presented.

The unaudited pro forma condensed combined financial information and
accompanying notes reflect the application of the purchase method of
accounting. Under this method of accounting, the purchase price is allocated
to each asset purchased and liability assumed based on the respective
estimated fair market values of each such asset and liability.

The unaudited pro forma condensed combined financial information also
reflects:

(i) The merger of Verdant with Southern Resources, Inc. ("SRI"), a
manufacturer and marketer of consumer pesticides. The merger, completed in
December 1997, was accounted for as a purchase. The operating results of
SRI are included in Verdant's historical amounts beginning December 1,
1997. The pro forma information for fiscal 1997 below includes the
operations of SRI prior to December 1, 1997 as if the acquisition had
occurred on October 1, 1996, and is based in part on the historical
financial statements of SRI for the year ended October 3, 1997 included
elsewhere in this joint Proxy Statement-Prospectus.

(ii) The acquisition by Verdant of substantially all of the assets of
Dexol Industries, Inc. ("Dexol"), a manufacturer and marketer of consumer
pesticides. The acquisition, completed in March 1997, was accounted for as
a purchase. The operating results of Dexol are included in Verdant's
historical amounts beginning March 1, 1997. The pro forma information for
fiscal 1997 below includes the operations of Dexol prior to March 1, 1997
as if the acquisition had occurred on October 1, 1996, and is based on
internal unaudited financial statements of Dexol for the period from
October 1, 1996 to February 28, 1997.

The pro forma information is presented for illustrative purposes only and is
not necessarily indicative of the operating results or financial position that
would have occurred if the Merger had been consummated on the date indicated,
nor is it necessarily indicative of future operating results or financial
position.

55
<PAGE>

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS
AS OF JUNE 30, 1998
(in thousands, except per share amounts)

<TABLE>
<CAPTION>
VERDANT CONSEP PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Cash............................ $ 159 $ 438 $ -- $ 597
Investments..................... -- 68 68
Accounts receivable............. 14,702 9,926 24,628
Inventories, net................ 11,069 9,988 (150)(d) 20,907
Other current assets............ 747 974 (100)(c) 1,621
------- ------- ------- -------
26,677 21,394 (250) 47,821
Assets held for sale............ 2,113 -- 2,113
Property, net................... 596 5,681 6,277
Intangibles, net................ 13,200 1,447 14,647
Goodwill, net................... -- 1,958 (1,958)(b) --
-- (f)
Other assets.................... 151 61 212
------- ------- ------- -------
$42,737 $30,541 $(2,208) $71,070
======= ======= ======= =======
Accounts payable................ $10,133 $ 7,324 $ -- $17,457
Accrued expenses................ 2,315 1,365 1,460(e) 5,140
Bank line of credit............. 7,609 3,975 11,584
Current maturities.............. 302 496 798
Other current liabilities....... -- 172 172
------- ------- ------- -------
Total current liabilities..... 20,359 13,332 1,460 35,151
Long-term debt.................. 7,123 -- 7,123
Notes payable................... -- 2,042 2,042
Warrant obligation.............. -- 20 20
Common stock.................... 167 96 (5)(a) 258
Additional paid in capital...... 37,620 44,227 (32,839)(a) 49,008
Cumulative translation
adjustment..................... (236) (59) 59 (a) (236)
29,117
Accumulated deficit............. (22,296) (29,117) -- (a) (22,296)
------- ------- ------- -------
Total shareholders' equity.... 15,255 15,147 (3,668) 26,734
------- ------- ------- -------
$42,737 $30,541 $(2,208) $71,070
======= ======= ======= =======
</TABLE>

56
<PAGE>

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998
(in thousands, except per share amounts)

<TABLE>
<CAPTION>
VERDANT CONSEP PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues........................... $31,745 $22,778 $ -- $54,523
Cost of revenues................... 20,049 16,923 36,972
------- ------- ----- -------
Gross margin....................... 11,696 5,855 17,551
Operating expenses................. 9,596 5,588 -- (g) 15,184
------- ------- ----- -------
Income from operations............. 2,100 267 -- 2,367
Other expenses..................... (586) (207) (793)
------- ------- ----- -------
Income before taxes................ 1,514 60 -- 1,574
Provision for taxes................ -- -- --
------- ------- ----- -------
Net income......................... $ 1,514 $ 60 $ 1,574
======= ======= ===== =======
Earnings per share--basic.......... $ 0.09 $ 0.01 $ 0.06
======= ======= =======
Earnings per share--diluted........ $ 0.09 $ 0.01 $ 0.06
======= ======= =======
Weighted average shares--basic..... 16,689 9,607 9,184(a) 25,873
======= ======= ===== =======
Weighted average shares--diluted... 16,940 9,640 9,184(a) 26,124
======= ======= ===== =======
</TABLE>

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1997
(in thousands, except per share amounts)

<TABLE>
<CAPTION>
VERDANT SRI PRO FORMA VERDANT CONSEP PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS ADJUSTED HISTORICAL ADJUSTMENTS COMBINED
---------- ---------- ----------- -------- ---------- ----------- ---------
(M)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $ 4,767 $ 1,411 $ (67)(h) $6,111 $ 4,951 $ -- $11,062
Cost of revenues........ 3,131 1,936 (67)(h) 5,000 4,442 9,442
------- ------- ----- ------- ------- ----- -------
Gross margins........... 1,636 (525) -- 1,111 509 -- 1,620
Operating expenses...... 2,768 1,862 59(i) 4,689 2,521 -- (g) 7,210
------- ------- ----- ------- ------- ----- -------
Income (loss) from
operations............. (1,132) (2,387) (59) (3,578) (2,012) -- (5,590)
Other income (expense).. (65) (215) -- (280) (33) (313)
------- ------- ----- ------- ------- ----- -------
Income (loss) before
taxes.................. (1,197) (2,602) (59) (3,858) (2,045) -- (5,903)
Provision (benefit) for
taxes.................. -- -- -- -- -- -- --
------- ------- ----- ------- ------- ----- -------
Net income (loss)....... $(1,197) $(2,602) $ (59) $(3,858) $(2,045) $ -- $(5,903)
======= ======= ===== ======= ======= ===== =======
Earnings (loss) per
share--basic........... $ (0.09) $ (0.22) $ (0.22) $ (0.22)
======= ======= ======= =======
Earnings (loss) per
share--diluted......... $ (0.09) $ (0.22) $ (0.22) $ (0.22)
======= ======= ======= =======
Weighted Average
Shares--basic.......... 13,313 4,500 17,813 9,451 9,184 26,997
======= ===== ======= ======= ===== =======
Weighted Average
Shares--diluted........ 13,313 4,500 17,813 9,451 9,184 26,997
======= ===== ======= ======= ===== =======
</TABLE>

57
<PAGE>

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

TWELVE MONTHS ENDED SEPTEMBER 30, 1997
(in thousands, except per share amounts)

<TABLE>
<CAPTION>
PRO PRO
FORMA 12/31/97 FORMA PRO
VERDANT DEXOL SRI ADJUST- VERDANT CONSEP ADJUST- FORMA
HISTORICAL HISTORICAL HISTORICAL MENTS ADJUSTED HISTORICAL MENTS COMBINED
---------- ---------- ---------- ------- -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $18,820 $2,973 $25,034 $ (67)(h) $46,760 $39,204 $ -- $85,964
Cost of revenues........ 10,255 2,030 20,787 (67)(h) 33,005 29,787 62,792
------- ------ ------- ----- ------- ------- ----- -------
Gross margin............ 8,565 943 4,247 -- 13,755 9,417 -- 23,172
(42)(j)
Operating expenses...... 9,090 1,486 3,847 389 (i) 14,770 11,281 -- (g) 26,051
------- ------ ------- ----- ------- ------- ----- -------
Income (loss) from oper-
ations................. (525) (543) 400 (347) (1,015) (1,864) -- (2,879)
Interest income (ex-
pense), net............ (80) (78) (927) 28 (k) (1,057) (267) -- (1,324)
Other income (expense).. 59 -- (7) -- 52 309 361
------- ------ ------- ----- ------- ------- ----- -------
Loss before taxes....... (546) (621) (534) (319) (2,020) (1,822) -- (3,842)
Provision benefit for
taxes.................. -- -- (125) 125 (1) -- -- -- --
------- ------ ------- ----- ------- ------- ----- -------
Net Loss................ $ (546) $ (621) $ (409) $(444) $(2,020) $(1,822) $ -- $(3,842)
======= ====== ======= ===== ======= ======= ===== =======
Loss per share--basic... $ (0.05) $ (0.13) $ (0.19) $ (0.15)
======= ======= ======= =======
Loss per share--
diluted................ $ (0.05) $ (0.13) $ (0.19) $ (0.15)
======= ======= ======= =======
Weighted average
shares--
basic.................. 11,541 16,041 9,451 9,184(a) 25,225
======= ======= ======= ===== =======
Weighted average
shares--
diluted................ 11,541 16,041 9,451 9,184(a) 25,225
======= ======= ======= ===== =======
</TABLE>

NOTES TO CONDENSED PRO FORMA FINANCIAL STATEMENTS:

(a) Issuance of Verdant Common Stock and retirement of Consep Common Stock at
time of Merger.
(b) Elimination of Consep goodwill not acquired.
(c) To adjust receivable to fair value.

(d) To adjust inventory to fair value and establish a valuation reserve for
products that will be discontinued.
(e) Accrue estimated direct costs of Merger ($1,210,000) and record
adjustments referred to in notes (c) and (d).
(f) Excess of purchase price over the fair value of net assets acquired at
time of Merger (less than $1,000).
(g) Amortization over 20 years of the excess of purchase price over the net
assets acquired in the Merger (less than $1,000).
(h) Elimination of sales to Verdant by SRI for the three month transition
period ended December 31, 1997 and fiscal year ended September 30, 1997.
(i) Amortization of excess of purchase price over net assets acquired in the
SRI merger and Dexol acquisition and amortization of intangible assets
valued at the time of the SRI merger for the three month transition period
ended December 31, 1997 and fiscal year ended September 30, 1997.
(j) Elimination of portion of Dexol business not acquired.
(k) Reduction in interest expense on notes to Dexol shareholders not assumed
by Verdant.
(l) Elimination of income tax benefit.
(m) The historical results of operations of Consep for the three month period
ended December 31, 1997 have also been included in the historical results
of Consep contained in the unaudited pro forma condensed combined
statement of operations for the twelve months ended September 30, 1997.

58
<PAGE>

BUSINESS OF VERDANT

General. At its April 15, 1998 Annual Shareholders Meeting, Verdant
Shareholders approved a proposal to change its name from Ringer Corporation to
Verdant Brands, Inc. The name change occurred in July 1998 when an official
announcement was made. In connection with the name change, Verdant adopted the
new trading symbol of "VERD" for its shares traded on the NASDAQ National
Market System.

Verdant is a developer and marketer of lawn, garden and turf products for
consumer, specialty commercial and professional markets. Verdant's product
lines include proprietary and non-proprietary pest control products and lawn
and garden fertilizers.

Verdant was founded by C. Judd Ringer and incorporated in 1961. Until 1986,
Verdant was operated as a regionally-based, closely-held provider of lawn and
garden products. In 1986, Verdant was sold to new venture capital investors
who reorganized Verdant under new management and expanded its distribution
channels into national lawn, garden and turf care markets.

Since 1986, Verdant has raised approximately $27 million in capital through
private equity offerings to venture capital organizations and individuals, and
through public offerings of common stock in 1990 and 1992. The capital raised
was used by Verdant to acquire pest control product lines, to fund programs
for advertising, promotion, product development and product package redesign
and to increase working capital. Verdant's current pest control product lines
were acquired in 1991 through the acquisition of Safer, Inc., a wholly-owned
subsidiary of Verdant, and in 1997 through the purchase of substantially all
of the assets of Dexol Industries, Inc.

Verdant's products are sold primarily in the consumer lawn and garden and
the commercial golf course turf management markets. Product lines are composed
of environmentally-oriented pest control products, traditional pesticides,
granular fertilizers and water soluble fertilizers.

Verdant's environmentally-oriented pest control products, sold under the
Safer(R) brand name, use microbial, botanical and mechanical technologies to
effectively control insects, weeds and fungal diseases. These products are
designed to work on targeted pests without harming beneficial insect
populations or leaving harmful residues on turf and garden plants and are
developed to provide premium performance using available technologies with the
lowest environment impact.

Verdant's traditional pesticides, sold under the Dexol(R) and Black Leaf(R)
brand names and various private label brands, use synthetic chemical pesticide
compounds commonly used in the lawn and garden industry for the control of
insects, rodents, weeds and fungal diseases. Verdant's line of traditional
pesticides was acquired in March 1997 with the acquisition of the assets of
Dexol Industries, Inc.

Verdant's granular fertilizer products use proprietary microbially-based
delivery systems that control release of nutrients for extended uniform plant
feeding and are marketed under the Restore(R) and Supreme Garden Fertilizers
brand names.

Verdant's water soluble fertilizer products use proprietary oxygen releasing
compounds that enhance root growth and function to promote more vigorous and
healthy plants. Water soluble fertilizers were added to Verdant's product
lines in December 1994 through the acquisition of the assets of Plant Research
Laboratories. These products were marketed by Verdant under the Oxygen Plus(R)
brand name in fiscal 1995 and under the Safer(R) brand name beginning in
fiscal 1996.

Verdant's products are directed toward wholesale fertilizer and pesticide
markets which exceed $1 billion in annual sales according to the 1991 Kline &
Company industry survey report. Verdant anticipates that future growth in its
share of these markets will be derived from increased sales of its existing
products, from sales of future products developed by Verdant or licensed from
others, and from the acquisition of additional product lines or companies with
additional product lines.

59
<PAGE>

Southern Resources, Inc. On December 9, 1997, Verdant completed a merger
with Southern Resources, Inc. ("SRI"), a previously privately-owned Georgia-
based holding company, with annual consolidated sales of approximately $25
million. SRI manufactures and markets traditional pesticides, through its
subsidiary, SureCo, Inc., under a variety of proprietary and private label
brand names to commercial and consumer markets throughout North America. The
merger was accounted for using the purchase method of accounting.

Dexol Industries, Inc. In March 1997, Verdant acquired substantially all of
the assets of Dexol Industries, Inc. (the "Dexol acquisition"), a California
based manufacturer and marketer of pesticides to the retail consumer with
annual sales of approximately $10 million. The pesticide products acquired use
non-proprietary traditional chemical technology commonly available in the lawn
and garden industry. The acquisition was accounted for using the purchase
method of accounting.

Sales and Marketing. Verdant's products are marketed in the United States
through both retail and commercial distribution channels. Retail channels
consist principally of mass merchants, specialty lawn and garden stores and
hardware cooperatives. Commercial channels consist of specialty distributors
who sell products to turf management professionals primarily in the golf
course industry. In fiscal 1997, U.S. retail and commercial markets accounted
for 87% and 3%, respectively, of Verdant's sales. The remaining 10% is
attributable to foreign retail and commercial market sales, primarily in
Canada.

Retail sales in the United States are conducted through a variety of retail
outlets in all fifty states. These outlets consist of mass merchandisers and
several lawn and garden wholesale distributors who, in turn, resell to retail
garden centers, nurseries and hardware and home center stores. National
retailers selling Verdant's products include The Home Depot, Menards, Target,
Tru-Serve and Frank's Nursery & Crafts, although some of these retailers
currently carry only limited selections of Verdant's products or only carry
them in certain regions of the country.

Verdant's retail sales efforts in the United States are managed by a vice
president of sales located in Verdant's main office, and by six regional sales
managers located in Maryland, Georgia, Illinois, Indiana, Washington and
California. Verdant uses a combination of direct sales personnel and
independent manufacturers' representatives to market its products. The direct
sales personnel and independent representatives, who report to the regional
managers, are assigned territories that cover all 50 states. In addition,
Verdant uses its wholesalers' sales and merchandising personnel and other
merchandising service organizations to contact and service some of the larger
retail outlets who sell Verdant's products.

Most of Verdant's distribution and marketing activities are concentrated in
the United States and Canada, however, a level of international overseas
business has been maintained for a number of years. Verdant currently sells
certain pest control products to foreign manufacturers and distributors and
has sold products to customers in Germany, Switzerland and other European
markets for over ten years. International sales are currently managed by
Safer, Ltd., Verdant's subsidiary in Toronto, Ontario, Canada. Safer, Ltd.
maintains its own sales and marketing organization, its own product
development operation and most of its own sources of supply and manufacturing.
Although management believes there are significant future international market
opportunities, management expects to concentrate Verdant's marketing efforts
in the United States and Canada for the foreseeable future while Verdant
focuses on establishing profitable operations in these primary market areas.

Verdant's commercial sales are supervised by a manager of commercial sales.
Approximately 30 professional turf distributors, with several locations
throughout the U.S. and Canada, buy products from Verdant for sale primarily
to golf courses with some sales going to lawn service operators, specialty
landscapers and government landscape services. The commercial product line
includes several microbial fertilizer formulations specifically designed for
the needs of professional turf managers.

In recent years, Verdant has used various forms of advertising and promotion
to market its products. These forms primarily consist of cooperative
advertising programs, point-of-purchase marketing materials and radio and
print advertising.

60
<PAGE>

In fiscal 1997, 1996 and 1995, Verdant spent approximately $3.8 million,
$3.3 million and $4.8 million, respectively, on sales and marketing expenses.

Distribution and Transportation. Verdant relies primarily on common carrier
transportation, leased warehouse facilities and public warehouse services to
distribute its products nationwide. Verdant's distribution and freight costs
tend to be significant as a percentage of sales. This is due to the relatively
heavy weight and bulky nature of Verdant's products and the substantial
shipping distances from distribution locations to some of Verdant's major
market areas.

Freight costs are particularly significant for granular fertilizer products.
Some fertilizer competitors located in closer proximity to some of Verdant's
major market areas incur lower freight costs which can be an advantage when
competing against Verdant's fertilizer products. Consequently, Verdant's
relatively high distribution and freight costs can hinder fertilizer sales
growth in some markets.

In fiscal years 1997, 1996 and 1995, Verdant spent approximately $2.2
million, $1.6 million and $1.9 million, respectively, on product
transportation and warehousing costs.

Verdant's Technologies. Verdant applies four major areas of technology to
its products. First, biological and botanical pest control technologies which
focus on a broad spectrum of plant pests including insects, weeds and fungal
diseases. Second, synthetic chemical technologies common to the lawn and
garden industry which are used for the control of various insects, rodents,
weeds and fungal diseases. Third, granular microbially-activated fertilizer
systems which have been developed for specific lawn, garden and commercial
turf uses. Fourth, oxygen-releasing water soluble fertilizer technology which
is used in Verdant's water soluble fertilizer products for use on indoor
plants, outdoor container plants, and other lawn and garden uses.

Verdant's biological and botanical pest control technology is based on
fatty-acid compounds, naturally occurring plant extracts and microorganisms,
and mechanical traps to control unwanted pests. Verdant holds numerous patents
for fatty-acid based pest control products and products using fatty-acids as
synergists in combination with both natural and synthetic pesticides.

Verdant's synthetic chemical pesticide technologies are based on non-
proprietary synthetic chemical pesticides common to the lawn and garden
industry. These include various forms of chemical insecticides, herbicides,
fungicides and rodenticides which are obtained primarily from large national
and international chemical companies who supply the agricultural,
horticultural and lawn and garden markets.

Verdant's granular fertilizer technologies are based on the use of naturally
occurring soil microbes in combination with plant nutrients and high energy
carbohydrate sources to produce a superior controlled release fertilizer
system. These fertilizers promote natural soil microbial activity which helps
make nutrients available to plants and promotes plant health and vigor.
Healthy microbial activity also plays an important role in regulating some
plant diseases.

Verdant's water soluble fertilizer technologies use a patented oxygen
releasing compound ("ORC") in combination with high quality plant nutrients.
This fertilizer technology overcomes plant growth problems associated with
oxygen deficient soils caused by physical compaction, heavy clay content, over
watering and flooding. Through the use of ORC, Verdant's water soluble
fertilizers help to reduce oxygen deficient conditions and promote a heathy
growing environment by providing a reliable supply of timed-release oxygen and
other beneficial plant nutrients directly to the plant root system.

Verdant performs extensive product performance tests through contract
research and development facilities.

To assist the process of investigating new product opportunities, Verdant
consults, from time to time, with knowledgeable scientists and other experts
regarding trends and technologies in fertilizers, pesticides and turf
management.

61
<PAGE>

Products. Verdant's four major product categories are environmentally-
oriented pest control products, traditional pesticides, microbial fertilizers
and water soluble fertilizers.

Environmentally Oriented Pest Controls. Verdant's environmentally oriented
pest control products, sold under the Safer(R) brand name, are based on
naturally occurring microbial and botanical derivatives and synthesized
versions of naturally occurring botanical derivatives. These active
ingredients, used alone or in combinations, have been developed to control
specific insects, weeds and fungal diseases. The active ingredients include
fatty-acids, pyrethrum (a derivative of a certain chrysanthemum flower),
pyrethroids (synthetic variations of pyrethrum), neem (a derivative of the
tropical Neem tree), bacterium strains with toxicity specific to certain
insects, and elemental sulfur. Verdant's environmentally-oriented pest
controls bio-degrade more rapidly and have a lower mammalian toxicity rating
than most traditional pesticides.

Verdant's environmentally-oriented pest control products accounted for 48%,
70% and 63% of sales in fiscal 1997, 1996 and 1995, respectively.

Traditional Pesticides. Verdant acquired its line of traditional pesticide
products in March 1997 with the purchase of substantially all of the assets of
Dexol Industries, Inc. See "--Dexol Industries, Inc." above.

Verdant's traditional pesticide products, sold under the Dexol(R) brand name
and various private label brand names, use synthetic chemical pesticides
common to the lawn and garden industry and include insecticides based on
organophosphates (such as Diazinon and Malathion) and carbamates (such as
Carbaryl or Sevin), herbicides based on phenoxy-herbicides and dicamba
compounds, and fungicides based on sulfur or chlorthalonil.

Verdant's traditional pesticides accounted for 33% of sales in fiscal 1997
since the acquisition of these products in March 1997. There were no sales of
these products in prior years.

Microbial Fertilizers. Verdant offers three types of proprietary microbial
fertilizer products which use, in varying degrees, naturally occurring soil
microorganisms to slowly break down materials into nitrogen and other
nutrients usable by the plant. These include all-natural fertilizers marketed
under the Restore(R) brand name, natural and synthetic hybrid fertilizers
marketed under the Supreme Garden Fertilizers and Safer(R) brand names. Hybrid
fertilizers, including garden fertilizers and low phosphate lawn fertilizers,
using a natural nutrient component with synthetic nutrients. These microbial
fertilizers provide high performance, non-burning, slow-release fertilization
programs for improved plant growth and extended feeding. Natural fertilizer
components include commodity feed-grade materials, including a high protein
source (such as feather or leather meal), high carbohydrate ingredients, and
natural soil microorganisms. Synthetic materials include synthetic nitrogen
sources such as urea, coated urea and dicyanodiamide. Verdant's microbial
fertilizer products accounted for 18%, 26% and 31% of sales in fiscal 1997,
1996 and 1995, respectively.

Water Soluble Fertilizers. Verdant offered water soluble fertilizers for the
first time in fiscal 1995 which were acquired from Plant Research Laboratories
in December 1994. Verdant's water soluble fertilizers are marketed in both
liquid and powdered formulas under the Safer(R) brand name. Safer(R) water
soluble fertilizers use macro nutrients in combination with a patented oxygen
releasing compound ("ORC"). ORC was developed to overcome plant growth
problems caused by oxygen deficient soil due to heavy clay content, physical
compaction, over watering or flooding. ORC utilizes the plant's own soil as an
organic catalyst to provide the plant time-released oxygen, activated by
water, for an optimal balance of soil, water, air and nutrients. Verdant's
water soluble fertilizer products accounted for 2%, 3% and 4% of sales in
fiscal 1997, 1996 and 1995, respectively.

Product Development. Verdant conducts ongoing product development efforts to
enhance existing products and develop new products. Current efforts include
product development using Verdant's patented pesticide and herbicide
technology which uses fatty-acids as a synergist in combination with
traditional synthetic chemicals. Management believes that the technology will
enable Verdant to develop effective pesticides and herbicides that use much
less chemical active ingredient, thus making traditional chemical herbicides
and

62
<PAGE>

pesticides more environmentally friendly. Most of Verdant's product
development, research and testing is conducted by university and government
researchers unaffiliated with Verdant.

In fiscal 1997, 1996 and 1995, Verdant spent $972,360, $748,932 and
$981,495, respectively, on research and development expenditures.

Manufacturing. Verdant has a leased manufacturing facility in Torrance,
California where it manufactures much of its traditional pesticide products.
The manufacturing facility was acquired with the Dexol acquisition in March
1997. In addition, subsidiaries of one of Verdant's subsidiaries own a
manufacturing facility in Fort Valley, Georgia. Verdant also uses outside
subcontract manufacturers to produce the remainder of its products.

Verdant's microbial fertilizers and water soluble fertilizers are produced
pursuant to short-term manufacturing agreements with two subcontractors.
Verdant's environmentally oriented pest control products and certain
traditional pesticides fertilizers are manufactured by subcontract companies
located in Minnesota, Missouri and California.

Verdant believes that its manufacturing facilities and its subcontractors
have sufficient available manufacturing capacity to satisfy Verdant's needs
for the foreseeable future. Products for Canada and overseas markets are
manufactured by subcontractors in Canada, Europe and the United States.
Verdant believes that adequate alternative subcontractors are available, if
needed.

Verdant believes that its fertilizers and composting products and its pest
control products are manufactured using generally available raw materials and
processes common to the industry. Verdant does not anticipate any shortages of
such raw materials or manufacturing capacity which would materially affect the
supply of finished goods, although price fluctuations may affect total product
costs.

Government Regulation and Product Registration. Government regulation in the
United States and other countries is a significant factor in the research,
development, production and marketing of pesticides and, to a lesser extent,
fertilizers. To develop and sell a pesticide product, federal and state
product registration must be obtained for each pest and plant for which the
product is used. In the United States, pesticides are regulated by the
Environmental Protection Agency ("EPA") under the Federal Insecticide,
Fungicide and Rodenticide Act, as amended ("FIFRA"), which requires extensive
efficacy, toxicology and environmental testing to substantiate product
performance and safety prior to registration. In addition, many states have
additional registration requirements that go beyond FIFRA.

Under FIFRA, field efficacy testing may be conducted on a small scale in
certain instances. To conduct large-scale field tests, a company must obtain
an experimental use permit ("EUP"), which generally requires satisfactory
completion of certain toxicology and environmental studies. Initial EPA
registration for a new pesticide may therefore be a lengthy and expensive
process. In addition, the U.S. Congress has mandated that the EPA require that
all pesticide products registered prior to 1984 be re-registered by 1997 using
today's stricter testing protocols. Registration applicants also must submit
their proposed labeling for EPA approval. FIFRA creates a complex and detailed
scheme for pesticide labeling. After a pesticide is registered, it must be
sold with labeling and claims exactly as approved by the EPA.

To regulate the development and use of biological pest controls, including
those based on naturally occurring microorganisms, the EPA established special
guidelines for their registration which are set forth in Subdivision M of the
EPA's Pesticide Assessment Guidelines. Biological pest controls currently are
subject to a three-tier toxicology testing procedure and a four-tier
environmental testing procedure. A biological pest control product that
satisfactorily completes both the toxicology and environmental Tier I tests is
not required to go through the tests specified in subsequent tiers. Should
questions arise during any tier of testing, additional tests may be required.
The cost of registering biological pest control products is generally
substantially lower than that for chemical pesticides. Most of Verdant's
products have only required Tier I testing. Stricter registration requirements
apply to products based on genetically engineered organisms. Verdant does not
currently use any genetically modified organisms. Based on current EPA
regulations, management believes that biological pest control product
registrations can be obtained at a reasonable cost to Verdant.

63
<PAGE>

The fertilizer products produced and marketed by Verdant are currently
regulated by individual state departments of agriculture. Requirements for
obtaining registrations to sell fertilizers vary from state to state. Every
fertilizer product must be registered and licensed in each state where it is
sold, and a registration or license fee to maintain this registration must be
paid on an annual basis.

Verdant's product performance claims for its fertilizers are more extensive
than those typical of traditional fertilizers, and include claims that the
products improve soil and minimize conditions that promote certain diseases.
As part of the registration process, research data in support of these claims
must be submitted to the appropriate state agencies. This research must be
independently generated, preferably at the university level. Verdant's
fertilizer products have been tested at several state universities across the
country, as well as in a leading independent turf research facility in Europe.

Verdant's fertilizer products are currently registered in most states under
a national label which makes certain performance claims. Several states object
to certain claims made on the packaging or require claims specific to a state.
Verdant, where possible, has designed special packaging, citing limited
claims, to permit as wide of registration and sale as possible. Verdant
continues to work with all states to improve registration status nationwide,
and to substantiate the performance claims through studies conducted at
universities.

Verdant's products will also be subject to regulation by agencies of foreign
countries in which the products are tested, sold or used. Verdant's activities
may be subject to regulation under various other federal and international
laws, regulations and guidelines, and state and local regulatory requirements,
including approvals prior to shipping the products into a country, state or
locality for either experimental or commercial purposes. Verdant currently
maintains product registrations in 11 foreign countries and has registrations
pending in three additional foreign countries. Verdant cannot predict the
effect of future legislation and regulation on Verdant's operations.

There can be no assurance that any testing approvals or registrations will
be granted on a timely basis, if at all, or that Verdant's resources will be
adequate to meet the costs of regulatory compliance. Any or all of those
approvals may be the subject of disputes that could postpone or prevent
research, development, production and/or marketing of Verdant's products.

Some states have laws imposing liability on certain parties for the release
of pesticides and/or fertilizers into the environment in a manner or in
concentrations not permitted by law. Such liability could include, among other
things, responsibility for cleaning up the damage resulting from such a
release. In addition, the Comprehensive Environment Response, Compensation and
Liability Act, commonly known as the federal Superfund law, imposes liability
on certain parties for the release into the environment of hazardous
substances, which might include fertilizers and pesticides under certain
circumstances. The federal Superfund law has been interpreted to impose
liability on a producer of pesticides for cleaning up environmental damage
resulting from the release of its products into the environment during their
manufacture. Verdant has not been subject to any claims for responsibility
relating to impermissible releases of pesticides under such federal or state
statutes. However, there can be no assurance that Verdant will not be subject
to claims under such statutes at some time in the future. Verdant believes
that it does not need, and it does not maintain, insurance for any
environmental claims which might result from the release of its products into
the environment in a manner or in concentrations not permitted by law. See
"RISK FACTORS--Environmental Matters."

Competition. Verdant faces significant competition in the fertilizer and
pesticide industries from numerous manufacturers and suppliers, several of
which significantly dominate their respective markets and many of which have
substantially greater financial, technical, marketing and other resources than
Verdant. The principal competitive factors in Verdant's markets are efficacy,
ease of application, price, health and environmental compatibility and name
recognition. Many of Verdant's products generally cost more than those of
their conventional chemical counterparts, and therefore Verdant is generally
not able to compete on pricing alone.

64
<PAGE>

Verdant believes that it has three categories of competitors in the
pesticides market: large chemical pesticide companies, companies with existing
bio-pesticide product lines, and companies developing new bio-pesticide
products. The pesticide industry is dominated by large chemical companies
located in the United States and Europe. These companies generally operate
throughout the world and have the capability to manufacture chemical
pesticides very efficiently.

Verdant's principal competitors in the consumer chemical pesticide market
are Solaris (Ortho) and Spectracide. There are several companies which
manufacture and market bio-pesticides for agricultural use, including Abbott
Laboratories and Novartis. Many of the large chemical pesticide companies are
currently conducting research on biological pest control technology. In
addition, Verdant is aware that at least one dominant chemical pesticide
manufacturer has introduced a limited line of alternative pest control
products. There are also small biotechnology companies which are conducting
research in the biological pest control area. These companies may represent
significant competition in the future.

Verdant's principal competitor in the consumer fertilizer market is The
Scotts-Miracle Grow Company. Other significant competitors include Lebanon
(Greenview), Milwaukee Sewer Improvement District (Milorganite) and Estech
(Vigoro). Freight cost involved in shipping bulk fertilizer products across
the country are a significant factor in national competition. In addition to
national competitors, Verdant has many regional and local competitors who
incur lower freight costs and are therefore more price competitive in regional
and local markets. Verdant estimates that approximately 35% of the market
share is held by smaller regional and local fertilizer manufacturers.

Products developed by Verdant may also be subject to competition from
products developed by companies using other technologies. One potential source
of competition in the future may come from plant science technology, including
development of pest-resistant plants by genetic engineering and other methods.

Seasonality. Sales of Verdant's products are highly seasonal, with Verdant
shipments of fertilizers and pest controls being heavily concentrated in the
winter (first fiscal quarter) and spring (second fiscal quarter). See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF VERDANT--Quarterly Performance."

Patents and Proprietary Technologies. Verdant uses proprietary and non-
proprietary technologies in its products. Non-proprietary technologies are use
in Verdant's traditional pesticide products sold under the Dexol(R) and Black
Leaf(R) brand names and various private label brands. Proprietary technologies
are used in many of Verdant's environmentally-oriented pest control products,
microbial fertilizers and water soluble fertilizers.

Verdant seeks to protect its proprietary product technologies through a
variety of means including patents, licenses, trade secrets, proprietary know-
how, technological innovation and customer education.

Verdant relies on the use of proprietary processes in the formulation of its
microbial fertilizer products to protect them against duplication by
competitors. Verdant acknowledges that there can be no assurance that such
proprietary processes will provide sufficient protection.

Verdant owns patents covering the herbicidal soap and the soap synergized
pyrethrum (SAP) technology. These patents expire in the years 2008 and 2007,
respectively. Also, in connection with the December 1994 acquisition from
Plant Research Laboratories of a water soluble fertilizer product line,
marketed under the Oxygen Plus(R) brand name, Verdant acquired an exclusive
worldwide license to practice patents relating to oxygen releasing technology
in the horticultural, agricultural and lawn and garden markets. The license
covers currently existing patents and any further patents on the technology
that may be issued in the future. The current patents on oxygen releasing
technology expire in the year 2011.

65
<PAGE>

As of December 1997, Verdant owned 39 patents, including 20 U.S. patents,
and licensed two additional U.S. patents, which expire at various times during
the year from 2006 through 2012. Verdant acknowledges that there can be no
assurances that its owned or licensed patents will provide sufficient
protection for its products or be of commercial benefit to Verdant.

Verdant obtains confidentiality agreements from current Verdant employees,
scientific consultants and potential strategic corporate partners prior to
disclosing Verdant trade secrets and know-how. There can be no assurance that
these confidentiality agreements will be honored or that such proprietary
know-how or trade secrets will not be independently created by third parties.

Employees. As of June 30, 1998, Verdant had 146 employees, all of whom are
full-time, located in the U.S. and Canada. Of these employees, 65 were engaged
in manufacturing, two were engaged in product development, 22 were engaged in
sales and marketing, 25 were engaged in distribution and material control and
22 were in general administration. Verdant plans to hire additional personnel
as required by the needs of its business. Verdant does not currently
anticipate difficulties in attracting sufficient numbers of qualified
employees. None of the employees are covered by collective bargaining
agreements, and Verdant has experienced no work stoppages. Verdant believes
that its employee relations are good.

Description of Property. Verdant leases approximately 6,000 square feet of
office facilities located in Bloomington, Minnesota. In addition, Verdant
leases approximately 26,000 square feet of warehouse and office space in
Eagan, Minnesota and approximately 32,500 square feet of office, warehouse and
production facilities in Torrance, California. Verdant's corporate office
lease and its warehouse lease expire in September 1999 and December 2001,
respectively. Its California facility lease is month to month with a six month
notice requirement. A subsidiary of Verdant leases approximately 13,600 square
feet of office and warehouse space in a suburb of Toronto, Canada. The lease
for the subsidiary's office and warehouse space expires in fiscal 2000.
Verdant anticipates that it will be able to renew such leases or enter into
new leases on substantially similar terms. In addition, subsidiaries of one of
Verdant's subsidiaries own a facility with approximately 100,000 square feet
of production, distribution and office space in Fort Valley, Georgia. Verdant
believes that the properties are adequately covered by insurance.

Legal Proceedings. Subsidiaries of Verdant's wholly-owned subsidiary, SRI,
are parties to a governmental action and certain legal proceedings in Superior
Court of Fulton County, Georgia, brought by or on behalf of property owners in
the area of SRI's subsidiaries' Fort Valley, Georgia, manufacturing site,
relating to contamination discovered on or near the site. Management believes
that the contamination arose prior to the purchase of the plant site by SRI's
subsidiaries from an unaffiliated predecessor owner. The former owner has been
cooperating with governmental authorities and has initiated remedial
activities on the site. Management believes that the governmental and legal
actions relating to the property will not result in a material loss to SRI or
Verdant. See "RISK FACTORS--Environmental Matters."

66
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF VERDANT

Financial amounts discussed below in this management discussion and analysis
and presented in the Selected Consolidated Financial Data included therein
have been extracted from Verdant's unaudited condensed consolidated financial
statements for the six months ended June 30, 1998 and 1997 and for the period
from October 1 to December 31, 1997 and 1996, included elsewhere in this Joint
Proxy Statement--Prospectus and Verdant's audited consolidated financial
statements for fiscal years ended September 30, 1997, 1996 and 1995 also
included elsewhere in this Joint Proxy Statement-Prospectus. The selected
consolidated financial data as of September 30, 1995 was derived from
Verdant's audited historical financial statements, which are not included
herein.

SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands except per share data)

<TABLE>
<CAPTION>
SIX MONTHS OCTOBER 1 TO
ENDED JUNE 30, DECEMBER 31, YEAR ENDED SEPTEMBER 30,
---------------- ---------------- ----------------------------
1998 1997 1997 1996 1997 1996 1995
------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CONDENSED STATEMENT OF
OPERATIONS INFORMATION:
Net Sales............... $31,745 $12,197 $ 4,767 $ 3,481 $ 18,821 $ 14,673 $ 14,194
Gross Profit............ 11,696 5,686 1,636 1,744 8,565 7,025 7,204
Operating expenses:
Distribution and
warehousing........... 3,050 1,315 512 387 2,200 1,556 1,887
Sales and marketing.... 3,527 2,414 1,032 818 3,814 3,332 4,812
General and
administrative........ 1,928 1,111 1,045 419 2,105 1,734 1,824
Product development and
registration.......... 1,091 648 179 125 972 749 981
------- ------- ------- ------- -------- -------- --------
Total operating
expenses.............. 9,596 5,488 2,768 1,748 9,090 7,371 9,503
------- ------- ------- ------- -------- -------- --------
Income (loss) before
other income (loss).... 2,100 198 (1,132) 26 (525) (346) (2,300)
Other income (expense),
net.................... (586) (68) 65 33 9 (2) 4
------- ------- ------- ------- -------- -------- --------
Income (loss) before
income taxes........... 1,514 130 (1,197) 60 (21) (222) 127
Income taxes............ 0 0 0 0 0 0 0
------- ------- ------- ------- -------- -------- --------
Net income (loss)....... $ 1,514 $ 130 $(1,297) $ 60 $ (546) $ (568) $ (2,173)
======= ======= ======= ======= ======== ======== ========
Net income (loss) per
share--basic and
diluted................ $ 0.09 $ 0.01 $ (0.09) $ (0.05) $(0.05) $ (0.05) $ (0.20)
======= ======= ======= ======= ======== ======== ========
CONDENSED BALANCE SHEET
INFORMATION:
Cash and cash
equivalents............ $ 159 $ 1,614 $ 423 $ 1,391 $ 3,264 $ 3,289 $ 2,756
Accounts receivable..... 14,702 4,354 4,437 3,543 1,153 992 1,200
Inventories............. 11,069 3,530 8,804 1,834 2,806 1,520 2,027
Prepaid assets.......... 747 245 1,180 269 221 134 133
------- ------- ------- ------- -------- -------- --------
Total current assets... 26,678 9,743 14,845 7,038 7,444 5,934 6,116
Property and equipment
(net).................. 596 415 631 268 430 238 299
Assets held for sale.... 2,113 -- 2,273 -- -- -- --
Intangible assets
(net).................. 13,200 6,892 13,470 5,214 6,654 5,297 5,583
------- ------- ------- ------- -------- -------- --------
Total assets............ $42,737 $17,051 $31,423 $12,520 $ 14,615 $ 11,470 $ 11,999
======= ======= ======= ======= ======== ======== ========
Current liabilities..... $20,359 $ 3,828 $14,344 $ 2,526 $ 2,385 $ 1,531 $ 1,478
Long-term debt.......... 7,123 1,451 3,307 0 1,459 0 0
------- ------- ------- ------- -------- -------- --------
Shareholders' equity.... 15,255 11,771 13,773 9,995 10,772 9,939 10,520
------- ------- ------- ------- -------- -------- --------
Total liabilities and
shareholders' equity... $42,737 $17,051 $31,423 $12,520 $ 14,615 $ 11,470 $ 11,999
======= ======= ======= ======= ======== ======== ========
</TABLE>

RECENT DEVELOPMENTS

Name Change To Verdant Brands, Inc. At Verdant's 1998 Annual Shareholders
Meeting, the shareholders approved a proposal to change Verdant's name from
Ringer Corporation to Verdant Brands, Inc. Verdant

67
<PAGE>

announced its intent to change its name in its first quarter earnings press
release on April 30, 1998. The name change occurred on July 20, 1998. In
connection with the name change, Verdant adopted the new trading symbol of
"VERD" for its shares traded on the NASDAQ National Market System.

Merger with Southern Resources, Inc. On December 8, 1997, a subsidiary of
Verdant Brands, Inc. (the "Company") merged with Southern Resources, Inc.
("SRI") which, on that date, became a wholly-owned subsidiary of Verdant.
Prior to the merger, SRI was privately held. SRI is a Fort Valley, Georgia-
based corporation with annual consolidated sales in 1997 of approximately $25
million, which, through its wholly-owned subsidiary, SureCo, Inc.,
manufactures and markets traditional liquid and granular pesticides. Its
products are sold under a variety of proprietary and private label brand names
to commercial and consumer retail markets throughout North America. Commercial
pesticides are sold principally under the AllPro (R) brand to specialty
agricultural, turf ornamental and professional pest control distributors.
Consumer products are sold into the consumer retail market principally under
the Rigo/Black Leaf (R) brand as well as under various private label store
brands. Verdant is currently operating SRI as a stand-alone subsidiary.

Verdant acquired all of the outstanding stock of SRI in exchange for
4,500,000 shares of Verdant's restricted common stock with an aggregate
valuation of $4,218,750. The SRI acquisition was accounted for using the
purchase method of accounting rather than the pooling-of-interest method as
originally announced. The change in accounting methods was required because of
management's post-merger decision to dispose of certain assets and discontinue
certain activities of the combined business entities. Such a desision
precludes the pooling of interest method of accounting. Verdant has not yet
finalized its analysis of the full financial impact associated with its
disposal plans. However, it has reflected in its balance sheet as of June 30,
1998 the Fort Valley, Georgia manufacturing facility acquired in the
acquisition as "Assets held for Sale".

The SRI purchase price has been allocated to the assets acquired and
liabilities assumed based on their estimated fair market values. The excess of
purchase price over the estimated fair market values of assets acquired and
liabilities assumed ("goodwill") totals approximately $2,072,000. Goodwill is
being amortized on a straight-line basis over 20 years. SRI's operations are
included in Verdant's consolidated statements of operations subsequent to the
effective date of the acquisition which, for accounting purposes, is December
1, 1997. Verdant is completing the process of establishing fair values of
assets acquired and liabilities assumed. As part of this process, during the
three months ended March 31, 1998, Verdant reallocated $4,950,000 of the
purchase price from goodwill to product registrations and trademarks, which
are being amortized over twenty years. Since Verdant has not formally
completed the valuation process, further adjustments to the allocation of
purchase price based on a final determination of fair values may occur.

Acquisition of the Assets of Dexol Industries, Inc. In March 1997, Verdant
completed the acquisition of substantially all of the assets of Dexol
Industries, Inc. ("Dexol"), a California based manufacturer and marketer of
home and garden pesticides sold under the Dexol (R) and various private label
brand names, for an aggregate purchase price of approximately $3,012,790 (the
"Dexol Acquisition"). The purchase price was comprised of the issuance of
1,059,340 shares of Verdant's restricted common stock valued at $1,397,005,
the issuance of a promissory note to Dexol with a principal amount of
$1,477,000 bearing simple interest at an annual rate of prime plus 3/4% and
estimated transaction costs of $138,785.

The Dexol Acquisition was accounted for under the purchase method of
accounting. Accordingly, the purchase price has been allocated to the assets
acquired and liabilities assumed based on their estimated fair market values
at the date of acquisition. The excess of purchase price over estimated fair
market value of net assets acquired ("goodwill") of approximately $1,840,000
is being amortized on a straight-line basis over twenty years. Since the
acquisition, Verdant has operated the acquired business as its Dexol division
and has continued marketing Dexol products. Dexol division operations are
included in Verdant's consolidated statements of operations from the effective
date of the acquisition which, for accounting purposes, is March 1, 1997.

68
<PAGE>

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, information
derived from the consolidated statements of operations of Verdant as a
percentage of net sales:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------
1998 1997
-------- --------
<S> <C> <C>
Net sales................................................ 100.0% 100.0%
Cost of sales............................................ 63.2 53.4
-------- --------
Gross profit........................................... 36.8 46.6
Operating Expenses:
Distribution........................................... 9.6 10.8
Sales & Marketing...................................... 11.1 19.8
General & Administrative............................... 6.1 9.1
Product Development & Registration..................... 3.4 5.3
-------- --------
30.2 45.0
-------- --------
Income before other expense.............................. 6.6 1.6
Other expense, net....................................... (1.8) (.5)
-------- --------
Net income............................................... 4.8% 1.1%
======== ========
</TABLE>

The following table sets forth the percentage of net sales represented by
each of Verdant's major product categories:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------
1998 1997
-------- --------
<S> <C> <C>
Pest control............................................. 89.6% 80.9%
Fertilizers and composting............................... 10.4 19.1
-------- --------
100.0% 100.0%
======== ========
</TABLE>

Seasonal Factors Affecting Sales and Results of Operations

Sales during the year are very seasonal. First quarter sales normally
consist of sales on initial orders from direct customers and reorders from
distributors who made their initial purchases for the season in the final
quarter of the preceding year. Second and third quarter sales consist largely
of reorders from direct-ship customers and sales of in-season promotion
products. Fourth quarter sales consist primarily of shipments on early season
orders from distributors who are stocking warehouses for the upcoming spring
selling season. Most of Verdant's sales occur during the months of December
through June of each year. The level of sales for the fiscal year depends
largely upon the level of retail sales of Verdant's products to home owner
consumers and the level of unsold retail inventory of Verdant's products
remaining in retail and wholesale distribution channels carried over from the
previous year. Retail sales to consumers are affected by numerous outside
circumstances such as weather, competitors' products and sales and marketing
programs, as well as new product introductions. Each of these factors can
fluctuate substantially from year to year and from quarter to quarter. Total
year sales cannot be accurately projected with any degree of certainty based
on results for the three months and six months ended June 30.

Comparison of the Six Months Ended June 30, 1998 to the Six Months Ended June
30, 1997

Net Sales. Net sales increased $19,548,129 or 160.3% to $31,745,288 in the
six months ended June 30, 1998 compared to $12,197,159 for the six months
ended June 30, 1997. The increase was due primarily to

69
<PAGE>

additional sales generated from the Dexol and SRI acquisitions. Net sales for
the six months ended June 30, 1998 contained approximately $15.9 million in
SRI net sales compared to no SRI net sales for the six months ended June 30,
1997. In addition, the six month period ended June 30, 1998 included six
months of Dexol product sales totaling approximately $6.8 million compared to
only four months of Dexol product sales totaling $4.8 million included in the
six months ended June 30, 1997. Increased sales of Verdant's Safer(R) brand
pesticides contributed to the remaining increase in net sales.

Gross Margins. Gross margins as a percent of sales decreased to 36.8% for
the six months ended June 30, 1998 compared to 46.6% for the six months ended
June 30, 1997. The decrease was the result of the SRI product sales added in
1998 which shifted product mix to an increased proportion of traditional
chemical pesticide sales which carry lower average gross margins compared to
the sales mix in 1997. Verdent expects that gross margin will continue to be
adversely affected by changes in sales mix. In addition, in the six months
ended June 30, 1998 unfavorable manufacturing efficiency variances incurred at
the SRI plant caused by certain material and packaging shortages, down time
associated with manufacturing equipment repair and other factors, further
contributed to the decrease in gross margins as a percent of sales.

Operating Expenses. Distribution expenses increased in absolute dollars by
$1,734,781 or 131.9% to $3,049,607 for the six months ended June 30, 1998 from
$1,314,826 for the three months ended June 30, 1997, but decreased as a
percentage of sales to 9.6% for the six months ended June 30, 1998 from 10.8%
for the six months ended June 30, 1997. The increase in distribution expenses
in absolute dollars in 1998 compared to 1997 was primarily due to incremental
distribution expenses incurred on increased sales in 1998 compared to 1997.
The decrease in distribution expenses as a percentage of sales reflects lower
average freight cost on SRI shipments due to closer proximity to customer
locations.

Sales and marketing expenses in absolute dollars increased $1,112,778 or
46.1% to $3,526,982 for the six months ended June 30, 1998 from $2,414,204 for
the three months ended June 30, 1997, but decreased as a percentage of sales
to 11.1% for the six months ended June 30, 1998 compared to 19.8% for the same
period in 1997. The increase in sales and marketing expenses was largely due
to increased variable selling expenses associated with higher sales levels,
offset in part by the reversal of $195,000 in estimated co-op advertising
accruals originally recorded in 1997, and the addition of the SRI sales and
marketing organizations for the six months ended June 30, 1998. The decrease
in sales and marketing expenses as a percentage of sales for the three months
ended June 30, 1998 compared to the same period in 1997 was largely the result
of synergies experienced from combining the various sales and marketing
organizations and eliminating redundant expenses and unnecessary overhead.

General and administrative costs increased $816,556 or 73.5% to $1,927,579
for the six months ended June 30, 1998 from $1,111,023 for the six months
ended June 30, 1997. The increase was primarily due to the addition of SRI
general and administrative expenses and increased amortization of intangible
assets associated with the SRI acquisition.

Product development and registration expenses increased $443,881 or 68.5% to
$1,091,432 for the six months ended June 30, 1998 compared to $647,551 for the
three months ended June 30, 1997. The increase was due primarily to increased
product registration costs for products added in the SRI acquisitions.

Other Expense, Net. Net other expense increased by $518,648 to $586,223 for
the six months ended June 30, 1998 compared to net other expense of $67,575
for the six months ended June 30, 1997. The increase in net other expense was
mainly due to additional interest expense on increased borrowings on Verdant's
lines of credit and interest expense incurred on long-term and short-term debt
assumed in the SRI acquisitions.

70
<PAGE>

Comparison of the Three Months Ended December 31, 1997 to the Three Months
Ended December 31, 1996

The following table sets forth, for the periods indicated, information
derived from the consolidated statements of operations of Verdant as a
percentage of net sales:
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED
DECEMBER 31,
---------------
1997 1996
------ ------
<S> <C> <C>
Net sales................................................... 100.0 % 100.0%
Cost of sales............................................... 65.7 49.0
------ ------
Gross profit.............................................. 34.3 51.0
Operating Expenses:
Distribution.............................................. 10.7 11.1
Sales & Marketing......................................... 21.6 23.5
General & Administrative.................................. 18.8 9.3
Research & Development.................................... 3.8 3.6
Amortization of intangibles............................... 3.1 2.7
------ ------
58.0 50.2
Income (loss) before other income........................... (23.7) .8
Other income, net........................................... (1.4) .9
------ ------
Net income (loss)......................................... (25.1)% 1.7%
====== ======
</TABLE>

The following table sets forth the percentage of net sales represented by
each of Verdant's major product categories:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
DECEMBER 31,
---------------
1997 1996
------ ------
<S> <C> <C>
Pest control............................................... 91% 76%
Fertilizers and composting................................. 9 24
------ ------
100% 100%
====== ======
</TABLE>

Net Sales. Net sales increased $1,286,502 or 36.7% to $4,767,233 in the
three months ended December 31, 1997 compared to $3,480,731 for the same three
months ended December 31, 1996. The increase was due to the addition of
approximately $2 million in 1997 sales from acquired businesses and product
lines added as a result of the 1997 Dexol and SRI acquisitions, partially
offset by lower sales of various products mainly caused by timing of
shipments.

Gross Margins. Gross margins decreased to 34.3% in the three months ended
December 31, 1997 compared to 51.0% in the three months ended December 31,
1996. The decrease was due primarily to a shift in product mix to a higher
percentage of lower-margin traditional chemical pesticides and to high levels
of manufacturing overhead at SRI for the month December 1997, the first month
of inclusion in Verdant's financial statements.

Operating Expenses. Distribution expenses increased $124,616, or 32.2%, to
$511,727 in the three months ended December 31, 1997 from $387,111 in the same
three months ended December 31, 1996, due primarily to increased variable
distribution costs on higher sales and the first-time inclusion of SRI
distribution operations for the month of December 1997. Sales and marketing
expenses increased $214,471 or 26.2%, to $1,032,010 for the three months ended
December 31, 1997 from $817,539 for the three months ended December 31, 1996.
The increase in sales and marketing expenses was largely due to the addition
of the SRI sales and marketing

71
<PAGE>

organization for the month of December 1997. Increased variable selling
expenses due to higher sales levels for the three months ended December 31,
1997 compared to the three months ended December 31, 1996 also added to the
increase. General and administrative costs increased $572,612 or 176% to
$897,685 for the three months ended December 31, from $325,073 for the three
months ended December 31, 1996. The increase was primarily the result of
additional administrative and corporate operating costs incurred related to
the addition and integration of the Dexol and SRI businesses, a significant
portion of which were eliminated effective December 31, 1997 as a result of
headcount reductions at Dexol and SRI. Research and development expenses
increased $54,296 or 43.6% to $178,913 for the three months ended December 31,
1997 compared to $124,617 for the three months ended December 31, 1996. The
increase was due primarily to increased product registration costs for
products added in the Dexol acquisition.

Other Income, Net. Net other income (expense) decreased to net other expense
of $65,065 for the three months ended December 31, 1997 compared to net other
income of $33,456 for the three months ended December 31, 1996. The increase
in net other expense was mainly due to increased interest expense on increased
borrowings on Verdant's line of credit and interest expense incurred on long-
term and short-term debt assumed in the Dexol and SRI acquisitions. In
addition, the increase in net other expense was unfavorably impacted by
reduced royalty income on international licencing agreements.

Comparison of Fiscal Year Ended September 30, 1997 to Fiscal Year Ended
September 30, 1996

The following table sets forth selected information derived from Verdant's
consolidated statements of operations:

<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
FOR YEARS ENDED SEPTEMBER 30,
---------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Net sales................... 100.0 % 100.0 % 100.0 %
Cost of sales............... 54.5 52.1 49.2
--------- --------- ---------
Gross margin................ 45.5 47.9 50.8
Operating expenses:
Distribution and
warehousing.............. 11.7 10.6 13.3
Sales and marketing....... 20.2 22.7 33.9
General and
administrative........... 8.8 9.1 10.2
Research and development.. 5.2 5.1 6.9
Amortization of
intangibles.............. 2.4 2.7 2.7
--------- --------- ---------
Total operating
expenses............... 48.3 50.2 67.0
--------- --------- ---------
Loss before other (expense)
income..................... (2.8) (2.3) (16.2)
Other (expense) income.... (.1) (1.6) .9
--------- --------- ---------
Net loss.................... (2.9)% (3.9)% (15.3)%
========= ========= =========
</TABLE>

The following table sets forth the percentage of net sales represented by
each of Verdant's major product categories:

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Pest control.................................. 80% 70% 63%
Fertilizer.................................... 20% 30% 37%
-------- -------- --------
100% 100% 100%
======== ======== ========
</TABLE>

Net Sales. Net sales for the fiscal year ended September 30, 1997 increased
by $4,147,841 or 28.3% to $18,820,625 from $14,672,784 for the previous fiscal
year ended September 30, 1996. The sales increase for

72
<PAGE>

fiscal 1997 was primarily due to the Dexol acquisition and the inclusion of
$6,187,190 in sales from the new Dexol division beginning March 1, 1997,
offset by a decline of $2,039,349 in sales for Verdant's base business,
principally as a result of a decline in Verdant's fertilzer sales (See "Dexol
Industries, Inc" and "Acquisition Activities" above.)

Gross Margin. Gross margins as a percent of sales decreased to 45.5% in
fiscal 1997 compared to 47.9% in fiscal 1996. The decline in gross margin as a
percent of sales was caused by the 1997 addition of Dexol products which carry
a lower average gross margin compared to Verdant's other products.

Operating Expenses. Distribution and warehousing expenses increased
$643,689, or 41.4%, to $2,199,586 in fiscal 1997 compared to $1,55 5,897 in
fiscal 1996 and increased as a percentage of sales in fiscal 1997 to 11.7%
compared to 10.6% in fiscal 1996. The increase was due to the addition of the
Dexol division warehousing function and additional direct distribution costs
associated with increased sales. Sales and marketing expenses increased
$481,462 or 14.4%, to $3,813,795 in fiscal 1997 compared to $3,332,333 in
fiscal 1996. The increase in sales expenses was due primarily to the addition
of the Dexol sales organization and increased direct selling costs associated
with Dexol sales. In addition, sales and marketing expenses were favorably
impacted by the reversal in fiscal 1997 of approximately $227,000 in estimated
co-operative advertising expenses, which were accrued in fiscal 1996,
resulting from a change in estimate based on actual utilization of co-op
advertising allowances. Fiscal 1996 sales and marketing expenses were
favorably impacted by the reversal of approximately $198,000 in estimated co-
operative advertising expenses, which were accrued in fiscal 1995.

General and administrative expenses increased $325,730 or 24.5% to
$1,656,996 in fiscal 1997 compared to $1,331,266 in fiscal 1996. The increase
was due largely to the addition of Dexol division offices and administrative
functions. Research and development expenses increased $223,428 or 29.8% to
$972,360 in fiscal 1997 from $748,932 in fiscal 1996 primarily as a result of
increased product registration and development activity related to the Dexol
acquisition.

Amortization of intangible assets increased to $447,498 in fiscal 1997
compared to $402,778 in fiscal 1996. The increase was due primarily to the
amortization of the additional goodwill associated with the Dexol acquisition.

Other Income and Expense. Interest income decreased slightly to $72,247 in
fiscal 1997 from $73,866 in fiscal 1996 due primarily to a small decline in
the amount of average excess cash investments. Interest expense increased to
$152,729 in fiscal 1997 from $68,250 in fiscal 1996. The increase in interest
expense was due primarily to additional interest expense incurred on a long-
term note payable added in 1997 in connection with the Dexol acquisition. Net
royalty income decreased to $50,885 in fiscal 1997 from $87,136 in fiscal 1996
due largely to decreased royalty income on sales to foreign licensees.

Comparison of Fiscal Year Ended September 30, 1996 to Fiscal Year Ended
September 30, 1995

Net Sales. Net sales for the fiscal year ended September 30, 1996 increased
by $478,886, or 3.4%, to $14,672,784 from $14,193,898 for the previous fiscal
year ended September 30, 1995. The sales increase for fiscal 1996 was
primarily due to increased sales of Safer (R) brand pesticide products which
were partially offset by lower sales of fertilizer products. Increased
pesticide sales was partially due to increased retail distribution and to new
product sales. Decreased fertilizer sales were largely due to microbial
fertilizer sales.

Gross Margin. Gross margins as a percent of sales decreased to 47.9% in
fiscal 1996 compared to 50.8% in fiscal 1995. The decline in gross margin as a
percent of sales was caused primarily by a continuing change in product mix to
a higher proportion of newer products and new promotional combination packs
which carry lower average gross margins.

Operating Expenses. Distribution and warehousing expenses decreased
$330,873, or 17.5%, to $1,555,897 in fiscal 1996 compared to $1,886,770 in
fiscal 1995 and decreased as a percentage of sales in fiscal 1996 to

73
<PAGE>

10.6% compared to 13.3% in fiscal 1995. The decrease as a percentage of sales
in fiscal 1996 compared to fiscal 1995 was primarily due to lower freight and
outside distribution costs resulting from consolidation of distribution
processes and reduced freight rates. Sales and marketing expenses decreased
$1,478,315, or 30.7%, to $3,332,333 in fiscal 1996 compared to $4,810,648 in
fiscal 1995 and decreased as a percentage of sales to 22.7% in fiscal 1996
from 33.9% in fiscal 1995. The decrease in sales expenses was due largely to
staffing reductions, offset in part by increased commissions incurred from
expanded utilization of manufacturer representative organizations and to lower
advertising expenses. In addition, sales and marketing expenses were favorably
impacted by the reversal in fiscal 1996 of approximately $198,000 in estimated
co-operative advertising expenses, which were accrued in fiscal 1995,
resulting from a change in estimate based on actual utilization of co-op
advertising allowances. General and administrative expenses decreased
$113,844, or 7.9%, to $1,331,266 in fiscal 1996 compared to $1,445,110 in
fiscal 1995 and decreased as a percentage of sales to 9.1% in fiscal 1996 from
10.2% in fiscal 1995. The decrease was due largely to reduced facility rental
costs resulting from the sublease of approximately half of Verdant's former
office facility. Research and development expenses decreased $232,563, or
23.7% to $748,932 in fiscal 1996 from $981,495 in fiscal 1995. The decrease
was largely due to lower product registration costs resulting from
discontinued registrations on certain products no longer being sold.
Amortization of intangible assets increased to $402,778 in fiscal 1996
compared to $379,358 in fiscal 1995. The increase was due primarily to multi-
year foreign product registrations obtained in fiscal 1996 which are being
amortized over the life of the registrations.

Other Income and Expense. Other income and expense includes a fourth quarter
charge of $312,771 for expenses associated with an election not to proceed
with a previously announced acquisition. (See "Merger and Acquisition
Activities" above.) Interest income decreased $9,164, or 11.0%, to $73,866 in
fiscal 1996 compared to $83,030 in fiscal 1995. The decrease in interest
income was largely due to declining interest rates on investments. Interest
expense increased to $68,250 in fiscal 1996 from $66,690 in fiscal 1995. The
increase in interest expense was due primarily to increased average borrowings
in fiscal 1996 compared to fiscal 1995. Net royalty income decreased to
$87,136 in fiscal 1996 from $106,352 in fiscal 1995. The decrease in net
royalty income was primarily caused by additional royalty expenses incurred by
Verdant in fiscal 1996 in connection with licensed technology used in
Verdant's water soluble fertilizer line.

Income Taxes

Income tax benefits of net deferred tax assets have been offset by valuation
allowances for the years ended September 30, 1997, 1996 and 1995 because it is
more likely than not that the tax benefits, which can not be carried back,
could not be realized in future periods.

At September 30, 1997, Verdant has approximately $23.2 million in combined
U.S. net operating loss carryforwards for federal income tax purposes. These
loss carry forwards expire between 1998 and 2013. Of the total, approximately
$4.1 million are U.S. net operating loss carryforwards of Safer, Inc.,
Verdant's wholly owned subsidiary. The use of the unexpired net operating loss
carryforwards of Verdant which were generated prior to September 1990,
totaling approximately $10.2 million, are restricted to $2,025,000 in any one
year under Internal Revenue Code Section 382 because of a significant
ownership change resulting from Verdant's initial public offering. The use of
net operating loss carryforwards of Verdant generated after the ownership
change are not restricted. The use of the net operating losses of Safer, Inc.
are limited to approximately $700,000 in any one year under Internal Revenue
Code Section 382 because of a significant ownership change resulting from
Verdant's acquisition of Safer, Inc. in January 1991. At September 30, 1997,
Verdant has approximately $565,000 of net operating loss carryforwards in
Canada which expire between 1999 and 2002.

74
<PAGE>

Quarterly Performance

The following table sets forth a summary of quarterly results for the past
two fiscal years in order to show the highly seasonal pattern of Verdant's
business and quarterly fluctuations in sales and earnings or losses. This
information is unaudited but contains all adjustments, consisting of normal
recurring accruals, which Verdant believes are necessary for a fair
presentation.

<TABLE>
<CAPTION>
FISCAL 1998
FISCAL 1996 FISCAL 1997 THREE MONTH THREE
THREE MONTHS ENDED THREE MONTHS ENDED TRANSITION MONTHS ENDED
--------------------------------- ---------------------------------- PERIOD ENDED ----------------
DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31, 1997 MAR. 31 JUNE 30
------- ------- ------- -------- ------- ------- ------- -------- ------------- ------- -------
(IN THOUSANDS, EXCEPT INCOME (LOSS) PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............ $ 3,636 $ 5,613 $ 4,005 $ 1,419 $3,481 $ 4,839 $ 7,358 $ 3,143 $ 4,767 $15,859 $15,887
Gross profit......... 1,850 2,878 1,709 588 1,774 2,243 3,443 1,105 1,636 5,666 6,030
Operating expenses... 1,921 2,383 1,619 1,448 1,748 2,283 3,205 1,854 2,568 4,591 5,005
Income (loss) before
other income (expense).. (71) 495 90 (860) 26 (40) 238 (749) (932) 1,075 1,025
Other income (expense).. 19 12 14 (267) 34 (14) (54) 13 (265) (265) (321)
Net income (loss).... $ (52) $ 507 $ 104 $(1,127) $ 60 (54) $ 184 $ (736) $(1,197) $ 810 $ 704
Income (loss) per
share--basic and
diluted.............. $ .00 $ .05 $ .01 $ (.10) $ .01 $ .00 $ .02 $ (.06) $ (.09) $ .05 $ .04
Shares used to
calculate basic
income (loss) per
share................ 10,922 10,922 10,922 10,922 10,922 10,934 12,118 12,181 13,313 16,688 16,689
Shares used to
calculate diluted
income (loss) per
share................ 10,922 10,923 10,931 10,922 10,922 10,934 12,175 12,182 13,313 16,801 16,940
</TABLE>

75
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Verdant's operations and cash needs are highly seasonal. During the three
months ended December 31 of each year, Verdant usually solicits and ships
early orders and expands production to build inventory needed for its major
selling season. During the three months ended March 31, Verdant's shipments
consist of initial sales to direct mass merchant customers and reorder sales
to certain distribution customers. Most of Verdant's seasonal shipments and
therefore most of the billings that result in revenue recognition and in
receivables, occur during the months of December through June of each year.
Accordingly, Verdant typically consumes significant cash in operating
activities during the periods from October through June from year to year as
it finances increases in its inventory, primarily during the periods from
October through April, and increases in receivables, primarily during the
period from late December through the end of May. Verdant has historically
relied upon bank lines of credit to fund seasonal cash needs.

Verdant relies on bank financing in the form of working capital lines of
credit to fund seasonal increases in receivables and inventory. Verdant
currently has in place a three-year $25,000,000 credit facility with GE
Capital Services that expires in May 2000, which funds working capital needs
of the parent company and its wholly owned subsidiaries, Safer, Inc. and SRI.
Borrowings under the line of credit are limited to an aggregate borrowing base
calculated using 85% of qualified accounts receivable and 60% to 65% of
qualified inventory. The credit facility is intended to finance Verdant's
seasonal working capital needs and to provide working capital financing for
future acquisitions. Verdant's wholly-owned subsidiary, SRI, previously had in
place an $8,000,000 working capital credit facility with a commercial finance
corporation which matured on April 22, 1998. In April 1998, Verdant
consolidated this line into its GE Capital Services line. Outstanding
borrowings on the GE Capital Services line of credit at June 30, 1998 totaled
$11,609,641 of which $4,000,000 is classified as long-term debt. Outstanding
borrowings on the GE Capital Services line of credit at December 31, 1997
totaled $3,024,910. In 1997, Verdant's maximum borrowings from its bank line
of credit were $2,436,527 compared to maximum borrowings of $3,405,417 in
fiscal 1996.

Verdant has experienced higher than expected cash demands caused by
unusually slow collection of certain accounts receivable, by relatively higher
inventory levels, by the funding of SRI's operating expenses and by the
retirement of SRI debt. As a result, Verdant has extended its accounts payable
significantly beyond normal payment terms in order to maintain its line of
credit borrowings within bank lending limits. Furthermore, production and
distribution activities are being negatively affected by credit restrictions
imposed by certain vendors, which is causing delays in receiving various
materials needed for product production and shipment. As of September 30,
1998, Verdant's available borrowing limit under terms of its bank line of
credit was $8.7 million. Its actual borrowings on that date were $8.1 million.
Verdant believes that collection of past due accounts receivable would satisfy
most of Verdant's cash needs for the remainder of the fourth quarter of 1998
and, accordingly, is aggressively pursuing such collections. In addition,
Verdant is taking steps to reduce its excess inventories. Verdant intends to
fund the remaining cash needs for the fourth quarter of 1998 and for fiscal
1999 through additional borrowings on its line of credit using Consep's
accounts receivable and inventory collateral which will be available to
Verdant upon completion of the Merger. Verdant believes that the addition of
Consep's accounts receivable and inventory collateral to Verdant's line of
credit facility will provide up to $3,000,000 in borrowing availability over
and above amounts funded by Consep's previous lender. If Verdant is
unsuccessful in completing the Merger, Verdant will need to obtain additional
financing from other sources. Verdant believes that such financing is
available, however, there is no assurance that Verdant will be successful in
obtaining such financing.

For the six months ended June 30, 1998, cash decreased by $264,157,
consistent with seasonal fluctuations. The decrease in cash reflects the
following: cash of $7,236,240 consumed in operating activities, primarily to
finance increased receivables and inventory which was offset in part by cash
provided by increased accounts payable, cash of $170,711 consumed in investing
activities to purchase equipment and intangible assets, and cash provided from
financing activities of $7,150,952 consisting of $8,584,731 in borrowings
against Verdant's bank lines of credit, $16,012 proceeds from the sale of
common stock, offset by principal payments on long-term debt of $1,449,791.

76
<PAGE>

For the three months ended December 31, 1997, cash decreased by $2,841,022.
The decrease in cash reflects the following: cash of $2,309,057 consumed in
operating activities, primarily to finance increased receivables, inventory
and product registration prepayments, and cash of $453,440 consumed in
investing activities to purchase office equipment and intangible assets and to
pay acquisition related costs.

In fiscal 1997, cash and cash equivalents decreased $24,487 to $3,264,294
from $3,288,781 at September 30, 1996. The decrease resulted primarily from
cash used in investing activities of $255,863 which was largely offset by cash
provided from operating activities of $116,605 and cash provided from
financing activities of $111,905. Cash used in investing activities was
primarily used to purchase property and equipment of $140,008, to pay expenses
relating the Dexol acquisition of $82,343 and to invest in patent and
trademark applications and other intangible assets of $42,401, partially
offset by proceeds from the sale of fixed assets of $8,889. The $116,605
provided by operating activities was primarily the result of reductions to
receivables and inventory of $1,605,348 and $873,900, respectively, offset in
part by reductions in accounts payable and accrued expenses of $2,150,758 and
195,638, respectively. The cash provided by financing activities was primarily
the result of cash received in the Dexol acquisition of $124,073 partially
offset by payments of $12,168 on long-term debt.

In fiscal 1996, cash and cash equivalents increased $532,404 to $3,288,781
at September 30, 1996. The increase resulted primarily from cash provided by
operating activities of $699,044, partially offset by cash used in investing
activities of $158,506. The $699,044 provided by operating activities was
primarily the result of decreased inventory and receivables of $502,224 and
$205,861, respectively, and increased accrued expenses of $249,746, which was
partially offset by cash used to fund the net operating loss of $568,119, less
net non-cash expenses of $511,896, and a reduction in accounts payable of
$194,464. Cash used in investing activities was primarily used to purchase
property and equipment of $60,861 and to invest in patent and trademark
applications and other intangible assets of $118,674, partially offset by
proceeds from the sale of fixed assets of $20,849.

In fiscal 1995, cash and cash equivalents decreased $2,091,246 to $2,756,377
at September 30, 1995. The decline resulted primarily from cash used in
operating activities of $1,640,482, cash used in investing activities of
$440,526 and cash used in financing activities of $2,063. The $1,640,482 used
in operating activities was used primarily to fund the net loss of $2,173,104
and increases in inventory of $748,040, which was partially offset by
decreases in accounts receivable and prepaid expenses of $313,494 and $90,174,
respectively, and increases in accounts payable of $331,887. Cash used in
investing activities was primarily used to acquire substantially all the
assets of Plant Research Laboratories (see Item 1. Business, "Plant Research
Laboratories"), to purchase property and equipment of $101,536 and to invest
in patent and trademark applications and other intangible assets of $106,288.
Cash used in financing activities resulted from final payments on capital
lease obligations of $3,667 partially offset by cash of $1,604 received from
the exercise of employee incentive stock options.

There are no commitments for capital expenditures in fiscal 1998. Verdant's
bank line of credit agreement limits Verdant to capital asset purchases to not
more than $300,000 per year during the term of the credit agreement ending May
2, 2000.

EFFECTS OF INFLATION

Verdant believes that, during the periods discussed above, inflation has not
had a material impact on Verdant's business.

YEAR 2000 CONCERNS

Verdant has completed an upgrade of its computer systems which brings the
systems into year 2000 compliance. Verdant invested approximately $250,000
over the last two years in these upgrades. Verdant is in the process of
evaluating other computer related administrative systems to determine year
2000 compliance and expects to be completed with this review by December 31,
1998. Costs to bring these systems into compliance are not expected to be
material to Verdant. Verdant has also begun to survey major customers, vendors
and suppliers to determine year 2000 compliance issues and the potential
financial impact of non-compliance by outside parties on Verdant. Verdant
expects to have this review completed by December 31, 1998.

77
<PAGE>

NEW ACCOUNTING PRONOUNCEMENTS

In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information. The Statement changes the way public
companies report segment information in annual financial statements and also
requires those companies to report selected segment information in interim
financial reports to shareholders. The Statement is effective for financial
statements for fiscal years beginning after December 15, 1997. Verdant will
adopt the Statement for its year ended December 31, 1998. Management has not
fully determined the impact of this Statement.

78
<PAGE>

BUSINESS OF CONSEP

General. Consep develops, manufactures and markets environmentally sensitive
pest control products for the commercial agriculture and consumer home, lawn
and garden markets. Consep's products employ proprietary controlled-release
technologies to enhance the effectiveness and duration of biorational pest
control agents by protecting them from natural degradation and by controlling
their release over planned periods of time. Biorational pest control products
use naturally occurring agents and biochemicals, such as pheromones, to
control pest populations. Consep's principal commercial agriculture products,
marketed under the CheckMate label, release synthetic pheromones to suppress
population levels of insects by disrupting their mating. Unlike most
conventional insecticides, Consep's products are non-toxic to humans and
animals, leave no harmful residues, do not contaminate soil or groundwater and
do not disrupt beneficial insect populations.

The majority of Consep's commercial agriculture products are sold through
independent distributors. In addition, Consep owns and operates full-line
agrichemical distributors in major agricultural regions of California and in
the Connecticut River Valley. In addition to selling Consep's commercial
agriculture products, Consep's distributors sell products produced by other
manufacturers, including biorational insect control products, conventional
toxic pesticides, fertilizers and other farm supplies. Consep also sells a
broad line of non-toxic consumer pest control products under its SureFire and
Insectigone labels through a network of cooperative buying groups and
distributors who in turn resell to lawn and garden centers, hardware stores
and retail chains. Consep also sells a line of insect repellent products based
on natural oils, which are manufactured by, and are the proprietary products
of, a third party, and are being marketed on an exclusive basis in the United
States under Consep's Blocker label.

Consep was incorporated in Oregon in 1984. Its principal executive offices
are located at 213 S.W. Columbia Street, Bend, Oregon 97702 (telephone number
(541) 388-3688).

Markets. Although conventional toxic insecticides dominate the worldwide
market for insecticides used in commercial agriculture, the demand for
alternative insect control products has increased, based in part on regulatory
limitations on the use of, growing concern over the safety and effectiveness
of and an increase in insect resistance to toxic insecticides.

Biorational insect control products have significant advantages over
conventional toxic insecticides in several important areas. The comparative
advantages of biorational insect control products, and the corresponding
problems associated with the use of toxic insecticides, include the following:

Regulatory. Under federal law, all insecticide products registered prior
to November 1984 were required to be re-registered with the EPA by 1997.
The cost of re-registration is high and entails the risk that new testing
will lead to adverse results and mandatory withdrawal of toxic insecticides
from the market. As a result, Consep believes many insecticides were not
re-registered for application in specialty crops such as fruits and
vegetables. In contrast to toxic chemicals, biorational products can be
registered with the EPA in less time and at substantially lower costs due
to the reduced level of toxicity testing required. In addition, in 1994,
the EPA established its Biopesticides and Pollution Prevention Division,
whereby companies developing safer and less-toxic alternatives to
conventional pesticides are able to have new products reviewed and
registered by a staff dedicated to this new division. The Food Quality
Protection Act ("FQPA"), passed in 1996, may further restrict the use of
toxic pesticides in that FQPA requires the EPA to consider establishing new
risk standards on U.S. registered pesticides.

Residues. Public concern over the adverse environmental and health
consequences of toxic insecticides continues to grow. These chemicals can
leave unacceptable levels of residues in food and can contaminate soil and
groundwater. Biorational insect control products use naturally produced or
occurring compounds and do not leave toxic residues in treated crops, soil
or groundwater.

Resistance. One of the limitations of toxic insecticides is the tendency
of insects to develop resistance to the active compound. Over 500 insect
species have developed resistance to one or more classes of toxic chemical
insecticides. When resistance occurs, growers are forced to increase the
amount of toxic insecticide

79
<PAGE>

necessary to control the target insects, which increases environmental and
health risks and reduces the economic viability of the toxic chemical.
Insects are less likely to develop resistance to biorational products,
particularly behavior-modifying pheromone-based products such as those
produced by Consep.

Resurgence. Toxic insecticides often destroy beneficial insects which
help to naturally control primary and secondary insect populations. As
beneficial insect populations are suppressed, there are fewer natural
enemies against primary and secondary pests and growers must use escalating
dosages and more frequent applications of toxic insecticides. This
increased application exacerbates environmental and health risks and
decreases the cost-effectiveness of the toxic insecticides. Biorational
products target specific insects and do not adversely affect beneficial
insect populations. As a result, beneficial insects remain in the field and
continue to help control detrimental insect populations.

In response to concerns regarding conventional toxic insecticides,
commercial growers are increasingly adopting more sophisticated and
environmentally safer methods of pest control which focus on ecosystem
management, collectively identified as Integrated Pest Management ("IPM"), to
control insects in their fields. IPM involves the use of a combination of crop
selection, cultivation practices and biorational pest control measures to
reduce or eliminate toxic chemical applications. Consep's primary focus is on
fruits, nuts, vegetables and selected row crops where growers are generally
more concerned with residues in harvested products or resistance of insects to
chemical insecticides and are thus more likely to adopt biorational insect
control as an alternative to conventional toxic chemicals. Consep's products
are ideally suited to IPM practices. Consep believes that IPM and crop
protection professionals, such as pest control advisers ("PCAs"), have become
key factors in promoting the introduction and distribution of insect control
products to the commercial agriculture market. This trend is most developed in
California where state licensed PCAs are the only individuals who are
authorized to recommend the application of any pesticide, including insect
control products.

Management estimates the market in which its consumer pest control products
compete in the United States and Canada to be approximately $1 billion. Consep
believes that, although biorational products currently represent less than 30%
of this market, consumers are becoming increasingly aware of the health risks
associated with many of the conventional toxic products used to control pests
in and around the home and that non-toxic products will represent an
increasing portion of the consumer pest control market.

Strategy. Management believes that regulatory limitations on the use of, and
increasing insect resistance to, conventional toxic pesticides, together with
growing concern over the safety of those products, have created substantial
opportunities to expand the use of Consep's alternative biorational pest
control products. The key components of Consep's strategy are set forth below.

Continue to Develop and Acquire Proprietary Biorational Pest Control
Products, Technologies or Businesses. Consep's strategy includes continuing to
develop new products and technologies through both its own research and
development efforts and its ongoing research and development relationships
with other outside organizations and governmental agencies. Consep also
intends to meet this objective by continuing to acquire complementary product
lines, technologies or businesses to further expand Consep's product lines
both in the commercial agriculture and consumer markets. During the past eight
years, Consep has completed eight acquisitions of complementary businesses and
product lines. Management believes such acquisition opportunities will
continue.

Focus Commercial Agriculture Products on High-Value Crops. Consep's primary
focus is on selected high-value fruit, nut and vegetable crops where growers
are generally more concerned with residues in harvested products and where
resistance to conventional pesticides is developing and are thus more likely
to adopt biorational insect control as an alternative to conventional toxic
chemicals. Additionally, given the high cost of re-registering conventional
toxic chemicals with the EPA, Consep believes market opportunities will expand
for biorational products as agrichemical companies have found it uneconomical
to re-register their products for these selected crop markets.

80
<PAGE>

Utilize Distributors Owned by Consep to Introduce and Promote Consep's
Products. Consep believes that owning and operating agrichemical distributors
accelerates the market acceptance and penetration of its proprietary
agricultural products, provides direct access to growers and field research
personnel and facilitates rapid evaluation and introduction of new products.
Consep may acquire additional agrichemical distributors in strategic locations
to facilitate grower adoption of IPM practices and biorational pest control
products.

Expand Presence and Distribution in Selected International Markets. Consep
believes it has the opportunity to significantly expand its international
presence. Management's strategy is to control the registration, introduction
and distribution of its products in selected international markets and, as a
result, has retained control over worldwide manufacturing and marketing rights
to its products. To effectively market its products abroad, Consep is staffing
an international sales and registration organization to support the
introduction of its products through established distributors in key
international markets.

Expand Presence and Distribution Channels in Consumer Markets. Consep is
focused on expanding its consumer product distribution channels by increasing
its retail account base and penetrating additional locations in existing
accounts. Through a combination of trade show attendance, promoting
relationships with independent manufacturers' representatives and direct
sales, Consep anticipates expanding into additional co-operative buying
groups, distributors and retail chains, including grocery and drug store
chains. Consep also is focusing on increasing the range of products sold
within the existing retail base through a combination of special display
advertising and co-operative promotional programs. Consep will continue its
efforts to expand its product line through product development, acquisitions
and distribution of biorational products manufactured by other manufacturers.

Technology. Consep believes it is well positioned to take advantage of
opportunities for biorational pest control products as a result of its
proprietary controlled release technologies. Consep's principal commercial
agricultural products combine proprietary controlled release delivery systems
with synthesized pheromones to provide effective biorational pest control.
Consep has devoted considerable resources to investigating the chemical makeup
of pheromones, their reaction with Consep's delivery systems and their
behavior in a variety of environmental conditions.

Pheromones are natural compounds produced by insects, which, when released
and detected by other insects of the same species, will elicit a specific
response. Over 1,600 insect pheromones have been identified in the scientific
literature and identification of additional insect pheromones continues to
occur. Consep has focused its efforts on one class of pheromones, sex
pheromones, most of which are produced by female insects in order to attract
males of the same species. Males are able to locate the females by using
sensors on their antennae to follow the pheromone trail to its source. These
compounds can be used to control specific insect populations if released in
sufficient quantities to overwhelm the males so that they are unable to locate
females. This system of control, called "mating disruption," produces a
substantial population drop of the target insect. The crop is thereby
protected from feeding larvae, which are the primary source of crop damage.

The key to an efficacious and economically feasible trapping or mating
disruption product is to determine the optimum release rate and to
successfully store, protect, and control the release of pheromones. Most
pheromones are highly unstable compounds which break down quickly when exposed
to normal environmental conditions. The proprietary controlled release systems
used in Consep's products protect the pheromones from the environment and
delay their degradation. Consep designs these devices to release pheromones at
a planned rate over periods ranging from a few weeks to a few months,
depending on the targeted pest and crop. Consep believes that by providing a
steady rate of release over time, Consep's controlled release technologies
allow Consep to use lower quantities of pheromones in its products, as
compared to competitive pheromone products, to achieve the same degree of pest
control. The controlled release technologies used in Consep's products include
membrane-based reservoirs, micro porous beads and dispersed (flowable)
microcapsules.

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Membrane-Based Reservoir System. The patented, membrane-based reservoir
system used in certain of Consep's products consists of a reservoir containing
the active ingredient, a rate-controlling membrane through which the active
ingredient diffuses and a protective impermeable backing. By varying the
surface area, membrane thickness and type of membrane materials, Consep is
able to adapt this technology to a variety of applications. Membrane-based
reservoir systems are used in the CheckMate and BioLure product lines and in
certain products within the SureFire product line.

Microporous Bead System. A microporous bead is a polymeric bead with an
internal pore structure encased in a rate-controlling outer surface. The
microporous nature of the beads permits a high loading of active ingredient,
with up to 80% of the bead weight consisting of biorational agents. By
comparison, only 5% to 30% of the weight of conventional micro-encapsulated
systems is represented by biorational agents. The microporous beads are
compatible with a wide range of active ingredients and can be readily mixed
with water and applied by ground or aerial spray equipment. By controlling the
size of the beads and their microporous structure, optimum rates of release
can be achieved. Microporous bead systems are used in current and development-
stage CheckMate products.

Dispersed (Flowable) Microcapsule System. A dispersed (flowable)
microcapsule system is a method of encapsulating biorational agents by
polymerizing a protective wall around the colloidal size particles of the
active agent. The release rate of the active biorational product is adjusted
by controlling the size of the microcapsule as well as the degree of polymer
crosslinking in the capsule wall. Dispersed (flowable) microcapsule systems
are used in certain current and development-stage CheckMate products.

Products. Consep develops, manufactures and markets three lines of non-toxic
pest control products: (i) pheromone-based mating disruption products used to
control insect populations in commercial agriculture; (ii) pheromone-based
traps used to monitor and trap insects in commercial agriculture; and (iii)
consumer products used to trap or otherwise control pests in homes, lawns and
gardens. Consep also sells a line of insect repellent products based on
natural oils, which are manufactured by, and are the proprietary products of,
a third party, and are being marketed on an exclusive basis in the United
States under the Blocker label.

Commercial Mating Disruption Products. Consep's commercial mating disruption
products, marketed under the CheckMate label, are used to suppress population
levels of insects by disrupting their mating cycles. CheckMate products employ
either microporous or microcapsule beads, which are applied by aerial or
ground spray equipment, or membrane-based reservoir dispensers, which are
attached by hand to the branches or stems of plants in crops which they
protect. As of December 31, 1997, Consep offers mating disruption products for
six species of insects. Revenues from the sale of Consep's commercial mating
disruption products for the years ended December 31, 1997, 1996 and 1995 were
$4.1 million, $3.0 million and $2.9 million, or 10.4%, 9.1% and 9.5% of
Consep's total revenues for such periods, respectively.

Commercial Monitoring and Trapping Products. Consep's monitoring and
trapping products for the commercial agriculture market are sold under the
BioLure label. A monitoring product typically consists of a trap and a lure
loaded with either pheromones or food bait to attract the target insect
species. Growers use monitoring products to identify the emergence of target
species, pinpoint infestation levels, and project insect population size and
crop damage, thereby facilitating more efficient control measures. The
monitoring systems are used in conjunction with pest control products to
correctly time the application of these control products and to monitor the
effectiveness of insect control programs. The system used in most of Consep's
monitoring and trapping products is a pheromone-based lure which incorporates
Consep's controlled release membrane-based technology to provide for uniform
release of the active ingredient over a longer period of time than
competitors' products. Monitoring and trapping systems which do not
incorporate a lure use food bait or a color spectrum as the attractant. Consep
currently offers trapping and monitoring systems for over 25 species of
insects. Revenues from the sale of Consep's monitoring and trapping products
for the years ended December 31, 1997, 1996 and 1995 were $983,000, $833,000
and $621,000, or 2.5%, 2.5% and 2.0% of Consep's total revenues for such
periods, respectively.

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Consumer Products. Consep's consumer product line, marketed under the
SureFire and Insectigone labels, is comprised of a broad group of non-toxic
products which trap or otherwise control pests found in and around the home.
In addition, Consep markets, under its SureFire label, hummingbird and
butterfly feeders. Products in Consep's consumer product line generally
incorporate Consep's proprietary technologies, which include the controlled
release of attractants that lure insects into traps, and insecticide powders
composed of patented baits and diatomaceous earth, which kill crawling insects
coming into contact with products incorporating this technology. Consep
currently offers pest control products for over 20 species of household and
garden pests. Consep also distributes a line of consumer products, based on
natural oils, to repel biting insects. These insect repellent products, which
are manufactured by, and are the proprietary products of, a third party, are
being marketed on an exclusive basis in the United States under Consep's
Blocker label. Consep holds exclusive distribution rights to these insect
repellent products in the United States, Canada and Mexico, subject to certain
performance requirements. Revenues from the sale of Consep's consumer products
for the years ended December 31, 1997, 1996 and 1995 were $6.9 million, $5.3
million and $4.6 million, or 17.6%, 15.8% and 15.0% of Consep's total revenues
for such periods, respectively.

Specialty Chemicals. In February 1995, Consep acquired Farchan Laboratories,
Inc. ("Farchan"), a Florida-based specialty chemicals manufacturer. Prior to
its primary manufacturing facility being destroyed by fire in October 1996,
Farchan supplied certain pheromones to Consep for use in certain of its mating
disruption products. In addition, Farchan supplied high quality specialty
chemicals, including organic acetylenes, to research organizations,
pharmaceutical companies and the agricultural industry. Revenues from
Farchan's operations (excluding pheromone sales to Consep) for the years ended
December 31, 1997, 1996 and 1995 were $1.0 million, $1.3 million and $1.2
million, or 2.6%, 3.9% and 3.9% of Consep's total revenues for such periods,
respectively. Farchan's primary manufacturing facility was destroyed by fire
in October 1996, and Consep has decided to discontinue its specialty chemicals
operations at the Farchan location, and has indefinitely postponed any
significant production of pheromones or other specialty chemicals at its
facility in Bend, Oregon. See "--Manufacturing," "--Properties" and
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF CONSEP--Liquidity and Capital Resources."

Distribution Operations. Consep owns and operates full-line agrichemical
distributors which, in addition to selling Consep's commercial agriculture
products, also sell products produced by other manufacturers, including
biorational insect control products, conventional toxic pesticides,
fertilizers and other farm supplies. Revenues from Consep's distribution
operations (which exclude sales of Consep's proprietary commercial agriculture
products through these distribution operations) for the years ended December
31, 1997, 1996 and 1995 were $26.2 million, $22.8 million and $21.5 million,
or 66.9%, 68.6% and 69.6% of Consep's total revenues for such periods,
respectively.

Sales, Marketing and Distribution. Consep's sales, marketing and
distribution strategies differ for each of the major markets in which its
products are sold.

Consep's sales in the commercial agriculture market are made principally
through agrichemical distributors. These distributors employ crop protection
professionals who consult for growers and recommend appropriate insect control
programs. Consep believes that IPM and crop protection professionals, such as
pest control advisers ("PCAs"), have become key factors in promoting the
introduction and distribution of insect control products to the commercial
agriculture market. This trend is most developed in California, where state
licensed PCAs are the only individuals who are authorized to recommend the
application of any pesticide, including insect control products. Consep's
strategy focuses on improving the PCAs' and growers' understanding of IPM and
how Consep's proprietary products can be integrated into insect control
programs. Consep markets its insect control products to this group through
Consep's 10-person technical sales organization.

As part of Consep's strategy to use distributors owned by Consep to
introduce and promote its products, Consep has acquired agrichemical
distribution subsidiaries in strategic market locations. These acquisitions,
which took place in 1990 and 1994, have allowed Consep to employ crop
protection professionals, including PCAs, and obtain direct access to growers
in order to facilitate the exchange of information and more effectively
introduce IPM practices in general, and Consep's products in particular.
Consep currently operates agrichemical

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distribution outlets in five locations in the Central Valley of California and
in one location in the Connecticut River Valley. Consep believes these
distribution operations, and the 24 PCAs which they employ, provide a
continuous source of valuable information with respect to new product needs,
performance of products in the field and the competitive position of those
products.

Consep supports the sales efforts of the independent and subsidiary
agrichemical distributors through the organization of grower meetings, direct
grower contact and education of other influential groups such as university
pest management specialists and researchers, government agricultural personnel
and independent PCAs. Consep's CheckMate and BioLure product lines are
promoted through the dissemination of brochures, corporate communications and
an on-line Web page, in addition to direct contact with influential groups
including distributors, retailers, PCAs and growers. Agricultural trade shows
and certain industry conferences, such as the California Agricultural
Production Consultants Conference, are other venues for promotion of Consep's
CheckMate and BioLure product lines.

Consep sells its SureFire, Insectigone and Blocker products through a
network of cooperative buying groups and distributors who in turn resell to
lawn and garden centers, hardware stores and retail chains including drug and
grocery stores. These products are also sold directly to retailers and through
mail-order catalogs. Promotion of Consep's consumer products is achieved
primarily by co-operative advertising, media participation and trade shows. In
addition, Consep uses limited television advertising to promote its Blocker
product line. Consep works directly with over 70 independent sales
representatives who are engaged in various sales and marketing activities
related to Consep's consumer product lines. These independent sales
representatives are overseen by Consep's 6-person consumer sales group.
Consep's sales and marketing efforts for its consumer products are directed
towards increasing the number of new retail and distribution accounts and
increasing the range of products carried by certain existing retail accounts.

Consep's commercial agriculture and consumer products are also sold through
independent distributors in certain international markets. In addition, Consep
has established joint testing and marketing programs with these distributors
to introduce and sell its commercial agriculture products in certain
international markets. Consep also manufactures and sells products on a
private label basis to customers in the industrial pest control market.
Consep's revenue attributable to export sales and sales occurring outside of
the United States of both commercial agriculture and consumer products for the
years ended December 31, 1997, 1996 and 1995 were $3,332,346, $2,522,164 and
$2,217,266, respectively. Consep also sells certain BioLure products to the
United States Department of Agriculture (the "USDA") and various state and
international departments of agriculture.

Consep's business is highly seasonal, with its highest revenues being
recognized in the second quarter of each year and its lowest revenues being
recognized in the fourth quarter of each year. This seasonality coincides with
the commercial growing season in the Northern Hemisphere and, to a lesser
extent, the consumer home, lawn and garden buying season. In addition, many of
Consep's products, and the products sold by its wholly-owned distributors, are
dependent upon the emergence of certain pests in the crops they are designed
to protect. To the extent adverse weather conditions prevent or otherwise
interfere with the growth of certain crops or the emergence of certain pests,
the results of Consep's operations could be adversely impacted. From time to
time, secondary pest infestations may occur within specific crops or
geographic markets causing affected growers to alter their customary pest
control practices. Such events may cause growers to temporarily increase their
use of conventional toxic insecticides and reduce or suspend the use of
biorational products, such as those sold by Consep, which could have a
material adverse effect on Consep's results of operations.

Manufacturing. Consep manufactures the membrane-based reservoir dispensers,
microporous beads and dispersed (flowable) microcapsules used in its products
at its facility in Bend, Oregon. Products containing diatomaceous earth are
manufactured at Consep's wholly-owned subsidiary located in Kirkland, Quebec,
Canada. Prior to its primary manufacturing facility in Gainesville, Florida
being destroyed by fire in October 1996, Farchan produced pheromones used in
certain of Consep's commercial agriculture products. As previously reported,
Consep has partially completed the first phase of an addition to its
headquarters and manufacturing facility in Bend, Oregon for the purpose of
producing pheromones and other specialty chemicals. Consep has

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re-evaluated its plans for the completion of the addition as well as its plans
to produce significant quantities of pheromones and other specialty chemicals
at the Bend, Oregon facility. At the present time, Consep has indefinitely
postponed any additional capital expenditures for the completion of the
addition as well as any significant production of pheromones or other
specialty chemicals. In addition, after completion of the investigation and
analysis of the cost feasibility for producing pheromones using intermediate
materials purchased from third parties, Consep has determined that it will
continue to purchase substantially all of its pheromones from its current
suppliers for the foreseeable future. See "--Properties" and "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
CONSEP--Liquidity and Capital Resources." As of June 30, 1998, Consep employed
23 people in manufacturing and quality control relating to the production of
its proprietary products.

Active ingredients, including pheromones and food baits, are purchased from
specialty chemical supply companies or are produced by Consep. Consep has
historically relied upon on a limited number of suppliers to provide
pheromones for its products. During February 1995, Consep acquired Farchan, a
Florida-based specialty chemicals manufacturer, in order to reduce the cost of
certain pheromones, provide assurance of consistent quality, and provide a
stable supply of these materials. This facility was destroyed by fire in
October 1996, and Consep has decided to discontinue its specialty chemicals
operations. The interruption of certain sources of supply or the failure of
suppliers, to adapt their products to Consep's changing technological
requirements could result in delays in product shipments, adversely affecting
Consep's financial condition and results of operations.

Consep has no current plans to expand its manufacturing facilities or
equipment and believes that it has adequate production capacity to meet its
foreseeable needs.

Research and Development. Consep believes that considerable investment in
new product development will continue to be necessary to remain competitive in
the biorational pest control market. Consep's product development projects
generally begin with the identification of major insect infestation problems
which Consep believes can be addressed with biorational agents and which
provide sufficient market opportunity. Once a potential product is identified,
Consep's research and development personnel study the intended biorational
agent and make a determination as to whether Consep's existing controlled
release technologies are likely to work with the biorational agent. If it
appears that the controlled release technologies may need to be modified to
work effectively with the intended biorational agent, Consep's research and
development personnel work to adapt the existing controlled release
technologies to suit the requirements of the particular biorational agent.
Once the controlled release technology has been selected and the active
ingredient has been tentatively formulated, the development effort continues
with laboratory studies and eventual field testing of prototypes in order to
arrive at the final form of the product. Field testing of products is
generally conducted on a collaborative basis with academic, governmental and
corporate entities in the United States, including the USDA and numerous
universities. In international markets, field testing is generally conducted
in collaboration with Consep's international distributors and government
researchers. Through these collaborative efforts, Consep gains access to
individuals within the collaborating organization who have particular
expertise in dealing with the targeted pest and crop and whose opinions are
generally widely accepted. Collaborative field testing also provides
independent verification of product efficacy which is critical to convincing
commercial growers to adopt new biorational products.

Pursuant to a license agreement with Bend Research, Consep is able to
participate in joint funding with various government agencies to develop
improvements to existing technologies. The license agreement also provides
Consep with license rights to agricultural applications of Bend Research
technologies, including technologies which are developed by Bend Research
pursuant to third party funded research and development efforts. See "--
Proprietary Rights." The license agreement also obligates Consep to request
Bend Research to perform research and development services budgeted at not
less than $600,000 a year, at least $400,000 of which must be directed towards
development of biorational products. For 1996 and 1997, the annual commitment
under the license agreement was reduced from $600,000 to $191,500 and
$125,000, respectively. For 1998, the annual commitment under the license
agreement has been waived with no minimum requirement. For years subsequent to
1998, the $600,000 annual commitment will be reinstated. The license agreement
continues until the later of

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2012 or the expiration of the last patent licensed under it. Consep may
terminate the license agreement on sixty days' notice. The license agreement
provides that if it were to be terminated for any reason, Consep would retain
rights to all Bend Research technologies incorporated in then current products
and in products then under development. If Consep were to lose the services of
Bend Research for any reason, Consep may experience delays in the development
and introduction of new products and would be required to make alternative
arrangements for the services performed by Bend Research. Any such alternative
arrangements could delay development efforts, could substantially increase the
cost of Consep's research and development efforts and could adversely affect
Consep's results of operations.

Consep is currently developing and expanding its CheckMate line of insect
control products. Field testing for the products under development is in
various stages of completion. Consep also plans to develop and introduce
additional products for its SureFire and Insectigone lines of consumer pest
control products. Additions to the consumer product lines will occur through
new product development and possible acquisitions of compatible product lines,
technologies or businesses.

Government Regulation and Product Registration. The pesticide industry is
heavily regulated worldwide. In the United States, the EPA regulates pesticide
products under FIFRA and more recently under FQPA. Pesticides are also subject
to state and foreign regulations. Some states, such as California, have their
own extensive registration requirements, as do certain foreign governments. To
develop and commercialize a pesticide product, detailed and complex procedures
must be completed prior to obtaining approvals through FIFRA, state and
foreign regulatory agencies. Small scale field testing usually can be
conducted prior to product registration to evaluate product efficacy. Unusual
weather conditions during field tests may require additional field testing
requirements in subsequent growing seasons, resulting in delays in product
registration submissions and approvals. In addition, failure to receive
regulatory approval prior to the growing season could delay market
introduction of a new product by up to a year. Significant delays in new
product development or commercialization would have a material adverse effect
on Consep's results of operations.

Chemical pesticides require extensive toxicology and environmental testing
to substantiate product safety prior to obtaining a product registration.
Commercial sale of a pesticide requires a product registration for each pest
and crop for which the product is used. Initial EPA registration for a new
chemical pesticide can take seven years or longer, and can cost $10 million or
more. In contrast to conventional toxic chemicals, biorational products have
fewer regulatory requirements before commercial use is permitted. For example,
substantially fewer toxicity studies are required for biorational insect
control products than for conventional toxic insecticides. Due to such
differences, registration costs for biorational insect control products are
significantly less than for toxic insecticides, and registration of
biorational products requires considerably less time to complete. However,
there can be no assurance that additional requirements will not be added by
the EPA which could make registration procedures more time-consuming and
costly or require further testing and review of previously registered
products. Furthermore, even without any such additional regulatory
requirements, the process of obtaining regulatory approvals can be time-
consuming and costly, and there can be no assurance that such approvals can be
obtained in a timely manner.

Government regulations have been enacted in recent years to encourage the
development and introduction of non-toxic alternatives to conventional
insecticides, including the streamlined registration of alternative pest
control products under the EPA's "Safer Pesticide Policy." In September 1993,
the EPA, the FDA and the USDA released a joint summary of the principles
guiding their legislative and regulatory agenda including: (i) a firm
commitment to reducing risks to people and the environment that may be
associated with toxic pesticides while ensuring the availability of cost-
effective pest management techniques; (ii) recognition of the need to work
with growers to develop and implement improved means of pest control, reduce
use of higher-risk toxic pesticides and promote greater use of IPM techniques;
and (iii) implementation of regulatory reforms and incentives for the
development of pesticides that will eliminate or reduce health and
environmental risks. Further, in 1994, the EPA established its Biopesticides
and Pollution Prevention Division, whereby companies developing safer and
less-toxic alternatives to conventional pesticides are able to have new
products reviewed and registered by a staff dedicated to this new division.
Such product reviews and registrations are generally completed over a

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shorter time period and at less expense than conventional insecticide reviews
and registrations. In addition, in 1996, Congress passed FQPA which requires
the EPA to perform a new type of risk assessment for the total exposure from
pesticides. Based upon the above actions, coupled with cost and timing
advantages of registering biorational products relative to conventional toxic
chemicals, Consep believes biorational products have significant advantages in
the commercial agriculture insect control market. Field testing, manufacture
and sale of Consep's products outside the United States may be subject to
regulatory approval by other jurisdictions which may be more or less rigorous
than in the United States.

Competition. The pest control industry is highly competitive and is
dominated by multinational chemical companies that have financial, technical
and marketing resources substantially greater than those of Consep. Currently,
biorational products account for only a small fraction of aggregate sales of
pest control products, and can require insect control practices, such as
timing and method of application, which are different from those typically
associated with toxic chemical products. As a result, in order for biorational
products to successfully compete with toxic chemicals, they must not only be
cost competitive but must also provide other advantages over conventional
pesticides. Consep believes that its products are cost competitive with
conventional toxic insecticides and, because they are non-toxic and leave no
harmful residue in food, soil or groundwater, provide sufficient advantages
over conventional toxic insecticides to compete effectively against such
products.

Consep believes that many of the large chemical pesticide companies are
developing chemical pesticides which are less-toxic to humans and the
environment, as well as new products based upon biorational agents. While
Consep believes that the emphasis of these companies has been on genetic
engineering of micro-organisms and insect-resistant plants and has been
primarily directed towards commodity crops such as wheat, corn, cotton and
soybeans, there can be no assurance that these companies will not direct
significant resources to either biorational products or less-toxic chemical
products that would compete directly with those of Consep.

In addition to the large chemical pesticide companies, Consep is aware of at
least five other companies using biorational control agents, including
pheromones, to produce alternative insect control products. Consep believes
that other companies are currently developing biorational insect control
products. Consep believes that none of these competing companies has delivery
systems that perform as effectively and efficiently as the proprietary
controlled release membrane-based reservoir, dispersed (flowable) microcapsule
and microporous bead systems used in Consep's CheckMate products and that
Consep is therefore in a strong competitive position with respect to these
companies.

Consep expects competition within the biorational pest control segment to
intensify as regulatory pressures on conventional toxic pesticides increase
and as advances in the field are made and become more widely known. There can
be no assurance that Consep will be able to compete successfully against its
current competitors or that these competitors or new market entrants will not
develop products that compete directly with Consep's products and are more
effective, less expensive or more widely accepted than those of Consep.

Proprietary Rights. Proprietary protection of Consep's products is important
to its business. Consep relies upon patents, trade secrets, unpatented know-
how and continuing technological innovation to develop and maintain its
competitive position. Consep maintains a policy of seeking patents on its
inventions, acquiring licenses under selected patents or patent applications
from third parties and entering into invention and proprietary information
agreements with its key employees and consultants with respect to technology
which it considers important to its business.

As more specifically described below, Consep has obtained manufacturing and
marketing rights in agriculture to certain proprietary rights of Bend
Research, including patents, patent applications, trade secrets and unpatented
know-how which relate to existing and development-stage technologies and
products. In addition, Consep has filed patent applications with respect to
its own inventions which relate to existing and development-stage technologies
and products. There can be no assurance that patents will issue from any
pending or future patent applications or, if patents are issued, that they
will be of sufficient scope or strength to provide meaningful protection of
Consep's technologies. In addition, there can be no assurance that any of the
current patents issued

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or licensed to Consep or future patents issued or licensed to Consep will not
be challenged or circumvented by competitors, or be found to be invalid or
non-infringed in judicial or administrative proceedings should a dispute
arise. Moreover, notwithstanding the scope of the patent protection available
to Consep, there can be no assurance that such patent rights will provide
commercial advantage to Consep as competitors could develop controlled release
technologies which are not covered by Consep's issued or licensed patents or
future patents issued or licensed to Consep.

Pursuant to an agreement with Bend Research, Consep has obtained a license
to all agricultural applications of technologies developed by Bend Research,
other than certain animal health and agricultural applications unrelated to
Consep's current or contemplated products. The license includes rights to
certain patents, patent applications, trade secrets and unpatented know-how
owned by Bend Research, and covers aspects of Consep's membrane-based
reservoir system, microporous bead system and dispersed (flowable)
microcapsule system technologies. The license agreement provides Consep with
exclusive worldwide rights to all agricultural applications (except as noted
above) of the licensed patents, patent applications, trade secrets and know-
how. The membrane-based reservoir system technology used in many of Consep's
CheckMate, BioLure and SureFire products is the subject of a United States
patent owned by Bend Research expiring in 2002. Such technology is not
patented outside the United States, other than in Japan where the patent is
held by a third party. Neither Consep nor Bend Research has rights with
respect to the Japanese patent. The microporous bead system technology used in
certain current and development-stage CheckMate products is the subject of a
pending United States patent application owned by Bend Research. The license
agreement provides Consep exclusive, worldwide rights to agricultural
applications (except as noted above) of the microporous bead system
technology. The dispersed (flowable) microcapsule system technology used in
certain current and development-stage CheckMate products is not patented in
any country. The license agreement provides Consep exclusive, worldwide rights
to agriculture applications (except as noted above) of the dispersed
(flowable) microcapsule system technology.

The foregoing licenses are royalty-free as to certain of Consep's existing
controlled-release products. Certain existing products are, and products
resulting from existing and future development efforts may be, royalty bearing
at rates ranging from 2.5% to 5.0% of Consep's direct gross margin, as defined
in the license agreement, on such products. During January 1995, royalties
related to certain products incorporating technology provided by Bend Research
for the term of the license agreement were prepaid by Consep. Such prepaid
royalties totaled $121,000 and are being amortized as the related products are
sold by Consep. The license agreement continues until the later of 2012 or the
expiration of the last patent licensed under it. Consep may terminate the
license agreement on sixty days' notice. The license agreement provides that
if it were to be terminated for any reason, Consep would retain rights to all
Bend Research technologies incorporated in then current products and any
products then under development.

Consep's technology relating to its diatomaceous earth products includes a
patented bait formulation. These patents provide protection in Canada and
Australia.

Much of Consep's technology and many of its processes are dependent upon the
knowledge, experience and skills of certain scientific and technical
personnel. To protect its rights to its proprietary information and
technology, Consep requires key employees, consultants, advisors and
collaborators to enter into confidentiality agreements which prohibit the
disclosure of confidential information to persons unaffiliated with Consep and
require disclosure and assignment to Consep of ideas, developments,
discoveries and inventions made by such persons. There can be no assurance
that these agreements will prevent disclosure of Consep's confidential
information or will provide meaningful protection for Consep's confidential
information if there is an unauthorized use or disclosure. In the absence of
patent protection, Consep's business may be adversely affected by competitors
who develop substantially equivalent technology.

Proprietary rights litigation, which could result in substantial cost to and
diversion of effort by Consep, may be necessary to enforce patents issued or
licensed to Consep, to protect trade secrets or know-how owned by Consep or to
defend Consep against claimed infringement of the rights of others and to
determine the scope and validity of the proprietary rights of Consep and
others. Adverse determinations in litigation could subject Consep

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to significant liabilities to third parties, could require Consep to seek
licenses from third parties and could prevent Consep from manufacturing,
selling or using its products, any of which could have a material adverse
effect on Consep's business, financial condition and results of operations.
Consep is not currently a party to any patent litigation or other litigation
regarding intellectual property rights and is not aware of any challenge to
its patents or proprietary rights.

Employees. As of June 30, 1998, Consep had 134 employees, with 16 involved
in sales of proprietary products, 24 employed as PCAs in its distribution
subsidiaries, 9 involved in product development and registration, 23 involved
in manufacturing and quality control of proprietary products, 15 involved in
finance and administration and 47 involved in operations at its distribution
subsidiaries.

Properties. Consep is headquartered in Bend, Oregon where it owns a 28,800
square foot facility purchased in 1997 for $1.495 million. In addition to
administrative offices, the headquarters facility contains research and
development, manufacturing, warehouse and sales operations for certain of
Consep's proprietary products. In addition, Consep, through its Chemfree
subsidiary, leases an office, manufacturing, sales and warehousing facility in
Kirkland, Quebec, Canada on a month-to-month basis. Consep believes it could
replace this facility in a timely manner, if required to do so. Total lease
expenditures related to all of Consep's proprietary product-related facilities
in 1997, 1996 and 1995 were $111,159, $147,407 and $150,461, respectively.

As of August 31, 1998, Consep also owned, through its Farchan subsidiary,
one building located in Gainesville, Florida, and one building located in
Alachua, Florida, with a combined capacity of approximately 8,000 square feet
used for this subsidiary's manufacturing, sales, research and development and
warehousing functions. In October 1996, one of Farchan's two buildings then
located in Gainesville, Florida with a capacity of approximately 3,000 square
feet, which was used as a manufacturing facility, was destroyed by fire. As an
indirect result of the fire at the Farchan facility, Consep decided it was not
feasible to proceed with plans to finish and occupy its proposed plant in
Alachua, Florida. Consep has removed all of its equipment from the Alachua
facility and is attempting to sell the land and building. Consep has also
decided not to rebuild the manufacturing facility at its Gainesville site and
is attempting to sell the property. As previously reported, Consep has
partially completed the first phase of an addition to its headquarters and
manufacturing facility in Bend, Oregon for the purpose of producing pheromones
and other specialty chemicals. Consep has re-evaluated its plans for the
completion of the addition as well as its plans to produce significant
quantities of pheromones and other specialty chemicals at the Bend, Oregon
facility. At the present time, Consep has indefinitely postponed any
additional capital expenditures for the completion of the addition as well as
any significant production of pheromones or other specialty chemicals. In
addition, after completion of the investigation and analysis of the cost
feasibility for producing pheromones using intermediate materials purchased
from third parties, Consep has determined that it will continue to purchase
substantially all of its pheromones from its current suppliers for the
foreseeable future. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS LIQUIDITY OF CONSEP."

Consep, through certain of its distribution subsidiaries, also owns office
and warehousing facilities for its agrichemical distribution operations in
Sacramento, Fresno, and Patterson, California. Consep's distribution
operations also lease sales and distribution facilities in Livingston and
Escalon, California, under leases which expire on December 31, 1999 and 2001,
respectively. Consep's distribution operations also lease sales and
distribution facilities in Worcester and Chicopee, Massachusetts on a month-
to-month basis. Consep believes that it could replace these facilities in a
timely manner, if required to do so. Total lease expenditures related to all
of Consep's distribution facilities in 1997, 1996 and 1995 were $89,940,
$93,820 and $83,340, respectively.

Consep believes that its existing facilities will be adequate to serve its
needs at least through 1999.

Legal Proceedings. Consep is not a party to any legal proceedings other than
various claims and lawsuits which Consep believes are not individually or
collectively material to its business.

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<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF CONSEP

SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands except per share)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------- -------------------------
1998 1997 1997 1996 1995
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues......................... $ 22,778 $ 24,606 $39,204 $33,229 $30,844
Net income (loss)................ 61 914 (1,822) (2,483) (1,286)
Net income (loss) per share--
basic and diluted............... 0.01 0.10 (0.19) (0.31) (0.19)
<CAPTION>
JUNE 30, DECEMBER 31,
----------------- ----------------
1998 1997 1997 1996
-------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.................. $ 8,063 $ 11,118 $ 8,272 $10,433
Total assets..................... 30,541 33,237 25,678 23,411
Long-term debt, excluding current
maturities...................... 2,062 2,395 2,168 1,191
Shareholders' equity............. 15,147 17,946 15,217 17,010
</TABLE>

OVERVIEW

Consep derives its revenues from the sale of its proprietary products to the
commercial agriculture and consumer home, lawn and garden markets and from
sales by its distribution subsidiaries of products produced by other
manufacturers, including both biorational insect control products and
conventional toxic pesticides as well as fertilizers and farm supplies.
Consep's primary focus is the development of proprietary products and
expansion of the markets for those products. A significant element of Consep's
strategy for the commercialization of its proprietary commercial agriculture
products has been to acquire distribution operations in key agricultural
regions and to introduce its proprietary products through those operations.

Continued growth in both proprietary and distribution revenues contributed
to a smaller loss in 1997 than incurred by Consep in 1996. The growth in
proprietary product revenues was primarily attributable to higher revenues
from increased sales of Consep's commercial agriculture products and to the
introduction of Consep's new insect repellent line. These increased revenues
were partially offset by higher overall operating expenses.

Since its inception, Consep has funded its growth primarily through equity
financings. Funds from these financings have allowed Consep to build its
organization, develop and register proprietary products for both the
commercial agriculture and consumer home, lawn and garden markets, acquire
distribution operations for the introduction of its commercial agriculture
products and expand its sales efforts through both domestic and international
channels of distribution.

Consep has incurred annual operating losses since its inception in 1984.
Consep believes its future annual profitability is dependent upon continued
revenue growth, maintained or strengthened gross margins, and controlled
growth of operating expenses. There can be no assurance that Consep will
become profitable on an annual basis.

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<PAGE>

Consep's business is seasonal with its highest revenues historically being
recognized in the second quarter of each year and its lowest revenues being
recognized in the fourth quarter of each year. This seasonality coincides with
the commercial growing season in the Northern Hemisphere and, to a lesser
extent, the consumer home, lawn and garden buying season. Consep anticipates
this seasonal profile will continue with a slight shift to third and fourth
quarter revenues as sales to international markets increase. In contrast to
revenues, many of Consep's operating expenses are largely independent of the
quarterly selling cycles. As a result, operating expenses will generally
represent a higher percentage of revenues in the third and fourth quarters as
compared to the first two quarters, and Consep may experience a loss in the
third and fourth quarters of an otherwise profitable year.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the percentage of
net revenues of certain items in Consep's Consolidated Financial Statements.
The table and the discussion below should be read in conjunction with the
historical financial statements and notes thereto of Consep. See "Unaudited
Pro Forma Condensed Combined Financial Statements" and "Index to Financial
Statements."

<TABLE>
<CAPTION>
PERCENTAGE OF NET REVENUES
--------------------------------------------------
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
----------------- ------------------------------
1998 1997 1997 1996 1995
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues
Proprietary products.... 32.6 % 38.2 % 33.1 % 31.4 % 30.4 %
Distribution............ 67.4 61.8 66.9 68.6 69.6
------- ------- -------- -------- --------
Total revenues........ 100.0 100.0 100.0 100.0 100.0
------- ------- -------- -------- --------
Cost of revenues
Proprietary products.... 21.0 21.9 21.1 20.1 17.8
Distribution............ 53.3 50.2 54.9 55.9 57.1
------- ------- -------- -------- --------
Total cost of
revenues............. 74.3 72.1 76.0 76.0 74.9
------- ------- -------- -------- --------
Gross margin.............. 25.7 27.9 24.0 24.0 25.1
Operating expenses
Research and development
(1).................... 3.6 2.5 3.1 4.4 3.4
Selling, general and
administrative (1)..... 11.3 14.6 16.0 17.1 15.0
Distribution (2)........ 9.6 7.5 9.7 10.1 10.9
------- ------- -------- -------- --------
Total operating
expenses............. 24.5 24.6 28.8 31.6 29.3
------- ------- -------- -------- --------
Operating income (loss)... 1.2 3.3 (4.8) (7.6) (4.2)
Other income (expense),
net...................... (0.9) 0.4 0.2 0.1 0.0
Net income (loss)
Proprietary products.... (4.6) (0.6) (7.0) (9.9) (5.6)
Distribution............ 4.9 4.3 2.4 2.4 1.4
------- ------- -------- -------- --------
Total net income
(loss)............... 0.3 % 3.7 % (4.6)% (7.5)% (4.2)%
======= ======= ======== ======== ========
</TABLE>
- --------
(1) Research and development and selling, general and administrative expenses
are allocated to Consep's proprietary product operations.
(2) Distribution expenses consist entirely of selling, general and
administrative expenses of Consep's distribution operations.

Comparison of Six Months Ended June 30, 1998 and 1997

Revenues. Total revenues for the six months ended June 30, 1998 decreased
7.4% to $22.8 million from $24.6 million in the corresponding period of 1997.
Revenues from the sale of proprietary products decreased 21.0% during the six
months ended June 30, 1998 to $7.4 million from $9.4 million in the
corresponding period of 1997. Revenues from Consep's distribution operations
increased 1.0% during the six months ended June 30, 1998 to $15.4 million from
$15.2 million in the corresponding period of 1997.

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<PAGE>

The decrease in proprietary product revenues for the six months ended June
30, 1998 was attributable to decreases in revenues for Consep's consumer
products, commercial agriculture products and specialty chemicals.

Revenues from the sale of commercial agriculture products decreased
$582,000, or 18.5%, for the six months ended June 30, 1998 as compared to the
corresponding period of 1997. The decrease was primarily attributable to i)
cooler and wetter weather conditions in California, Florida and Mexico that
resulted in lower insect populations in those regions and ii) a 75% reduction
in revenues from the sale of Consep's products to control pink bollworm in
cotton ("CheckMate PBW" and "CheckMate PBW-F") as a result of the same cooler
weather conditions in the southwest United States and Mexico. In addition to
the cooler weather, sales of Consep's product to control peach twig borer
("CheckMate PTB") were lower in the six months ended June 30, 1998 as compared
to the corresponding period in 1997, as a result of a shortage in the supply
of pheromone for this product. The pheromone supply shortage was due to
production delays related to the process scale-up in Consep's initial
production of this pheromone by a contract manufacturer using a new
proprietary synthesis route.

Revenues from the sale of consumer products from Consep's SureFire and
Blocker line of products in the United States and Chemfree products in Canada
decreased by $1.0 million, or 17.3%, for the six months ended June 30, 1998 as
compared to the corresponding period of 1997. The decrease in consumer product
revenues in the six months ended June 30, 1998 was primarily attributable to a
decrease in revenues for Consep's Blocker line of products of 60.2% as
compared to the corresponding period in 1997. The decrease in Blocker revenues
was primarily a result of i) inventory carried over from 1997, the
introductory year, by distributors and retailers; ii) a change in the sales
program which requires that Consep partially reserve against revenues for
potential product returns and iii) a 25% reduction in the selling price.
Revenues from the sale of Consep's SureFire products in the United States and
Chemfree products in Canada increased 13.1% in the six month period ended June
30, 1998 as compared to the corresponding period of 1997. The increase in
these revenues was primarily the result of more favorable weather conditions
in certain regions of the United States and Canada as well as lower initial
inventories at the retail level as compared to 1997.

Specialty chemical sales decreased to $46,000 in the six months ended June
30, 1998 from $422,000 in the corresponding period of 1997. The decrease is
the result of winding down business operations at Consep's Farchan facility,
which process was completed in early 1998.

The revenue increase of 1.0% from Consep's distribution operations during
the six months ended June 30, 1998 as compared to the corresponding period of
1997 was primarily the result of the addition of a new sales and warehousing
location for Consep's Massachusetts distribution operation. This increase was
partially offset by lower revenues in Consep's California distribution
operations as a result of the cooler and wetter weather conditions in
California discussed above.

Gross Margin. The consolidated gross margin for Consep decreased to 25.7% in
the six months ended June 30, 1998 from 27.9% in the corresponding period of
1997. The gross margin on the sale of proprietary products during the six
months ended June 30, 1998 decreased to 35.5% from the 42.6% gross margin
achieved on proprietary product revenues in the corresponding period of 1997.
Distribution gross margins increased in the six month period ended June 30,
1998 to 21.0%, from 18.8% in the corresponding period of 1997.

The gross margin on commercial agriculture proprietary product sales for the
six month period ended June 30, 1998 decreased to 32.7% from 35.4% in the
corresponding period of 1997. The decrease was primarily attributable to i)
the accrual of $320,000 for estimated insurance recoveries for the additional
pheromone expenses incurred in the six months ended June 30, 1997 due to the
October 1996 fire that destroyed Consep's specialty chemicals manufacturing
facility and ii) the change in product mix as a result of decreased sales for
Consep's higher margin CheckMate PBW and CheckMate PBW-F products. The one-
time insurance accrual reduced the cost of revenues by $320,000 for the six
month period ended June 30, 1997 and positively impacted the gross margin
percentage in 1997 on agriculture proprietary product sales by 10.2%.
Approximately $220,000 of this accrual was reversed in the fourth quarter of
1997 after settlement discussions were terminated and

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<PAGE>

Consep filed a lawsuit against its insurance carrier. As a result of the
decreased sales for the CheckMate PBW and CheckMate PBW-F products,
proprietary commercial agriculture gross margin percentages were decreased by
1.8% for the six month period ended June 30, 1998 as compared to the
corresponding period in 1997.

The gross margin on proprietary consumer product sales for the and six
months ended June 30, 1998 decreased to 41.6% from 49.0% in the corresponding
period of 1997. The decrease in gross margin was primarily attributable to a
25% price reduction on the Blocker line of products which decreased the gross
margin for this product line to 46.9% from 58.7% for the and six month period
ended June 30, 1998 as compared to the corresponding period of 1997. In order
to make the Blocker products more competitive in the marketplace, Consep
reduced its selling price for the 1998 season which will continue to have a
negative impact on gross margin as compared to 1997.

The gross margin from distribution revenues increased to 21.0% from 18.8%
for the six month period ended June 30, 1998 as compared to the corresponding
period of 1997. The increase was primarily attributable to differences in the
product sales mix for distribution operations.

Research and Development. Research and development costs during the six
months ended June 30, 1998 increased $211,000, or 34.3%, as compared to the
corresponding period of 1997. The increase was primarily attributable to
approximately $327,000 in scale-up and development costs related to the
initial production of pheromone for Consep's CheckMate PTB and CheckMate SF
products by a contract manufacturer using a new proprietary synthesis route.

Selling, General and Administrative. In the six months ended June 30, 1998,
selling, general and administrative costs associated with Consep's proprietary
product operations decreased 28.2% from the corresponding period of 1997. The
decrease was primarily attributable to i) a reduction in advertising costs
associated with Consep's Blocker line of insect repellent products in the
amount of $558,000 and ii) a reduction in expenses as a result of winding down
business operations at Consep's Farchan facility in the amount of $314,000.

Distribution. During the six months ended June 30, 1998, operating expenses
related to Consep's distribution operations increased $348,000, or 19.0%, as
compared to the corresponding period of 1997. The increase was primarily
attributable to i) the increased personnel required to meet the needs of
anticipated sales growth and ii) a reduction of bad debt reserves in 1997 that
did not occur in 1998.

Other Income and Expense. During the six months ended June 30, 1998, Consep
recorded net other expense of $207,000 compared to net other income of $89,000
in the corresponding period of 1997. This decrease was primarily attributable
to i) the recognition of $195,000 in business interruption insurance proceeds
in the first six months of 1997 that did not occur in 1998 and ii) an increase
of $121,000 for the six month period ended June 30, 1998 in interest expense
as a result of increased average borrowings outstanding as compared to the
corresponding period of 1997.

Comparison of Fiscal Years Ended December 31, 1997, 1996 and 1995

Revenues. Total revenues increased to $39.2 million in 1997 from $33.2
million in 1996 and $30.8 million in 1995. Revenues from Consep's proprietary
products increased to $13.0 million in 1997 from $10.4 million in 1996 and
$9.4 million in 1995, while revenues from distribution operations increased to
$26.2 million in 1997 from $22.8 million in 1996 and $21.5 million in 1995.

The growth in proprietary product revenues for the year ended December 31,
1997 was attributable to growth in sales of Consep's consumer products and
commercial agriculture products. These increases were offset by decreased
sales of specialty chemicals to third parties by Consep's Farchan subsidiary
as a result of a fire in October 1996 that destroyed Farchan's primary
manufacturing facility.

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<PAGE>

In 1997, revenues from the sale of commercial agriculture products increased
$1.2 million or 33.8%, as compared to 1996. The increase in sales of
commercial agriculture products was primarily attributable to a 34.5% increase
in sales of Consep's CheckMate line of products. The increase in revenues from
the sales of CheckMate products was primarily attributable to (i) the
introduction of a new combination product to control both peach twig borer and
oriental fruit moth ("CheckMate SF"), (ii) increased sales of the product to
control tomato pinworm ("CheckMate TPW") as a result of Consep's strengthening
its sales organization in Mexico, (iii) increased sales of the product to
control codling moth ("CheckMate CM") into markets in the southern hemisphere
and (iv) sales of the new CheckMate flowable product to control tomato pinworm
("CheckMate TPW-F"). These increases were partially offset by a decrease in
Company's CheckMate products to control pink bollworm in cotton ("CheckMate
PBW" and "CheckMate PBW-F"). The combined decrease in CheckMate PBW and PBW-F
revenues was primarily attributable to cooler weather conditions that led to
significantly reduced pink bollworm populations. In addition to the cooler
weather, the decrease in cotton product sales was also a result of the
increased use by growers of transgenic Bt cotton seed, a genetically
engineered insect resistant cotton.

Revenues from the sale of commercial agriculture products increased
$157,000, or 4.8%, in 1996 as compared to 1995. The increase in sales of
commercial agriculture products was primarily attributable to the introduction
of newly registered formulations of products for which registration approvals
were obtained during the year. In 1996, Consep received registration approval
for CheckMate PBW-F, its new flowable micro-encapsulated product, which
contributed to a 118.4% growth in revenues from the sale of CheckMate PBW
products. Also contributing to the increase in commercial agriculture product
revenues were increased sales of other CheckMate PBW products in Mexico and
increased international sales of CheckMate CM and the product to control
oriental fruit moth ("CheckMate OFM"). These revenue increases were offset by
(i) a reduction in revenues in Mexico from the sale of Consep's CheckMate TPW
product, and (ii) a reduction in revenues in California from the sale of
Consep's CheckMate CM product. Consep believes the decrease in revenues in
Mexico from the sale of CheckMate TPW was due to increased competition in
Mexico and responded by strengthening its sales organization in that market.
Consep believes the decrease in revenues in California from the sale of
CheckMate CM was due to a delay in receiving registration of a new warm
weather formulation of CheckMate CM from the State of California which caused
Consep to sell its cool weather formulation that did not perform adequately in
the hotter weather experienced in the spring of 1996. As a result, many
growers used alternatives to Consep's cool weather formulation of CheckMate
CM. Applications of Consep's new warm weather formulation of CheckMate CM were
made after registration was received and performed as expected.

In 1997, revenues from the sale of consumer products from Consep's SureFire
and Blocker line of products in the United States and Chemfree products in
Canada increased by $1.7 million, or 29.3%, as compared to 1996. This growth
in consumer product revenue was primarily attributable to the introduction of
Consep's new Blocker line of insect repellent products. These Blocker product
revenues were partially offset by a 17.1% decrease in revenues from sales of
Consep's SureFire line of products in the United States as compared to 1996.
Consep believes the decrease in SureFire revenues was the result of excess
inventory at the retail level carried over from 1996 which reduced the amount
of new orders placed in 1997. In addition, significantly cooler than normal
weather in the late spring, which reduced insect populations, was a major
contributor to the reduction in consumer product sales for 1997. Revenues from
the sale of consumer products increased 15.5%, or $765,000, in 1996 compared
to 1995 levels. This growth in consumer product revenues was generated by
Consep's continued efforts to increase the number of retail outlets through
which its products are sold while also increasing the number of products
carried by the individual retail operations.

Specialty chemical sales by Farchan decreased 21.4% in 1997 as compared to
1996. The decrease in sales was primarily the result of the fire in October
1996 that destroyed its primary manufacturing facility in Gainesville,
Florida. Partially offsetting the decrease in specialty chemical sales,
Farchan recognized revenues in 1997 from the sale of its research chemicals
catalog business and related inventory to GFS Chemicals, Inc. of Powell, Ohio.
In 1996, Farchan contributed $111,000 to the growth in proprietary product
revenues as compared to 1995. The increase in specialty chemical sales was
primarily attributable to an increase in the number of

94
<PAGE>

products offered by Farchan and the inclusion of only eleven months of results
in 1995. Partially offsetting this increase was a significant reduction in
sales in the fourth quarter of 1996 as a result of the fire.

Distribution revenues increased $3.4 million, or 15.0%, during the year
ended December 31, 1997 as compared to 1996. In 1996, distribution revenues
increased $1.4 million, or 6.3%, as compared to 1995. These increases were
primarily attributable to continued growth of Consep's California-based
subsidiaries as well as to favorable weather conditions in the Central Valley
of California, Consep's principal distribution market.

Gross Margin. The consolidated gross margin for Consep remained at 24.0% in
1997 compared to 24.0% in 1996. In 1996 the consolidated gross margin
decreased to 24.0% from the 25.1% gross margin in 1995. The decrease in gross
margin in 1996 was primarily attributable to lower gross margins on Consep's
commercial agriculture products.

Proprietary gross margins increased to 36.0% in 1997 from 35.8% in 1996. The
gross margin percentage for Consep's commercial agriculture products increased
to 28.2% in 1997 from 27.9% in 1996. This increase in margin percentage was
primarily attributable to differences in product sales mix and increases in
the overall sales and production volumes allowing manufacturing costs to be
allocated over a larger base of products. Substantially offsetting these
increases were decreases primarily as a result of (i) lower margins on
Consep's CheckMate product to control codling moth due to flexible pricing to
introduce the product into Europe and to recover lost markets in the United
States as a result of previously reported performance problems encountered in
1996, (ii) higher pheromone costs as a result of the fire that destroyed the
Farchan facility and (iii) additional manufacturing costs in the first quarter
primarily associated with the late arrival of production equipment, overtime
incurred to meet unexpected demand and the re-work of inventory carried over
from prior years. The gross margin on commercial agriculture proprietary
products includes an accrual of approximately $100,000 for estimated insurance
recoveries for additional pheromone expenses incurred in 1997 due to the
October 1996 fire that destroyed Consep's specialty chemicals manufacturing
facility. This accrual reduced cost of revenues by approximately $100,000 and
positively impacted the gross margin percentage on commercial agriculture
product sales by 2.2% in 1997. To date, Consep has not reached a final
settlement with its former insurance carrier for the claim. The investigation
by the insurance carrier has been completed, but settlement discussions have
reached an impasse and Consep has filed a lawsuit against its former insurance
carrier, MSI Insurance Company, in the Federal District Court in Portland,
Oregon to recover its claims. Although Consep intends to vigorously pursue
full recovery of its claims in the pending legal proceedings, there can be no
assurance that Consep will prevail in the litigation or that Consep will
recover its claims in full.

Proprietary gross margins decreased to 35.8% in 1996 from 41.6% in 1995. The
gross margin percentage for Consep's commercial agriculture products decreased
to 27.9% in 1996 from 43.7% in 1995. This decrease in margin percentage was
primarily attributable to differences in product sales mix and higher than
expected production and raw material costs incurred in connection with the
introduction of Consep's new warm weather CheckMate CM formulation. In
addition, the CheckMate CM product was redesigned for the 1997 season. As a
result of the new design of the CheckMate CM product, approximately $260,000
of CheckMate CM product was written off in the fourth quarter of 1996. This
inventory write-off lowered the gross margin percentage on commercial
agriculture products by 7.6%.

The gross margins on proprietary consumer product sales for 1997 increased
to 44.6% from 37.5% in 1996. The increase is primarily attributable to the
53.3% gross margin realized on sales of the new Blocker product line. In order
to make the Blocker products more competitive in the marketplace, Consep has
reduced its selling price for the 1998 season by 25% which will negatively
impact 1998 gross margins. Sales of consumer products during 1996 resulted in
a gross margin of 37.5%, the same percentage achieved in 1995.

Sales of specialty chemicals produced a gross margin of 9.1% in 1997 down
from the 49.0% gross margin reported in 1996. The decrease in gross margin
percentage for specialty chemical sales was the direct result of the October
1996 fire that destroyed Farchan's primary manufacturing facility in
Gainesville, Florida, which prevented Farchan from manufacturing higher margin
specialty chemical products during 1997. Proprietary

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<PAGE>

product margins on specialty chemical sales by Farchan in 1996 decreased to
49.0% from 53.0% in 1995. The decrease was primarily the result of differences
in the product sales mix for specialty chemicals.

The gross margins from distribution revenues for 1997 decreased to 18.1%
from 18.6% as compared to 1996. The decrease was primarily attributable to
differences in the product sales mix for the distribution operations. The
distribution operations' margin was 18.6% for 1996, compared to 17.9% in 1995.
During the second quarter of 1996 Consep changed the timing for recognition of
manufacturers' rebates for purchases of bulk chemicals. Rather than
recognizing these rebates when received, typically in the fourth and first
quarters of each year, Consep determined that recognition should occur at the
time the rebates are earned. This change improved distribution margins by 0.8%
in 1996.

Research and Development. Research and development costs decreased $251,000,
or 17.2%, from 1996 to 1997. This decrease was primarily attributable to a 84%
decrease in development costs incurred by Consep's Farchan subsidiary as a
result of the October 1996 fire. In addition, costs associated with the
development of the CheckMate flowable products was reduced as the time
required to develop new flowable processes were reduced. During 1996, research
and development costs increased $395,000, or 37.3%, from the level incurred
during 1995. This increase was primarily attributable to (i) increased costs
associated with the development of new, lower cost synthesis routes to be used
in the production of pheromones by Consep's Farchan subsidiary; (ii) costs
associated with the development of Consep's new dispersed (flowable)
microcapsule products; (iii) increased amortization relating to technology
purchased from Bend Research in 1995; and (iv) additional costs associated
with the development of other new products.

Selling, General and Administrative. In 1997, selling, general and
administrative costs associated with Consep's proprietary product operations
increased 10.5% over 1996. The increase was primarily attributable to selling
and marketing expenses related to Consep's new Blocker line of insect
repellent products and a write down of $200,000 to adjust the carrying value
of the unfinished specialty chemicals facility in Alachua, Florida to its
estimated fair market value. Consep has decided to sell the facility in
Alachua and estimates its fair market value to be less than its carrying
value. See "--Liquidity and Capital Resources." In 1996, selling, general and
administrative costs associated with Consep's proprietary product operations
increased 22.8% from 1995. The principal sources of this increase were (i)
sales and marketing costs associated with both proprietary consumer products
and commercial agriculture products increased due to increased personnel,
increased commissions on higher sales of consumer products and expanded
international operations for commercial agriculture products; (ii) additional
marketing costs related to the introduction of Consep's Blocker line of insect
repellent products; (iii) additional expenses for complimentary product given
to growers in California who encountered difficulties with the CheckMate CM
product described above and (iv) 1996 results included a full twelve months of
Farchan operations while 1995 included only eleven months of operating expense
for that subsidiary acquired in February 1995.

Distribution. During 1997, total operating costs related to Consep's
distribution operations increased 12.7% as compared to 1996. The increase is
primarily attributable to (i) increased selling and delivery expenses as a
result of greater sales volume and (ii) a reduction in bad debt reserves in
1996 that did not occur in 1997. Operating costs related to Consep's
distribution operations remained approximately the same in 1996 as in 1995.
Although selling and administrative costs increased 5.6% in 1996, Consep was
able to offset these increases with a reduction in bad debt reserves as a
result of improved collections.

Other Income and Expense. During 1997, Consep recorded net other income of
$42,000 compared to $35,000 of net other income in 1996. The increase is
primarily attributable to approximately $338,000 in business interruption
coverage reimbursements from Consep's insurance carrier in 1997 relating to
the Farchan fire. Substantially offsetting this increase in net other income
was a decrease relating to greater interest expense in 1997 as compared to
1996 as a result of higher outstanding borrowings during the year. For the
year ended December 31, 1996, Consep recorded net other income of $35,000
compared to approximately $20,000 in 1995. The increase was primarily
attributable to (i) a $227,000 gain relating to the insurance proceeds
exceeding the

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book value of the property destroyed at the Farchan subsidiary and (ii) a
$63,000 estimated reimbursement from the insurance company for the business
interruption coverage in 1996 relating to the Farchan fire. These increases
were substantially offset by (i) increased interest expense; (ii) reduced
interest income; (iii) increased foreign currency exchange losses relating to
Consep's Canadian subsidiary and (iv) the reversal of an accrued contingent
liability and the gain on the sale of property, both of which had a positive
impact on the 1995 results.

Quarterly Results of Operations. The following table sets forth unaudited
consolidated statements of operations data for each of Consep's last eight
quarters. This quarterly financial data has been prepared on the same basis as
the annual financial information presented elsewhere in this Joint Proxy
Statement--Prospectus and, in management's opinion, reflects all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the results of operations for each such quarter. The operating
results for any quarter are not necessarily indicative of the results which
may be expected for any future period.

<TABLE>
<CAPTION>
THREE MONTHS
ENDED THREE MONTHS ENDED THREE MONTHS ENDED
----------------- ------------------------------------ -------------------------------------
JUNE 30, MAR. 31 DEC. 31, SEP. 30, JUNE 30, MAR. 31, DEC. 31, SEP. 30, JUNE 30, MAR. 31,
1998 1998 1997 1997 1997 1997 1996 1996 1996 1996
-------- ------- -------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Proprietary products.... $ 3,778 $3,642 $ 805 $2,770 $ 4,600 $ 4,788 $ 895 $2,226 $ 3,723 $3,575
Distribution............ 9,377 5,981 4,146 6,877 9,180 6,038 3,073 6,142 7,961 5,634
------- ------ ------- ------ ------- ------- ------- ------ ------- ------
Total revenues.......... 13,155 9,623 4,951 9,647 13,780 10,826 3,968 8,368 11,684 9,209
Cost of revenues........ 9,946 6,977 4,442 7,605 10,045 7,695 3,531 6,515 8,744 6,452
------- ------ ------- ------ ------- ------- ------- ------ ------- ------
Gross margin............ 3,209 2,646 509 2,042 3,735 3,131 437 1,853 2,940 2,757
Operating expenses...... 2,812 2,776 2,521 2,719 3,474 2,567 2,787 2,578 2,749 2,391
------- ------ ------- ------ ------- ------- ------- ------ ------- ------
Operating income
(loss)................. 397 (130) (2,012) (677) 261 564 (2,350) (725) 191 366
Other income (expense),
net.................... (147) (60) (33) (14) 50 39 205 (73) (85) (12)
------- ------ ------- ------ ------- ------- ------- ------ ------- ------
Net income (loss)....... $ 250 $ (190) $(2,045) $ (691) $ 311 $ 603 $(2,145) $ (798) $ 106 $ 354
======= ====== ======= ====== ======= ======= ======= ====== ======= ======
</TABLE>

Consep's business is seasonal, with its highest revenues being recognized in
the second quarter of each year and its lowest revenues being recognized in
the fourth quarter of each year. This seasonality coincides with the
commercial growing season in the Northern Hemisphere and, to a lesser extent,
the consumer home, lawn and garden buying season. Consep anticipates this
seasonal profile to continue with a slight shift to third and fourth quarter
revenues as sales to international markets increase. In contrast to revenues,
operating expenses tend to be largely independent of the quarterly selling
cycles. As a result, operating expenses will generally represent a higher
percentage of revenues in the third and fourth quarters as compared to the
first two quarters of the year, and Consep may experience a loss in the third
and fourth quarters of an otherwise profitable year.

In addition, many of Consep's products, and the products sold by its wholly-
owned distributors, are dependent upon the emergence of certain pests in the
crops they are designed to protect. To the extent adverse weather conditions
prevent or otherwise interfere with the growth of certain crops or the
emergence of certain pests, the results of Consep's operations could be
adversely impacted. From time to time, secondary pest infestations may occur
within specific crops or geographic markets causing affected growers to alter
their customary pest control practices. Such events may cause growers to
temporarily increase their use of conventional toxic insecticides and reduce
or suspend the use of biorational products, such as those sold by Consep,
which could have a material adverse effect on Consep's results of operations.

LIQUIDITY AND CAPITAL RESOURCES

Since its inception, Consep has used funds generated from operations, equity
financings and bank borrowings to fund its research and development,
marketing, acquisition of capital equipment, acquisitions of other business
operations and working capital requirements. Through June 30, 1998, Consep has
raised approximately $44.3 million of equity. In addition to equity
financings, Consep has operated under a line of credit from Silicon Valley
Bank (the "Bank") pursuant to an Amended and Restated Loan and Security

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Agreement (the "Loan Agreement") with a maximum borrowing capacity of $7.5
million to support the working capital requirements of both Consep's principal
proprietary product and distribution operations. This line of credit matures
December 10, 1998 and is secured by substantially all of Consep's current
assets. Under the terms of the Loan Agreement, Consep is required to maintain
certain financial ratios and other financial conditions. At June 30, 1998,
Consep was not in compliance with certain covenants under the Loan Agreement
including the tangible net worth, debt to tangible net worth ratio and quick
ratio covenants, but has subsequently obtained the Bank's waiver with respect
to such non-compliance for the quarter ended June 30, 1998. In connection with
the Bank's waiver, the borrowing capacity has been reduced to $5.0 million
from the $7.5 million originally available. Consep does not expect the
decrease in the maximum borrowing capacity to materially affect its financial
condition since Consep does not expect to be able to borrow more than $5.0
million during the remaining term of the Loan Agreement.

At June 30, 1998, Consep had cash, cash equivalents and short-term
investments of approximately $506,000 and working capital of approximately
$8.1 million. Borrowings under the Bank line of credit discussed above were
approximately $4.0 million. Consep believes that cash and cash equivalents at
June 30, 1998, funds generated from operations and funds available from
existing bank lines of credit will be sufficient to fund Consep's operations
through at least 1998. Consep's capital needs may increase depending upon
several factors, including Consep's ability to comply with covenants under the
Loan Agreement for the three months ending September 30, 1998, future
acquisitions, changes to planned research and development activities, expanded
manufacturing and commercialization programs, additional technological,
regulatory and competitive developments and the timing of regulatory approvals
for new products. As a result, Consep may need to raise additional funds.
There can be no assurance that additional financing would be available and, if
available, that the terms would be acceptable to Consep or that the additional
financing could be obtained in a timely manner.

As previously reported, Consep has partially completed the first phase of an
addition to its headquarters and manufacturing facility in Bend, Oregon for
the purpose of producing pheromones and other specialty chemicals. Consep has
re-evaluated its plans for the completion of the addition as well as its plans
to produce significant quantities of pheromones and other specialty chemicals
at the Bend, Oregon facility. At the present time, Consep has indefinitely
postponed any additional capital expenditures for the completion of the
addition as well as any significant production of pheromones or other
specialty chemicals. In addition, after completion of the investigation and
analysis of the cost feasibility for producing pheromones using intermediate
materials purchased from third parties, Consep has determined that it will
continue to purchase substantially all of its pheromones from its current
suppliers in the foreseeable future. However, Consep still believes that, long
term, the greatest cost-savings will be achieved through the production of its
own pheromones.

YEAR 2000 ISSUES

Consep has reviewed its internal electronic information systems with respect
to any potential adverse impact of the upcoming change in the century on the
operation of such systems ("Year 2000 Issues") and believes that it will not
have any material internal Year 2000 Issues. Although Consep intends to
inquire as to whether its key suppliers, customers, creditors, independent
distributors and financial service organizations ("Consep's Business
Constituents") project any Year 2000 Issues with respect to their respective
business operations that may adversely impact Consep, Consep has not yet
commenced such inquiries. As a result, Consep has not determined whether any
of Consep's Business Constituents project any Year 2000 Issues for their
respective business operations that could have a material adverse impact on
Consep's future operating results or financial condition. Consep intends to
commence a program of contacting Consep's Business Constituents over the
remainder of 1998 to inquire as to their respective Year 2000 Issues.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information. The Statement changes the way public
companies report segment information in annual financial statements and also
requires those companies to report selected segment information in interim
financial reports to shareholders. The Statement is effective for financial
statements for fiscal years beginning after December 15, 1997. Consep will
adopt the statement for the year ended December 31, 1998.

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<PAGE>

DESCRIPTION OF VERDANT CAPITAL STOCK

The following description of the Capital Stock of Verdant does not purport
to be complete and is subject, in all respects, to applicable Minnesota law
and to the provisions of the Restated Articles of Incorporation of Verdant.
The following description is qualified by reference to the Restated Articles
of Incorporation of Verdant, which are incorporated by reference as Exhibits
to the Registration Statement of which this Joint Proxy Statement-Prospectus
is a part.

GENERAL

The authorized capital stock of Verdant currently consists of 25,000,000
shares of Verdant Common Stock, $.01 par value, and 5,000,000 shares of
preferred stock, $.01 par value, not designated as to terms and preferences.

COMMON STOCK

There were 16,705,261 shares of Verdant Common Stock issued and outstanding
as of October 15, 1998. In addition, Verdant had reserved a total of 969,747
shares of Verdant Common Stock for issuance upon exercise of options granted
or to be granted under the Verdant Brands, Inc. 1996 Incentive and Stock
Option Plan.

The holders of Verdant Common Stock: (a) have equal ratable rights to
dividends from funds legally available therefor, when, as and if declared by
the Verdant Board; (b) are entitled to share ratably in all of the assets of
Verdant available for distribution to holders of Verdant Common Stock upon
liquidation, dissolution or winding up of the affairs of Verdant; (c) do not
have preemptive, subscription or conversion rights and there are no redemption
or sinking fund provisions applicable thereto; and (d) are entitled to one
vote per share on all matters which shareholders may vote on at all meetings
of shareholders. All shares of Verdant Common Stock now outstanding are fully
paid and nonassessable.

The holders of Verdant Common Stock do not have cumulative voting rights,
which means that the holders of more than 50% of such outstanding shares
voting for the election of directors can elect all of the directors of Verdant
to be elected, if they so choose. In such event, the holders of the remaining
shares will not be able to elect any of Verdant's directors.

The payment by Verdant of dividends, if any, in the future rests within the
discretion of the Verdant Board and will depend, among other things, upon
Verdant's earnings, its capital requirements and its financial condition, as
well as other relevant factors. Due to its anticipated financial needs and
future plans, Verdant does not contemplate paying any dividends upon the
Verdant Common Stock in the foreseeable future.

PREFERRED STOCK

The Verdant Board is authorized, without further shareholder action, to
issue preferred stock in one or more series and to fix the voting rights,
liquidation preferences, dividend rights, repurchase rights, conversion
rights, redemption rights and terms, including sinking fund provisions, and
certain other rights and preferences, of the preferred stock. Although there
is no current intention to do so, the Verdant Board may, without shareholder
approval, issue shares of a class or series of preferred stock with voting and
conversion rights which could adversely affect the voting power of the holders
of Verdant Common Stock and may have the effect of delaying, deferring or
preventing a change in control of Verdant.

MINNESOTA BUSINESS CORPORATION ACT

Section 302A.671 of the Minnesota Statutes applies, with certain exceptions,
to any acquisition of voting stock of Verdant (from a person other than
Verdant, and other than in connection with certain mergers and

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<PAGE>

exchanges to which Verdant is a party) resulting in the beneficial ownership
of 20% or more of the voting stock then outstanding. Section 302A.671 requires
approval of any such acquisitions by a majority vote of the shareholders of
Verdant prior to its consummation. In general, shares acquired in the absence
of such approval are denied voting rights and are redeemable at their then
fair market value by Verdant within 30 days after the acquiring person has
failed to give a timely information statement to Verdant or the date the
shareholders voted not to grant voting rights to the acquiring person's
shares.

Section 302A.673 of the Minnesota Statutes generally prohibits any business
combination by Verdant, or any subsidiary of Verdant, with any shareholder
which purchases 10% or more of Verdant's voting shares (an "interested
shareholder") within four years following such interested shareholder's share
acquisition date, unless the business combination is approved by a committee
of all of the disinterested members of the Verdant Board before the interested
shareholder's share acquisition date.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar with respect to Verdant Common Stock is
Norwest Bank Minnesota, National Association.

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<PAGE>

COMPARISON OF SHAREHOLDER RIGHTS

The rights of the shareholders of Consep are governed by the Minnesota
Business Corporation Act (the "MBCA"), the Articles of Incorporation of
Verdant (the "Verdant Articles") and the Bylaws of Verdant (the "Verdant
Bylaws"). The rights of Consep shareholders are governed by the Oregon
Business Corporation Act (the "OBCA"), the Articles of Incorporation of Consep
(the "Consep Articles") and the Bylaws of Consep (the "Consep Bylaws"). The
following is a summary of certain material differences between the rights of
shareholders of Verdant and the rights of shareholders of Consep, as contained
in provisions of the MBCA and the OBCA, the Verdant Articles and the Verdant
Bylaws, and the Consep Articles and the Consep Bylaws. It does not purport to
be a complete statement of the rights of Verdant shareholders as compared with
the rights of Consep shareholders, and the identification of certain specific
differences is not meant to indicate that other equally or more significant
differences to not exist.

NUMBER OF DIRECTORS, VACANCIES AND CLASSIFICATION OF BOARD

Under the MBCA, the minimum number of directors is one. The actual number of
directors may be fixed by the articles of incorporation or bylaws, and the
number of directors may be increased or decreased by the shareholders or the
board as permitted by the articles of incorporation or bylaws. The Verdant
Bylaws provide that the number of directors can be increased or decreased by
resolution of the shareholders or, to the extent permitted by law, the Board
of Directors.

The MBCA states that, unless the articles of incorporation or bylaws provide
otherwise, vacancies resulting from the death, resignation, removal or
disqualification of a director may be filled by the affirmative vote of a
majority of the remaining directors, even though less than a quorum, and
vacancies resulting from a newly-created directorship may be filled by the
affirmative vote of a majority of the directors serving at the time of the
increase. The shareholders may elect a new director to fill a vacancy that is
created by the removal of a director by the shareholders. The Verdant Bylaws
provide that vacancies in the Board of Directors occurring by reason of death,
resignation, removal or disqualification will be filled for the unexpired term
by a majority of the remaining members of the Directors of the Board.

The MBCA permits, but does not require, a classified board of directors,
with the terms of any such classes to be provided for in the articles of
incorporation or bylaws. Neither the Verdant Articles nor the Verdant Bylaws
provide for the classification of the Board.

Under the OBCA, the number of directors is specified or fixed in accordance
with the articles of incorporation or bylaws. The Consep Articles provide that
the number of directors shall not be less than six nor more than twelve, with
the exact number to be fixed by the Board of Directors.

Vacancies on the Consep Board, however occurring, may be filled by the
shareholders or the Board of Directors (even if the remaining directors
constitute fewer than a quorum). A director elected to fill a vacancy in the
Board of Directors is duly elected until the next shareholders' meeting at
which directors are elected.

The OBCA allows, but does not require, the classification of the board into
classes provided that the articles of incorporation or bylaws provide for at
least six directors. The board may be divided into two or three classes, with
each class to be a nearly equal in number as possible. The Consep Bylaws
provide for the division of Board of Directors into three classes.

REMOVAL OF DIRECTORS

Under the MBCA, the shareholders may remove one or more director with or
without cause unless the articles of incorporation provide that directors may
be removed only for cause. The Verdant Bylaws permit any or all directors to
be removed at any time, with or without cause, by a majority vote of the
shareholders entitled to vote at an election of directors.

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<PAGE>

The OBCA also permits shareholders to remove one or more director with or
without cause unless the articles of incorporation provide that directors may
be removed only for cause. Shareholders may remove directors only at a meeting
called for that purpose. The Consep Articles provide that all or any number of
directors may be removed only for cause, at a meeting of shareholders called
expressly for that purpose, and by at least 75% of the votes entitled to be
cast for the election of directors. The Consep Articles also provide that at
any meeting of shareholders at which directors are removed, a majority vote
may fill the vacancy created by such removal.

CUMULATIVE VOTING

The MBCA provides for cumulative voting by shareholders unless the articles
of incorporation provide otherwise. The Verdant Articles expressly opt out of
cumulative voting.

The OBCA provides that the articles of incorporation may allow cumulative
voting by shareholders. The Consep Articles do not provide for cumulative
voting.

SPECIAL MEETINGS OF SHAREHOLDERS

The Verdant Bylaws provide that a special meeting can be called for any
purpose at any time by the President, Treasurer, any two directors or a
shareholder or shareholders holding 10% or more of the shares entitled to vote
at the meeting. Under the MBCA, a special meeting for the purpose of any
business combination must be called by 25% or more of the voting power.

The Consep Bylaws provide that special meetings of shareholders may be
called by the President or by the Board of Directors, and shall be called by
the President at the request of the holders of not less than 10% of all the
outstanding shares of the corporation entitled to vote at the meeting.

QUORUMS FOR SHAREHOLDER MEETINGS

Under the MBCA, the holders of majority of the voting power constitutes a
quorum unless the articles of incorporation or the bylaws provide otherwise.
The Verdant Bylaws provide that the holders of a majority of the shares
entitled to vote constitute a quorum for the transaction of business at any
regular or special meeting.

The OBCA provides that holders of a majority of the voting power constitute
a quorum, although the articles of incorporation may provide for a lesser or
greater quorum requirement. However, in no event may a quorum consist of less
than one-third of the votes entitled to be cast on any matter by the
shareholders. Any amendment to the articles of incorporation that changes the
quorum or voting requirements must meet the quorum requirement and be adopted
by the vote of the shareholders required to take such action immediately prior
to the change. The Consep Bylaws provide that a majority of the votes entitled
to be cast on the matter by the voting group constitutes a quorum of that
voting group for action on that matter.

ACTION BY WRITTEN CONSENT OF SHAREHOLDERS

Under the MBCA, any action required or permitted to be taken in a
shareholder meeting may be taken without a meeting by a written action signed
by all of the shareholders. The Verdant Articles provide that any action that
may be taken at a meeting of shareholders may be taken without a meeting if
done in writing and signed by all of the shareholders entitled to vote on that
action.

Both the OBCA and the Consep bylaws provide that actions required or
permitted to be taken at a shareholder's meeting may be taken by all the
shareholders entitled to vote on such actions if the action is evidenced by
one or more written consents describing the actions taken, signed by all of
the shareholders entitled to vote on such action and delivered to the
corporation for inclusion in the minutes or filing with the corporate records.
Action taken in this manner are effective when the shareholders signs the
consent, unless the consent specifies otherwise.

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AMENDMENTS TO ARTICLES OF INCORPORATION

Under the MBCA, the articles of incorporation may be amended only by the
shareholders, subject to limited exceptions. The MBCA also entitles holders of
shares of a class or series to vote as a class or series on any amendment that
would change the number of authorized shares of such class or series, change
or adversely affect the rights and preferences of such class or series, create
a new class or series of shares with rights and preferences prior and superior
to such class or series, or increase the rights and preferences of any class
or series with rights and preferences prior and superior to such class or
series. The Verdant Articles do not provide specific provisions on amendments
to the of Articles of Incorporation.

The OBCA authorizes a corporation's board of directors to adopt certain
limited amendments to the corporation's Articles of Incorporation without
shareholder action, including, but not limited to, deleting the names and
addresses of the initial directors or the initial registered agent. The board
of directors may propose other amendments to the shareholders for approval.
Under the OBCA, unless Oregon law or the corporation's Articles of
Incorporation require a greater vote, an amendment to the Articles of
Incorporation requiring shareholder approval is approved if, upon approval by
the board of directors and referral to the shareholders, a quorum exists and
the votes cast favoring the amendment exceed the votes cast opposing the
amendment, unless the amendment would create dissenters' rights, in which case
a majority of the votes entitled to be cast is required for approval.
Furthermore, certain amendments to the Articles of Incorporation that
particularly affect one class of shares, such as amendments that change the
rights, preferences, privileges or restrictions of that class, must be
approved by the holders of a majority of the outstanding shares of that class.
The Consep Articles do not contain specific provisions regarding amendments to
the Articles of Incorporation.

AMENDMENTS TO BYLAWS

The MBCA states that the bylaws may be adopted or amended by the board of
directors, unless the power is reserved exclusively for shareholders in the
articles of incorporation, and subject to certain instances in which
shareholders approval is required. After initial bylaws are adopted, the board
may not, without shareholder approval, adopt, amend or repeal a bylaw fixing a
quorum for meetings of shareholders, prescribing procedures for removing
directors or filling vacancies in the board, or fixing the number of directors
or their classifications, qualifications or terms of office except that the
board may adopt or amend a bylaw to increase the number of directors. The MBCA
also allows holders of three percent or more of the voting power to call for
the adoption, amendment or repeal of a bylaw. The Verdant Bylaws provide for
the amendment and repeal of the Bylaws by a majority vote of the Board of
Directors, subject to the statutory power of the shareholders to change or
repeal such Bylaws by a majority vote.

Under the OBCA, the board of directors may amend or repeal the bylaws unless
either the articles of incorporation reserve the power exclusively to the
shareholders, or the shareholders in amending a particular bylaw provide
expressively that the board of directors may not amend that bylaw. The Consep
Articles do not contain specific provisions on the amendment of the Bylaws.
The Consep Bylaws grant the board of directors the authority to alter, amend
or repeal, and adopt new Bylaws, subject to repeal or change by action of the
shareholders.

INDEMNIFICATION

The MBCA requires a corporation to indemnify persons acting within their
official capacity against judgments, penalties, fines, excise taxes,
settlements and reasonable expenses incurred in the proceeding. The articles
or the bylaws may prohibit indemnification or impose conditions on
indemnification, provided the prohibition or conditions apply equally to all
persons or to all persons within a given class. The Verdant Bylaws provide for
indemnification in accordance with the MBCA.

The OBCA provides that a corporation may indemnify directors, officers or
others against liability if the conduct of the individual was in good faith,
the individual reasonably believed that the conduct was not opposed

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to the best interest of the corporation and, in the case of a criminal
proceeding, the individual did not have a reasonable cause to believe the
conduct was unlawful. The Consep Articles provide for indemnification to the
fullest extent allowed by the OBCA.

PREEMPTIVE RIGHTS

Both the MBCA and the OBCA provide that shareholders have preemptive rights
to subscribe for securities of the corporation, unless such rights are denied
or limited in the articles of incorporation. Both the Verdant Articles and the
Consep Articles deny such preemptive rights.

MERGERS, CONSOLIDATIONS AND OTHER BUSINESS COMBINATIONS

The MBCA requires that, unless such rights are denied or limited in the
articles of incorporation, the disinterested shareholders must approve any
"control share acquisition" of stock of an "issuing public corporation" if an
acquirer exceeds specified levels of ownership (20%, 33 1/3% and 50%) of the
stock of the target corporation. This provision essentially requires a proxy
contest to approve such share acquisitions and delays the acquirer's purchase
up to 55 days while a special shareholders' meeting is held to vote on the
acquisition. The definition of "control share acquisition" excludes cash
tender offers for all outstanding shares if the offer has been approved in
advance by the board of directors of the target corporation and acquisitions
by employee benefit plans. The Verdant Articles expressly reject the
application of the control share acquisition provisions of the MBCA.

The MBCA also restricts transactions with an "interested shareholder"
acquiring 10% or more of the shares of a publicly-held "issuing public
corporation" unless the share acquisition or the transaction has been approved
by the corporation's board of directors prior to the acquisition of the 10%
interest. An "issuing public corporation" is a corporation which has at least
50 shareholders. For four years after the 10% threshold is exceeded (absent
prior board approval), the corporation cannot have a merger, sale of
substantial assets, loan, substantial issuance of stock, plan of liquidation
or reincorporation involving the interested stockholder or its affiliates. The
Verdant Articles expressly reject the application such business combination
provisions of the MBCA.

The Oregon Business Combination Statute contains provisions regulating a
broad range of business combinations, such as a mergers or consolidations,
between a "resident domestic corporation" and "interested shareholders"
(defined as any owner of 15% or more of the corporation's stock), or an
affiliate or associate of the interested shareholder, for three years after
the date on which such shareholder became an interested shareholder. These
provisions apply unless the acquisition that caused the person to become an
interested shareholder, or the business combination, was approved in advance
by the corporation's board of directors, the business combination was approved
by the board of directors and authorized at a meeting of shareholders by at
least two-thirds of the outstanding voting stock not owned by the interested
shareholder or, upon consummation of the transaction which resulted in the
shareholder becoming an interested shareholder, the interested shareholder
owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced (excluding certain shares). The Consep Articles
do not address this statutory provision.

The provisions of the Oregon Control Share Act effectively deny voting
rights to shares of an Oregon corporation acquired in "control share
acquisitions" unless a resolution granting such voting rights is approved at a
meeting of shareholders by a majority vote of all outstanding shares entitled
to vote at such meeting by class if required by the terms of such shares, and
excluding all interested shares. A control share acquisition is one in which a
purchasing shareholder acquires more than 20%, 33 1/3% and 50%, under various
circumstances, of the voting power of the stock of an "issuing public
corporation." An "issuing public corporation" is an Oregon corporation with
one hundred or more shareholders, its principal place of business, principal
office or substantial assets in Oregon, and either more than 10% of its
shareholders reside in Oregon, more than 10% of its shares are owned by Oregon
residents, or 10,000 shareholders reside in Oregon. The OBCA permits a
corporation to opt out of the application of the Oregon Control Share Act by
appropriately amending its articles of incorporation or bylaws. The Consep
Articles do not contain specific provisions regarding the control share act.

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TRANSACTIONS WITH RELATED PARTY

Under the MBCA, a contract or other transaction between a corporation and
its director(s) is not void or voidable if (1) the contract or transaction was
fair and reasonable as to the corporation at the time it was authorized,
approved or ratified; (2) the material facts as to the director's interest are
fully disclosed to the shareholders and the contract is approved in good faith
by the holder of two-thirds of the voting power of the shares other than the
interested director(s), or the unanimous affirmative vote of the holders of
all outstanding shares; (3) the material facts as to the transaction and the
director's interest are fully disclosed to the board, or committee, excluding
the interested director authorizes, approves, or ratifies the transaction in
good faith. Neither the Verdant Bylaws nor the Verdant Articles provide
specific regulations regarding transactions with a related party.

Under the OBCA, a transaction with a related party is not voidable solely
because of a director's interest in the transaction, provided the material
facts of the transaction and the director's interest were disclosed and known
to the board of directors, the material facts of the transaction and the
interest of directors are known and disclosed to shareholders, who authorized,
approved and ratified the transaction, and the transaction was fair to the
corporation. A conflict of interest transaction is authorized if it receives a
majority vote of the directors on the board of directors who have no direct or
indirect interest in the transaction. The Consep Bylaws provide that a
transaction in which a director of the corporation has an interest is valid if
the material facts of the transaction and the director's interest are
disclosed to the Board of Directors or an authorized committee thereof, and
the Board of Directors or the shareholders authorize, approve, or ratify the
transaction by a vote sufficient for that purposes excluding votes of the
directors who has a interest in the transaction.

SHAREHOLDERS' DISSENTERS' RIGHTS

Under the MBCA, shareholders may dissent in the event of any of the
following actions: (1) an amendment of the articles of incorporation that
materially and adversely affects the rights and preferences of the shares of
the dissenting shareholder; (2) a sale or transfer of all or substantially all
of the assets of the corporation; (3) a plan of merger to which the
corporation is a party; (4) a plan of exchange of shares to which the
corporation is a party; and (5) any other corporation action with respect to
which the corporation's articles of incorporation or bylaws give dissenting
shareholders the right to obtain payment for their shares. Neither the Verdant
Articles nor the Verdant Bylaws contain additional provisions concerning
dissenter's rights.

Under the OBCA, shareholders are entitled to dissent in certain limited
situations. No dissenter's rights are available to holders of shares that have
been registered on a national securities exchange or quoted on the National
Association of Securities Dealers, Inc. Automated Quotation System-National
Market System on the record date for the meeting of shareholders at which the
corporate action giving rise to the dissenters' rights is to be approved.
Neither the Consep Articles nor the Consep Bylaws contain additional
provisions for dissenters' rights.

105
<PAGE>

PROPOSAL TO APPROVE AMENDMENT TO VERDANT
RESTATED ARTICLES OF INCORPORATION

The Verdant Board of Directors has proposed that the Articles be amended in
accordance with the MBCA to increase the number of authorized shares of
Verdant Common Stock from 25,000,000 to 50,000,000 (the "Charter Amendment").
The principal purpose and effect of the Charter Amendment is to authorize
additional shares of capital stock to create a sufficient number of shares of
Verdant Common Stock for issuance to Consep Shareholders in the Merger and to
authorize additional shares of Verdant Common Stock that may be issued upon
the approval of the Verdant Board without shareholder approval to accommodate
further issuances under employee benefit plans, for future equity financings,
if any, and for use in connection with other acquisitions, if any. The
approval of the Merger Agreement is contingent upon the approval of the
Charter Amendment. The Verdant Board recommends that Verdant Shareholders vote
"FOR" the Charter Amendment

As of the Verdant Record Date, there were 16,705,261 shares of Verdant
Common Stock outstanding and an additional 1,551,851 shares of Verdant Common
Stock were reserved for issuance. This leaves Verdant with 6,742,888
authorized but unissued, unreserved and uncommitted shares of Verdant Common
Stock available for issuance. After giving effect to the Merger and the
Charter Amendment, approximately 28,409,181 shares of Verdant Common Stock
will be outstanding or reserved for issuance. Accordingly, Verdant will have
approximately 21,590,819 shares of Verdant Common Stock available for issuance
after the Merger. As of the Verdant Record Date, there were no preferred
shares of Verdant outstanding and no preferred shares of Verdant reserved for
issuance. Verdant had 5,000,000 authorized but unissued, unreserved and
uncommitted preferred shares available for issuance at the Verdant Record
Date.

The additional shares of Verdant Common Stock for which authorization is
sought would be a part of the existing class of Verdant Common Stock and, if
and when issued, would have the same rights and privileges as the shares of
Verdant Common Stock presently outstanding. Such additional shares would not
(and the shares of Verdant Common Stock presently outstanding do not) entitle
holders thereof to preemptive or cumulative voting rights. The increase in
authorized shares will, in addition to providing sufficient capital stock for
issuance in connection with the Merger, provide additional shares for general
corporate purposes, including stock dividends, raising additional capital,
issuances pursuant to employee and shareholder stock plans and possible future
acquisitions. There are, however, no present plans, understandings or
agreements for issuing a material number of additional shares of Verdant
Common Stock from the additional shares of stock proposed to be authorized
pursuant to the Charter Amendment. Approximately 10,152,069 shares of Verdant
Common Stock are expected to be issued in the Merger.

The issuance of shares of Verdant Common Stock, including the additional
shares that would be authorized if the Charter Amendment is adopted, may
dilute the present equity ownership position of current holders of Verdant
Common Stock and may be made without shareholder approval, unless otherwise
required by applicable laws or stock exchange regulation. Under existing
Nasdaq National Market regulations, approval of the holders of a majority of
the shares of Verdant Common Stock would nevertheless be required in
connection with any transaction or series of related transactions that would
result in the original issuance of additional shares of Verdant Common Stock,
other than in a public offering for cash, if (1) the Verdant Common Stock
(including securities convertible into Verdant Common Stock) has, or will have
upon issuance, voting power equal to or in excess of 20% of the voting power
outstanding before the issuance of such Verdant Common Stock, (2) the number
of shares of Verdant Common Stock to be issued is or will be equal to or in
excess of 20% of the number of shares outstanding before the issuance of the
Verdant Common Stock or (3) the issuance would result in a change of control
of Verdant.

The amendment might also have the effect of discouraging an attempt by
another person or entity, through the acquisition of a substantial number of
shares of Verdant Common Stock, to acquire control of Verdant with a view to
consummating a merger, sale of all or any part of Verdant's assets, or a
similar transaction, because the issuance of new shares could be used to
dilute the stock ownership of such person or entity.

106
<PAGE>

OWNERSHIP OF COMMON STOCK

VERDANT COMMON STOCK

The following table sets forth certain information as of July 31, 1998, with
respect to the beneficial ownership of Verdant's Common Stock by all persons
known by Verdant to be the beneficial owners of more than 5% of its
outstanding shares, by all directors, nominees for election as directors, by
the executive officers named in the executive compensation table and by all
officers and directors as a group. Unless noted below, the address of each of
the following shareholders is the same as Verdant.

<TABLE>
<CAPTION>
AMOUNT
AND NATURE
OF BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
- ------------------------------------ ------------- --------
<S> <C> <C>
William J. DeMare........................................ 1,125,000 6.7
14702 Claredon Drive
Tampa, FL 33624
Benjamin F. Law.......................................... 1,125,000 6.7
2755 Arden Rd., N.W.
Atlanta, GA 30327
D. David Bailey.......................................... 1,125,000 6.7
2504 Gardener Court
Tampa, FL 33611
David K. Vansant......................................... 1,125,000 6.7
132 Princeton Drive
Macon, GA 31220
Parsnip River Company.................................... 1,005,388 6.0
4422 IDS Center
80 South 8th Street
Minneapolis, MN 55402
Stanley Goldberg......................................... 366,130 2.2
Robert W. Fischer........................................ 112,001 *
Donald E. Lovness........................................ 35,550 *
Franklin Pass, M.D. ..................................... 25,000 *
Frederick F. Yanni, Jr. ................................. 38,300 *
John F. Hetterick........................................ 35,000 *
Richard Mayo............................................. 25,000 *
Mark G. Eisenschenk...................................... 104,777 *
Scott A. Glatstein....................................... 18,333 *
Officers and directors as a group (1 persons)(1)......... 2,930,041 17.5%
</TABLE>
- --------
* Less than one percent.
(1) Includes for Stanley Goldberg, options to purchase 201,130 shares of
Verdant Common Stock which are exercisable within 60 days; for Robert W.
Fischer, options to purchase 25,000 shares of Verdant Common Stock which
are exercisable within 60 days; for Donald E. Lovness, options to purchase
25,000 shares of Verdant Common Stock which are exercisable within 60
days; for Franklin Pass, M.D., options to purchase 25,000 shares of
Verdant Common Stock which are exercisable within 60 days; for Frederick
F. Yanni, Jr., options to purchase 35,000 shares of Verdant Common Stock
which are exercisable within 60 days; for John F. Hetterick, options to
purchase 35,000 shares of Verdant Common Stock which are exercisable
within 60 days; for Richard Mayo, options to purchase 15,000 shares of
Verdant Common Stock which are exercisable within 60 days; for Mark G.
Eisenschenk, options to purchase 50,000 shares of Verdant Common Stock
which are exercisable within 60 days; for Scott A. Glatstein, options to
purchase 18,333 shares of Verdant Common Stock which are exercisable in 60
days; and for all officers and directors as a group, options to purchase
432,240 shares of Verdant Common Stock which are exercisable within 60
days.

107
<PAGE>

CONSEP COMMON STOCK

The following table sets forth certain information with respect to the
beneficial ownership of Consep Common Stock as of August 1, 1998 by: (i) each
person known by Consep to beneficially own more than 5% of the outstanding
shares of Consep Common Stock, (ii) each of Consep's directors, (iii) each of
Consep's named executive officers, and (iv) all directors and executive
officers as a group. Except as otherwise indicated, Consep believes that each
of the following shareholders has sole voting and investment power with
respect to the shares beneficially owned by such shareholder.

<TABLE>
<CAPTION>
SHARES OF PERCENT OF
COMMON STOCK COMMON
BENEFICIALLY STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) OUTSTANDING
- ------------------------------------ ------------ -----------
<S> <C> <C>
Heartland Advisors, Inc.(2).......................... 1,426,000 14.8%
790 North Milwaukee Street
Milwaukee, WI 53202
J.P. Morgan Investment Corporation(3)................ 702,860 7.3
J.P. Morgan & Co. Incorporated(3).................... 702,860 7.3
60 Wall Street
14th Floor
New York, NY 10260
Nazem & Company III, L.P.(4)......................... 692,470 7.2
645 Madison Avenue
12th Floor
New York, NY 10022
Volker G. Oakey(5)................................... 500,030 5.1
Walter C. Babcock(6)................................. 363,639 3.8
Philip E. Barak(7)................................... 4,000 *
John A. Beaulieu(8).................................. 4,000 *
Gordon D. Barker(9).................................. 2,000 --
Kenneth D. MacKay(10)................................ 4,000 *
Kenneth C. Rymer(11)................................. 56,995 *
Steven R. Hartmeier(12).............................. 57,784 *
All directors and executive officers as a group (8
persons)(13)........................................ 992,448 10.0
</TABLE>
- --------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Commission, and includes voting and investment power with respect to
shares. Shares of Consep Common Stock subject to options or warrants
currently exercisable or exercisable within 60 days after August 1, 1998
are deemed outstanding for computing the percentage ownership of the
person holding such options or warrants, but are not deemed outstanding
for computing the percentage of any other person.
(2) This information as to beneficial ownership is based on a Schedule 13G/A
filed by Heartland Advisors, Inc. with the Securities and Exchange
Commission on January 27, 1998. The Schedule 13G/A states that as of
December 31, 1997, Heartland Advisors, Inc. was the beneficial owner of
1,426,000 shares of Concep Common Stock as to which it had sole voting and
dispositive power.
(3) Represents 702,860 shares beneficially owned by J.P. Morgan Investment
Corporation, which includes 23,167 shares issuable upon the exercise of
immediately exercisable warrants. J.P. Morgan & Co. Incorporated is the
indirect parent corporation of J.P. Morgan Investment Corporation and
therefore also beneficially owns shares owned by J.P. Morgan Investment
Corporation.

108
<PAGE>

(4) Includes 7,667 shares issuable upon the exercise of immediately
exercisable warrants.
(5) Includes 184,079 shares issuable upon exercise of stock options that are
exercisable within 60 days. Also includes 47,049 shares beneficially owned
by Mr. Oakey's wife and children. Mr. Oakey is a director of Bend
Research, Inc. Mr. Oakey disclaims beneficial ownership of the (i) 316,466
shares beneficially owned by Bend Research, Inc. and (ii) the 47,049
shares beneficially owned by Mr. Oakey's wife and children.
(6) Includes 12,250 shares issuable upon the exercise of immediately
exercisable stock options. Also includes 880 shares beneficially owned by
Dr. Babcock's wife. Also includes 316,466 shares beneficially owned by
Bend Research, Inc. Dr. Babcock is President, Chief Executive Officer, a
shareholder and a director of Bend Research, Inc. Dr. Babcock disclaims
beneficial ownership of (i) the 316,466 shares beneficially owned by Bend
Research, Inc. and (ii) the 880 shares beneficially owned by Dr. Babcock's
wife.
(7) Represents 4,000 shares issuable upon exercise of stock options that are
exercisable within 60 days.
(8) Represents 4,000 shares issuable upon exercise of stock options that are
exercisable within 60 days.
(9) Represents 2,000 shares issuable upon exercise of stock options that are
exercisable within 60 days.
(10) Represents 4,000 shares issuable upon exercise of stock options that are
exercisable within 60 days.
(11) Represents 56,995 shares issuable upon exercise of stock options that are
exercisable within 60 days.
(12) Includes 37,784 shares issuable upon exercise of stock options that are
exercisable within 60 days.
(13) Includes 305,108 shares issuable upon exercise of stock options that are
exercisable within 60 days. Also includes shares that Messrs. Oakey and
Babcock, respectively, may be deemed to beneficially own, but as to which
each disclaims beneficial ownership. See notes (5) and (6).

109
<PAGE>

MANAGEMENT OF VERDANT AND CONSEP

MANAGEMENT OF VERDANT

Executive Officers. The following table lists the executive officers of
Verdant as of September 30, 1998:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Stanley Goldberg........ 51 Chairman, Chief Executive Officer and President
(Verdant)
Mark G. Eisenschenk..... 40 Executive Vice President, Chief Financial Officer, Treasurer
(Verdant) and Secretary
Patrick J. McGinnity, 43 Vice President and General Manager--Safer and
Ph.D................... (Verdant) Verdant Products
Michael R. Goblet....... 51 Vice President--Sales
(Verdant)
</TABLE>

See the biographical information regarding Mr. Goldberg under "MANAGEMENT
AND OPERATIONS AFTER THE MERGER--Board of Directors."

Mark G. Eisenschenk joined Verdant in January 1994 as Chief Financial
Officer, Vice President of Finance, Treasurer and Secretary. From 1991 to
1994, Mr. Eisenschenk was the Vice President and Chief Financial Officer of
ECM Publishers, Inc. From 1986 to 1991, Mr. Eisenschenk was Director of
Treasury, Taxation and Accounting of Sinclair and Valentine, formerly a unit
of Allied-Signal, Inc. From 1981 to 1986, he was a certified public accountant
with Arthur Andersen & Co.

Patrick J. McGinnity, Ph.D. joined Verdant in September 1987 as Vice
President--Research and Development. From December 1983 to September 1987, Dr.
McGinnity was Senior Field Research and Development Specialist and Regional
Field Research and Development Manager at PPG Industries, Inc.

Michael R. Goblet joined Verdant in March 1993 as Vice President--Sales.
From 1982 to 1993, he was a regional manager at O.M. Scotts Company.

Summary Compensation Table. The table below shows the compensation awarded
or paid to, or earned by, Verdant's chief executive officer and each of its
most highly compensated executive officers who received salary and bonus of
$100,000 or more (the "named executive officers") during each of the years in
the three-year period ended September 30, 1997.

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------- -------------------------------------
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS OPTIONS COMPENSATION(1)
- --------------------------- ---- -------- ------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Stanley Goldberg,........ 1997 $185,250 -- -- 90,000 $21,584(2)
Chairman, President and 1996 $178,500 $20,000 -- -- $22,227(2)
Chief Executive Officer 1995 $171,133 -- -- 225,000 $20,548(2)
Patrick J. McGinnity,.... 1997 $105,000 -- -- 5,000 --
Vice President and
General Manager 1996 $104,167 -- -- -- --
Safer and Ringer
Products 1995 $ 94,875 -- -- 35,000 --
Michael R. Goblet,....... 1997 $104,375 -- -- 5,000 --
Vice President of Sales 1996 $102,083 $ 1,000 -- -- --
1995 $102,417 -- -- 17,000 --
Mark G. Eisenschenk,..... 1997 $103,542 -- -- 50,000 --
Executive Vice
President, Chief 1996 $ 90,938 $ 7,500 -- -- --
Financial Officer,
Treasurer and Secretary 1995 $ 81,333 $ 4,000 -- 50,000 --
</TABLE>
- --------
(1) Mr. Goldberg held 15,000 shares of restricted stock valued at $27,188 as
of September 30, 1997.
(2) Includes compensation of $7,343 in 1997, $7,087 in 1996 and $7,417 in 1995
relating to the purchase of disability insurance for Mr. Goldberg.

110
<PAGE>

Long-Term Incentive Plan Awards. The following table summarizes the value of
the options held at the end of Fiscal 1997 by the named executive officers of
Verdant.

<TABLE>
<CAPTION>
FISCAL YEAR-END OPTION VALUES
---------------------------------------------------
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS
AT END OF FISCAL 1997 AT END OF FISCAL 1997
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Stanley Goldberg............ 136,190 178,810 $68,095 $89,405
Patrick J. McGinnity........ 59,628 30,372 29,814 10,186
Mark G. Eisenschenk......... 48,000 2,000 24,000 1,000
Michael R. Goblet........... 42,442 11,558 21,221 5,779
</TABLE>

MANAGEMENT OF CONSEP

Executive Officers. The following table lists the executive officers of
Consep as of September 30, 1998:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Volker G. Oakey......... 57 Chairman of the Board of Directors, President, Chief
(Consep) Executive Officer, Chief Financial Officer and Secretary
Kenneth C. "Curt" 46 Vice President, Consumer Products
Rymer.................. (Consep)
Steven R. Hartmeier..... 40 Vice President, Commercial Agriculture Products
(Consep)
</TABLE>

See the biographical information regarding Mr. Oakey under "MANAGEMENT AND
OPERATIONS AFTER THE MERGER--Board of Directors."

Kenneth C. "Curt" Rymer joined Consep in February 1985, as Controller. Mr.
Rymer served as Controller until June 1987, at which time he was named
National Sales Manager of Consumer Products for Consep. In May 1994, Mr. Rymer
was named Vice President, Consumer Products, and became an executive officer
of Consep. Prior to joining Consep, Mr. Rymer served as Controller for Xytec
Corporation from February 1983 to January 1985. Prior to joining Xytec
Corporation, Mr. Rymer held various positions with Dean Witter Reynolds, Moss
Adams, and Peat, Marwick, Mitchell and Company. Mr. Rymer holds a B.S. in
Business from the University of Northern Colorado.

Steven R. Hartmeier was named Vice President, Commercial Agriculture
Products and became an officer of Consep in September 1996. Mr. Hartmeier
served as Consep's Director, Sales and Marketing, Agriculture Products from
July 1994 to September 1996. From July 1991 to July 1994, Mr. Hartmeier held
various positions in Consep's distribution group, Pacoast, Inc., most recently
as Manager of Sales and Marketing. Mr. Hartmeier joined Consep in July 1991.
Prior to joining Consep, Mr. Hartmeier held various sales and marketing
positions with Monsanto Agricultural Company, focusing on both the
agricultural and industrial, turf and ornamental markets. Mr. Hartmeier holds
a B.S. in Plant Science from the University of California, Davis.

111
<PAGE>

Summary of Cash and Certain Other Compensation. The following table provides
information concerning the compensation of Consep's chief executive officer
and each of the other executive officers of Consep (the "named executive
officers") for the fiscal years ended December 31, 1995, 1996 and 1997.

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------- ------------
STOCK
OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS GRANTED
- --------------------------- ------- -------- ------ ------------
<S> <C> <C> <C> <C>
Volker G. Oakey...........................
Chairman, President, Chief Executive 1997 $132,500 -- 57,438
Officer, Chief Financial Officer and 1996 $157,500 -- 25,000
Secretary 1995 $135,000 -- 15,000

Kenneth C. "Curt" Rymer................... 1997 $ 89,250 -- 15,000
Vice President, Consumer Products 1996 $ 89,250 -- 25,000
1995 $ 76,500 5,000 10,333

Steven R. Hartmeier(1).................... 1997 $ 90,000 -- 15,000
Vice President, Commercial Agricultural 1996 $ 81,333 $5,000 35,000
Products 1995 $ -- $ -- --
</TABLE>
- --------
(1) Mr. Hartmeier first became an executive officer in September 1996.

Stock Options. The following table sets forth information concerning options
granted to the named executive officers of Consep during the fiscal year ended
December 31, 1997 under Consep's 1997 Stock Incentive Plan.

<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES OF
PERCENT OF STOCK PRICE
NUMBER OF TOTAL APPRECIATION
SECURITIES OPTIONS FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM(2)
OPTIONS EMPLOYEES PRICE PER EXPIRATION ----------------
NAME GRANTED IN 1997 SHARE(1) DATE 5% 10%
---- ---------- ---------- --------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Volker G. Oakey......... 57,438(3) 25.23% $1.50 12/31/2007 $54,183 $137,312
Kenneth C. "Curt"
Rymer.................. 15,000(3) 6.59 1.50 12/31/2007 14,150 35,859
Steven R. Hartmeier..... 15,000(3) 6.59 1.50 12/31/2007 14,150 35,859
</TABLE>
- --------
(1) Options were granted at an exercise price equal to the fair market value
of Consep Common Stock, as determined by reference to the closing price
reported on the Nasdaq Stock Market on the last trading day prior to the
date of the grant.
(2) The potential realizable value is calculated based on the term of the
option at its time of grant (10 years) and is calculated by assuming that
the stock price on the date of grant appreciates at the indicated annual
rate compounded annually for the entire term of the option and that the
option is exercised and sold on the last day of its term for the
appreciated price. The 5% and 10% assumed rates of appreciation are
derived from the rules of the commission and do not represent Consep's
estimates or projections of the future Consep Common Stock price. There
can be no assurance that the Consep common stock will appreciate at any
particular rate or at all in future years.
(3) Options become exercisable starting March 31, 1998, with one-quarter of
the options becoming exercisable at that time and with an additional one-
quarter of the options becoming exercisable on June 30, 1998, September
30, 1998 and December 31, 1998, respectively.

112
<PAGE>

Fiscal Year End Option Values. The following table sets forth, for each of
the named executive officers of Consep, the number and value of unexercised
options as of December 31, 1997. None of the named executive officers of
Consep acquired any shares upon exercise of options in 1997.

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1997 DECEMBER 31, 1997(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Volker G. Oakey............ 139,000 63,438 $40,000 *
Kenneth C. "Curt" Rymer.... 40,326 27,340 * *
Steven R. Hartmeier........ 25,734 37,400 * *
</TABLE>
- --------
(1) The value of unexercised in-the-money options is based on the difference
between $1.50, which was the closing price of Consep Common Stock on
December 31, 1997, and the applicable exercise price.
* The indicated options were not in-the-money on December 31, 1997, in that
the applicable exercise price is greater than $1.50, which was the closing
price of the Consep Common Stock on December 31, 1997.

LEGAL OPINIONS

The validity of the shares of Verdant Common Stock offered hereby will be
passed upon for Verdant by Dorsey & Whitney LLP, Minneapolis, Minnesota.

The Merger Agreement provides that, as a condition to the obligation of
Consep to consummate the Merger, Consep shall have received the opinion of
Ater Wynne LLP, legal counsel to Consep, substantially to the effect that the
Merger will qualify as a "reorganization" under Section 368(a) of the Code.

EXPERTS

The consolidated financial statements of Verdant (formerly Ringer
Corporation) at September 30, 1997 and 1996 and for each of the years ended
September 30, 1997, 1996 and 1995, respectively, included in this Joint Proxy
Statement-Prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein, and have been included
in reliance upon the report of such firm, given on the authority of said firm
as experts in auditing and accounting.

The consolidated financial statements of Consep as of December 31, 1997 and
1996 and for each of the years in the three-year period ended December 31,
1997 have been included in this Joint Proxy Statement-Prospectus in reliance
upon the report of KPMG Peat Marwick, LLP, independent certified public
accountants, given upon the authority of said firm as experts in auditing and
accounting.

Representatives of Deloitte & Touche LLP are expected to be present at the
Verdant Special Meeting, and such representatives will have the opportunity to
make a statement if they so desire and are expected to be available to respond
to appropriate questions.

Representatives of KPMG Peat Marwick, LLP are expected to be present at the
Consep Special Meeting, and such representatives will have the opportunity to
make a statement if they so desire and are expected to be available to respond
to appropriate questions.

The consolidated financial statements of SRI as of October 3, 1997 and
September 27, 1996 and for each of the two years then ended have been included
herein in reliance upon the report of Smith & Howard, P.C., independent
certified public accountants, given upon the authority of said firm as experts
in auditing and accounting.

The consolidated financial statements of Dexol as of September 30, 1996 and
1995 and for each of the two years then ended have been included herein in
reliance upon the report of Singer Lewak Greenbaum & Goldstein LLP,
independent certified public accountants, given upon the authority of said
firm as experts in auditing and accounting.

113
<PAGE>

SHAREHOLDER PROPOSALS

In order to be eligible for inclusion in Verdant's proxy solicitation
materials for its 1999 annual meeting of shareholders, any shareholder
proposal to be considered at such meeting must be received by Verdant's
Corporate Secretary, at Verdant's main office, 9555 James Avenue South, Suite
200, Bloomington, Minnesota 55431-2543, no later than December 16, 1998. Any
such proposal shall be subject to the requirements of the proxy rules adopted
under the Exchange Act.

OTHER MATTERS

As of the date of this Joint Proxy Statement-Prospectus, the Verdant Board
and the Consep Board know of no matters that will be presented for
consideration at the Verdant Annual Meeting or the Consep Special Meeting
other than as described in this Joint Proxy Statement-Prospectus. If any other
matters shall properly come before either shareholder meeting or any
adjournments or postponements thereof and be voted upon, the enclosed proxies
will be deemed to confer discretionary authority on the individuals named as
proxies therein to vote the shares represented by such proxies as to any such
matters. The persons named as proxies intend to vote or not to vote in
accordance with the recommendation of the respective managements of Verdant
and Consep.

114
<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
VERDANT BRANDS, INC.:
Independent Auditor's Report............................................. F-2
Consolidated Balance Sheets as of September 30, 1996 and 1997............ F-3
Consolidated Statements of Operations--Years Ended September 30, 1995,
1996 and 1997........................................................... F-4
Consolidated Statements of Stockholders' Equity--Years Ended September
30, 1995, 1996 and 1997................................................. F-5
Consolidated Statements of Cash Flows--Years Ended September 30, 1995,
1996 and 1997........................................................... F-6
Notes to Consolidated Financial Statements............................... F-7
Consolidated Balance Sheets (unaudited) at September 30, 1997 and
December 31, 1997....................................................... F-19
Consolidated Statements of Operations (unaudited)--Three Months Ended
December 31, 1996 and 1997.............................................. F-20
Consolidated Statements of Cash Flows (unaudited)--Three Months Ended
December 31, 1996 and 1997.............................................. F-21
Notes to Consolidated Financial Statements (unaudited)--Three Months
Ended December 31, 1996 and 1997........................................ F-22
Consolidated Balance Sheets (unaudited) at December 31, 1997 and June 30,
1998.................................................................... F-25
Consolidated Statements of Operations (unaudited)--Six Months Ended June
30, 1997 and June 30, 1998.............................................. F-26
Consolidated Statements of Cash Flows (unaudited)--Six Months Ended June
30, 1997 and June 30, 1998.............................................. F-27
Notes to Consolidated Financial Statements (unaudited)................... F-28
Independent Auditor's Report (SRI)....................................... F-32
Consolidated Balance Sheets (SRI) at September 27, 1996 and October 3,
1997.................................................................... F-33
Consolidated Statements of Income and Retained Earnings (SRI)--Years
Ended September 27, 1996 and October 31, 1997........................... F-35
Consolidated Statements Cash Flows (SRI)--Years Ended September 27, 1996
and October 3, 1997..................................................... F-36
Notes to Consolidated Financial Statements (SRI)......................... F-38
Report of Independent Certified Public Accountants (Dexol)............... F-45
Balance Sheets (Dexol) at September 30, 1996 and 1995.................... F-46
Statements of Operations (Dexol)--Years ended September 30, 1996 and 1995
........................................................................ F-47
Statements of Shareholder's Equity (Deficit) (Dexol)--Years ended
September 30, 1996 and 1995............................................. F-48
Statements of Cash Flows (Dexol)--Years ended September 30, 1996 and
1995.................................................................... F-49
Notes to Financial Statements (Dexol).................................... F-50
Condensed Balance Sheet (Dexol) (unaudited) as of February 28, 1997...... F-57
Condensed Statement of Operations (Dexol) (unaudited) --Five Months Ended
February 28, 1997....................................................... F-58
Condensed Statement of Cash Flows (Dexol) (unaudited)--Five Months Ended
February 28, 1997....................................................... F-59
Notes to Financial Statements (Dexol) (unaudited)........................ F-60
CONSEP, INC.:
Independent Auditor's Report............................................. F-61
Consolidated Balance Sheets at December 31, 1996 and 1997................ F-62
Consolidated Statements of Operations--Years Ended December 31, 1995,
1996 and 1997........................................................... F-63
Consolidated Statements of Shareholders' Equity--Years Ended December 31,
1995, 1996 and 1997..................................................... F-64
Consolidated Statements of Cash Flows--Years Ended December 31, 1995,
1996 and 1997........................................................... F-65
Notes to Consolidated Financial Statements............................... F-66
Consolidated Balance Sheets at December 31, 1997 and June 30, 1998
(unaudited)............................................................. F-80
Consolidated Statements of Operations--Six Months Ended June 30, 1997 and
1998 (unaudited)........................................................ F-81
Consolidated Statement of Shareholders' Equity--Six Months Ended June 30,
1998 (unaudited)........................................................ F-82
Consolidated Statements of Cash Flows--Six Months Ended June 30, 1997 and
1998 (unaudited)........................................................ F-83
Notes to Interim Consolidated Financial Statements (unaudited)........... F-84
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
Verdant Brands, Inc,
Bloomington, Minnesota

We have audited the accompanying consolidated balance sheets of Verdant
Brands, Inc., formerly Ringer Corporation, and subsidiary (the "Company"), as
of September 30, 1997 and 1996, and the related statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended September 30, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Ringer Corporation and subsidiary as of September 30, 1997 and 1996 and the
results of their operations and their cash flows for each of the three years
in the period ended September 30, 1997 in conformity with generally accepted
accounting principles.

Deloitte & Touche LLP

Minneapolis, Minnesota
December 5, 1997 (September 29, 1998 as to Note 12)

F-2
<PAGE>

VERDANT BRANDS, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
SEPTEMBER 30
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................ $ 3,264,294 $ 3,288,781
Trade accounts receivable, less allowance for
doubtful accounts of $134,000 and $126,000,
respectively.................................... 1,153,271 992,198
Inventories (Note 3)............................. 2,805,661 1,519,692
Prepaid expenses................................. 221,186 133,746
------------ ------------
Total current assets......................... 7,444,412 5,934,417
PROPERTY AND EQUIPMENT, net (Note 4)............... 430,138 238,297
INTANGIBLE ASSETS, at cost, less accumulated
amortization of $2,713,002 and $2,264,349,
respectively (Note 1)............................. 6,653,501 5,297,329
OTHER ASSETS....................................... 87,044
------------ ------------
$ 14,615,095 $ 11,470,043
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................. $ 1,273,570 $ 651,546
Accrued expenses:
Co-op advertising.............................. 280,475 319,691
Other accrued expenses......................... 807,449 559,908
Current portion of long-term debt.............. 23,207
------------ ------------
Total current liabilities.................... 2,384,701 1,531,145
LONG-TERM DEBT (Note 6)............................ 1,458,799
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY (Note 7):
Preferred stock, undesignated, par value $.01 per
share, authorized 5,000,000 shares, no shares
issued and outstanding
Common stock, par value $.01 per share,
authorized 25,000,000 shares, issued and
outstanding 12,181,270 and 10,921,930 shares,
respectively.................................... 121,813 109,219
Additional paid-in capital....................... 33,683,587 32,036,675
Notes receivable from sale of common stock to
officers (Note 10).............................. (262,500)
Accumulated deficit.............................. (22,613,212) (22,067,276)
Cumulative translation adjustment................ (158,093) (139,720)
------------ ------------
10,771,595 9,938,898
------------ ------------
$14,615,095 $ 11,470,043
============ ============
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE>

VERDANT BRANDS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
-------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES.............................. $18,820,625 $14,672,784 $14,193,898
COST OF GOODS SOLD..................... 10,255,353 7,647,293 6,990,175
----------- ----------- -----------
Gross profit....................... 8,565,272 7,025,491 7,203,723
OPERATING EXPENSES:
Distribution and warehousing......... 2,199,586 1,555,897 1,886,770
Sales and marketing.................. 3,813,795 3,332,333 4,810,648
General and administrative........... 1,656,996 1,331,266 1,445,110
Research and development............. 972,360 748,932 981,495
Amortization of intangibles.......... 447,498 402,778 379,358
----------- ----------- -----------
9,090,235 7,371,206 9,503,381
----------- ----------- -----------
Loss before other (expense)
income............................ (524,963) (345,715) (2,299,658)
OTHER (EXPENSE) INCOME:
Interest income...................... 72,247 73,866 83,030
Interest expense..................... (152,729) (68,250) (66,690)
Royalties, net (Note 6).............. 50,885 87,136 106,352
Other income (expense), net.......... 8,624 (2,385) 3,862
Abandoned acquisition expenses (Note
2).................................. (312,771)
(20,973) (222,404) 126,554
----------- ----------- -----------
NET LOSS............................... $ (545,936) $ ( 568,119) $(2,173,104)
=========== =========== ===========
NET LOSS PER WEIGHTED AVERAGE COMMON
SHARE--BASIC AND DILUTED.............. $ (.05) $ (.05) $ (.20)
=========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING--BASIC AND DILUTED........ 11,540,885 10,921,930 10,897,704
=========== =========== ===========
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE>

VERDANT BRANDS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK
------------------- ADDITIONAL RECEIVABLES CUMULATIVE
NUMBER OF PAID-IN FROM SALE ACCUMULATED TRANSLATION
SHARES AMOUNT CAPITAL OF STOCK DEFICIT ADJUSTMENT TOTAL
---------- -------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30,
1994................... 10,786,013 $107,860 $31,835,805 $(19,326,053) $(131,619) $12,485,993
Issuance of common
stock in connection
with the purchase of
Oxygen Plus........... 125,000 1,250 186,250 187,500
Issuance of common
stock upon exercise of
stock options......... 917 9 1,595 1,604
Issuance of common
stock as non-cash
compensation to
officer............... 10,000 100 13,025 13,125
Foreign currency
translation
adjustments........... 5,188 5,188
Net loss............... (2,173,104) (2,173,104)
---------- -------- ----------- --------- ------------ --------- -----------
BALANCE AT SEPTEMBER 30,
1995................... 10,921,930 109,219 32,036,675 (21,499,157) (126,431) 10,520,306
Foreign currency
translation
adjustments........... (13,289) (13,289)
Net loss............... (568,119) (568,119)
---------- -------- ----------- --------- ------------ --------- -----------
BALANCE AT SEPTEMBER 30,
1996................... 10,921,930 109,219 32,036,675 (22,067,276) (139,720) 9,938,898
Issuance of common
stock in connection
with the purchase of
Dexol................. 1,059,340 10,594 1,386,412 1,397,006
Issuance of common
stock upon sale of
stock to officers..... 200,000 2,000 260,500 $(262,500) --
Foreign currency
translation
adjustments........... (18,373) (18,373)
Net loss............... (545,936) (545,936)
---------- -------- ----------- --------- ------------ --------- -----------
BALANCE AT SEPTEMBER 30,
1997................... 12,181,270 $121,813 $33,683,587 $(262,500) $(22,613,212) $(158,093) $10,771,595
========== ======== =========== ========= ============ ========= ===========
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE>

VERDANT BRANDS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (NOTE 10)

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
-----------------------------------
1997 1996 1995
---------- ---------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................. $ (545,936) $ (568,119) $(2,173,104)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization........... 616,079 514,940 519,928
Write-off of intangible assets.......... 76,085 1,312 42,564
Stock issued as compensation for
services............................... 13,125
Income from investment in joint
venture................................ (10,078) (4,356)
(Gain) loss on sale of property and
equipment.............................. 29 (11,449) (5,786)
(Increase) decrease in assets:
Trade accounts receivable.............. 1,605,348 205,861 313,494
Inventories............................ 873,900 502,224 (748,040)
Prepaid expenses....................... (152,426) 3,349 90,174
Increase (decrease) in liabilities:
Accounts payable....................... (2,150,758) (194,464) 331,887
Accrued expenses....................... (195,638) 249,746 (24,724)
---------- ---------- -----------
Net cash provided by (used in)
operating activities................. 116,605 699,044 (1,640,482)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment....... (140,008) (60,681) (101,536)
Purchase of intangible assets............ (42,401) (118,674) (106,288)
Proceeds from sale of property and
equipment............................... 8,889 20,849 24,958
Net cash paid relating to acquisition of
Dexol................................... (82,343)
Net cash paid relating to acquisition of
Oxygen Plus............................. (257,660)
---------- ---------- -----------
Net cash used in investing
activities........................... (255,863) (158,506) (440,526)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash received in Dexol acquisition....... 124,073
Proceeds from issuance of common stock... 1,604
Principal payments on long-term debt..... (12,168) (3,667)
---------- ---------- -----------
Net cash provided by (used in)
financing activities................. 111,905 (2,063)
Effect of exchange rate changes on cash... 2,866 (8,134) (8,175)
---------- ---------- -----------
(Decrease) increase in cash and cash
equivalents.............................. (24,487) 532,404 (2,091,246)
CASH AND CASH EQUIVALENTS:
BEGINNING OF YEAR........................ 3,288,781 2,756,377 4,847,623
---------- ---------- -----------
END OF YEAR.............................. $3,264,294 $3,288,781 $ 2,756,377
========== ========== ===========
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE>

VERDANT BRANDS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995

1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business--The Company develops, manufactures and markets pesticide and
fertilizer products for the retail and commercial lawn, garden and turf
management markets. Products are sold under several nationally recognized
brand names and a variety private labels.

Principles of consolidation--The consolidated financial statements include
the accounts of Verdant Brands, Inc. and Safer, Inc., its wholly owned
subsidiary (the Company). All material intercompany accounts and transactions
have been eliminated.

Revenue recognition--The Company recognizes revenue on the date of shipment
for sales other than "bill and hold" sales. Revenue on infrequent "bill and
hold" sales is recognized at the time that title and risk of ownership passes
to purchaser.

Translation of foreign financial statements--The Company's foreign
operations are translated from functional foreign currency to U.S. dollars.
Assets and liabilities are translated at year end rates of exchange and the
statements of operations are translated at the average rates of exchange for
the applicable reporting years. Gains and losses resulting from translating
foreign currency financial statements are not included in operations but are
accumulated as a separate component of stockholders' equity.

Inventories--Inventories are stated at the lower of cost (first-in, first-
out method) or market.

Property and equipment--Property and equipment are recorded at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets of three to ten years.

Intangible assets and evaluation of potential impairment--Intangible assets
consist primarily of goodwill which represents the purchase price and related
acquisition costs in excess of the fair value of identifiable assets acquired.
Other intangible assets include patents and trademarks. Intangible assets are
amortized on a straight-line basis over estimated lives of five to twenty
years. The Company regularly evaluates its intangible assets for potential
permanent impairment. Such evaluations take into consideration anticipated
future operating results and cash flows on an undiscounted basis. Anticipated
future operating results and cash flows are estimated based on current product
sales trends, expected sales from related products in development, general
market trends and other market and business circumstances.

Concentration of credit risks--The percentage of consolidated net sales in
fiscal 1997 to U.S. retail and commercial markets totaled 87.3% and 2.5%,
respectively. The percentage of consolidated net sales in fiscal 1996 to U.S.
retail and commercial markets totaled 79.3% and 4.4%, respectively. The
percentage of consolidated net sales in fiscal 1995 to U.S. retail and
commercial markets totaled 81.0% and 5.1%, respectively. The remaining
percentage of consolidated net sales in fiscal 1997, 1996 and 1995 of 10.2%,
16.3% and 13.9%, respectively, represent foreign sales, primarily in Canada.
In fiscal 1997, 1996 and 1995, sales to one U.S. retail customer accounted for
12.8%, 15.3% and 14.5%, respectively, of consolidated net sales while sales
during the same periods to one distributor that resells to retailers accounted
for 8.0%, 14.8% and 12.4%, respectively, of consolidated net sales.

Cash and cash equivalents--Cash and cash equivalents include cash on hand
and in banks and money market funds with maturities of three months or less
when acquired.

Fair value of financial instruments--The estimated fair values of financial
instruments approximate their carrying amounts in the consolidated balance
sheets.

F-7
<PAGE>

VERDANT BRANDS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Income taxes--The Company accounts for income taxes as required by Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes." The
Statement requires recognition of deferred assets and liabilities for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax assets
and liabilities are determined based on the differences between the financial
statements and the tax basis of assets and liabilities using enacted tax rates
in effect for the years in which the differences are expected to reverse.

Effective December 15, 1997, the Company adopted Statement on Financial
Standard No. 128, "Earnings Per Share". Earnings or loss per share for prior
year periods have been restated for the adoption of SFAS No. 128. The
following table reflects the calculation of basic and diluted earnings per
share.

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------
1997 1996 1995
---------- ---------- -----------
<S> <C> <C> <C>
Loss Per Share Net income (loss)...... $ (545,936) $ (568,119) $(2,173,104)
---------- ---------- -----------
Weighted average shares............. 11,540,885 10,921,930 10,897,704
---------- ---------- -----------
Loss per share...................... $ (.05) $ (.05) $ (.20)
========== ========== ===========
Loss Per Share--Assuming Dilution
Net income (loss)................... $ (545,936) $ (568,119) $(2,173,104)
---------- ---------- -----------
Weighted average shares............. 11,540,885 10,921,930 10,897,704
Dilutive impact of options and
warrants........................... [*] [*] [*]
Weighted average shares and
potential dilutive shares
outstanding........................ 11,540,885 10,921,930 10,897,704
---------- ---------- -----------
Net loss per share.................. $ (.05) $ (.05) $ (.20)
========== ========== ===========
</TABLE>
- --------
[*] The impact of options and warrants are excluded because their effect
would be antidilutive.

Use of estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Change in estimates--Fiscal 1997 and 1996 includes the reversal of
approximately $227,000 and $198,000, respectively, in estimated co-op
advertising expenses, which were accrued in the previous fiscal year,
resulting from a change in estimate based on actual utilization of co-op
advertising allowances.

2. ACQUISITIONS

Acquisition of the assets of Plant Research Laboratories--On December 1,
1994, the Company issued 125,000 shares of its common stock with a fair market
value of $187,500 at December 1, 1994 and paid cash of $257,660 to acquire
substantially all of the assets of Plant Research Laboratories ("PRL"), a
California based developer and marketer of water soluble fertilizers for the
indoor houseplant and outdoor lawn and garden markets. The acquisition was
accounted for using the purchase method using a combination of cash and the
issuance of common stock. The products, marketed under the Oxygen Plus(R)
brand name, were previously sold by PRL primarily in the western United
States. The historical annual sales of Oxygen Plus were less than one million
dollars. The 1995 pro forma impact on net loss and net loss per share is
immaterial.

F-8
<PAGE>

VERDANT BRANDS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Abandoned Acquisition Expenses--On May 30, 1996, the Company entered into a
letter of intent to acquire all outstanding stock of The Chas. H. Lilly
Company ("Lilly"), a Portland based developer and marketer of lawn and garden
fertilizers, pesticides and packet seeds. On December 12, 1996, the Company
announced that it elected to discontinue efforts to acquire Lilly.
Accordingly, the costs associated with this acquisition attempt, which
amounted to $312,771, have been charged to expense in the accompanying fiscal
1996 Consolidated Statement of Operations and are included in other expense.

Acquisition of the assets of Dexol--In March 1997, the Company completed the
acquisition of substantially all of the assets of Dexol Industries, Inc., a
California based manufacturer and marketer of home and garden pesticides sold
under the Dexol(R) and various private label brand names, for an aggregate
purchase price of $3,012,790 (the "Dexol acquisition"). The purchase price was
comprised of the issuance of 1,059,340 shares of the Company's restricted
common stock valued at $1,397,006, the issuance of a promissory note to Dexol
Industries, Inc. with a principal amount of $1,477,000 bearing simple interest
at an annual rate of prime plus 3/4% and estimated transaction costs of
$138,785 and a performance based earnout of up to $455,000 if certain
contingencies are achieved.

The Dexol acquisition was accounted for under the purchase method of
accounting. Accordingly, the purchase price has been allocated to the assets
acquired and liabilities assumed based on their estimated fair market values
at the date of acquisition. The excess of purchase price over estimated fair
market value of net assets acquired ("goodwill") of approximately $1,915,000
is being amortized on a straight-line basis over twenty years. Since the
acquisition, the Company has operated the acquired business as its Dexol
division and has continued marketing Dexol products. Dexol division operations
are included in the Company's consolidated statements of operations from the
effective date of the acquisition of March 1, 1997.

The following unaudited pro forma condensed statement of operations combines
the results of operations of Verdant Brands, Inc. and Dexol Industries, Inc.
as if the acquisition had occurred on October 1, 1995. The pro forma financial
information is in thousands, except per share data, is provided for
illustrative purposes only, and is not necessarily indicative of future
results of operations of the Company or of the results of operations that
would actually have occurred had the acquisition been in effect during the
periods presented. A balance sheet in not presented because the acquisition
has been reflected in the Company's balance sheet herein.

<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
----------------
1997 1996
------- -------
(UNAUDITED)
<S> <C> <C>
Net sales................................................. $21,793 $27,392
Net (loss)................................................ $(1,128) $(1,480)
======= =======
Net (loss) per share--basic and diluted................... $ (.09) $ (.12)
======= =======
</TABLE>

3. INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30
---------------------
1997 1996
---------- ----------
<S> <C> <C>
Raw materials.......................................... $1,697,454 $ 726,099
Finished goods......................................... 1,108,207 793,593
---------- ----------
$2,805,661 $1,519,692
========== ==========
</TABLE>

F-9
<PAGE>

VERDANT BRANDS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

4. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30
------------------------
1997 1996
----------- -----------
<S> <C> <C>
Office furniture and equipment..................... $ 680,454 $ 791,464
Machinery and equipment............................ 801,974 786,442
Leasehold improvements............................. 45,798 8,091
Transportation equipment........................... 6,400 6,400
----------- -----------
1,534,626 1,592,397
Less accumulated depreciation...................... (1,104,488) (1,354,100)
----------- -----------
$ 430,138 $ 238,297
=========== ===========
</TABLE>

5. LINE OF CREDIT

On May 2, 1997, the Company secured a three-year, $25 million revolving
credit facility from GE Capital Services, which replaced a $5,000,000 bank
line of credit from a previous lender. The facility is intended to meet
seasonal working capital needs of up to approximately $5,000,000 and to
provide financing for future business acquisitions. The credit facility is
secured by substantially all of the assets of the Company and its subsidiary.
Borrowings under the facility are limited to a borrowing base of 85% of
eligible receivables and 50% of eligible inventory, as defined in the credit
agreement. Interest is at an Index Rate (published rate for 30-day dealer-
placed high-graded unsecured commercial paper) plus 3 1/4 percentage points
(9.0% at September 30, 1997). The Company is required to pay a commitment fee
of 3/8% on any unused portion of the line. There are no outstanding borrowings
under the line of credit as of September 30, 1997.

The Company's line of credit contains provisions which require the Company
to maintain certain minimum levels of Borrowing Base availability and tangible
net worth. In addition, there are restrictions on the amount of fixed assets
that may be purchased during a loan year.

6. LONG-TERM DEBT, COMMITMENTS AND CONTINGENCIES

Long-Term Debt--Long-term debt at September 30, 1997 consists of a note
payable to Dexol Industries, Inc. and a capital lease obligation, less current
maturities which are classified as current liabilities. The note payable and
capital lease obligation have carrying values equal to estimated fair values.

The note payable has a principal amount of $1,465,800 at September 30, 1997
and bears simple interest at prime plus 3/4% per annum (9.25% at September 30,
1997). Current maturities total $19,200. The note requires payments of $1,600
per month plus accrued interest with a balloon payment of the remaining
principal and interest in December 2000. Yearly principal maturities under the
note for its term are $19,200, $19,200, 19,200 and $1,408,202 for the fiscal
years of 1998, 1999, 2000 and 2001, respectively.

The capital lease obligation totals $16, 206 at September 30, 1997 and bears
implicit interest at an annual rate of 5.4%. Current maturities total $4,007.
Future yearly principal payments under the capital lease obligation are
$4,007, $4,228, $4,463 and $3,508 for the fiscal years of 1998, 1999, 2000 and
2,001, respectively.

Operating Leases--The Company leases office and warehouse space and various
vehicles and equipment under noncancellable operating leases. In addition to
minimum lease payments, these leases require the Company to pay its
proportionate share of real estate taxes, special assessments and maintenance
costs. The lease on the

F-10
<PAGE>

VERDANT BRANDS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Company's corporate offices expires in September 1999. The lease on the
Company's warehouse facility expires in December 2001. The Company is also
required to carry liability insurance on the premises.

Costs incurred under operating leases are recorded as rent expense and
totaled $344,587, $220,176 and $290,343 for the years ended September 30,
1997, 1996 and 1995, respectively.

Future minimum operating lease payments--The future minimum lease payments
due under non-cancellable operating leases are as follows:

<TABLE>
<S> <C>
Year ending September 30:
1998............................................................. $208,719
1999............................................................. 184,644
2000............................................................. 118,391
2001............................................................. 112,623
2002............................................................. 28,669
Thereafter......................................................... --
--------
Total minimum obligation........................................... $653,046
========
</TABLE>

Royalty agreements--The Company has paid royalties for the use of
technologies licensed under two agreements entered into in connection with the
acquisition of a water soluble fertilizer product line on December 1, 1994.
The licenses calls for royalty payments of from 2% to 5% of the net selling
price of applicable water soluble fertilizers. Payments under the agreements
terminate in 1999 and 2011. Royalty expense incurred under these agreements
totaled $34,411, $18,197 and $23,786 for the years ended September 30, 1997,
1996 and 1995, respectively.

Royalty income of $85,296, $105,333 and $130,138 for the fiscal years ended
September 30, 1997, 1996 and 1995, respectively, was generated by the Company
through licensing pesticide technologies to certain foreign and commercial
pesticide distributors for a royalty fee.

Contingencies

The Company has a Contingency Retention Plan which provides for payment to
certain key employees of the Company, including all of the officers, of a lump
sum termination benefit plus continuation of life insurance, health insurance
and dental benefits for a period of time in the event the employment of such
employees is terminated within two years after a "change of control," as
defined. The amount of the lump sum termination benefit varies from the
equivalent of three months to two years of salary and bonus at the time of
termination.

The period during which health and welfare benefits continue after
termination varies from three months to two years, but is terminated if the
employee obtains other employment with similar benefits. The Contingency
Retention Plan continues in effect unless terminated, prior to a change in
control, by a resolution approved by at least two-thirds of the Board of
Directors.

F-11
<PAGE>

VERDANT BRANDS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

7. STOCKHOLDERS' EQUITY

Preferred stock--The Board of Directors of the Company is authorized to
issue preferred stock or other senior equity securities in one or more series,
and with certain limitations, to determine preferences as to dividends,
liquidation, conversion and redemption.

Stock warrants--As of September 30, 1997, a total of 1,000 shares of common
stock were reserved for currently exercisable outstanding warrants described
below.

<TABLE>
<CAPTION>
WARRANT
EXPIRATION SHARES EXERCISE PRICE
---------- ------- --------------
<S> <C> <C>
September 20, 1998.................................... 1,000 $2.00
</TABLE>

1996 Incentive and Stock Option Plan--The 1996 Incentive and Stock Option
Plan was adopted by the board of directors on November 25, 1996 and approved
by shareholders at the Company's annual shareholder meeting on February 18,
1997. A total of 500,000 shares of the Company's common stock were initially
reserved for issuance pursuant to the exercise of options granted under the
plan.

Under the terms of the 1996 Incentive and Stock Option plan, options to
purchase shares of the Company's common stock are granted at a price not less
than 100% of the fair market value of the stock at the date of grant. Options
have a vesting period of from three to five years and expire ten years from
the date of grant. Options become fully vested upon the occurrence of a change
in control, as defined. The weighted average remaining contractual life of the
outstanding options at September 30, 1997 is 9.1 years. Activity under the
plan is as follows:

<TABLE>
<CAPTION>
AVERAGE
OPTION EXERCISE PRICE
SHARES PER SHARE
------- --------------
<S> <C> <C>
Balance, September 30, 1996.......................... -0-
Granted............................................ 61,600 $1.88
Revalued (*)....................................... (.57)
Canceled........................................... (16,100) 1.31(*)
-------
Balance, September 30, 1997.......................... 45,500 $1.31(*)
=======
Exercisable, September 30, 1997...................... 12,938 $1.31
=======
</TABLE>
- --------
(*) On April 29, 1997, the board of directors approved amendments to all
outstanding stock options to reduce the exercise price of each option to
$1.31 per share. Accordingly, options outstanding on that date which were
previously issued under the 1996 Plan for the purchase of up to 61,600
shares of the Company's common stock were amended to reduce the option
exercise price from $1.88 per share to $1.31 per share.

1986 Employee Incentive Stock Option Plan--The 1986 Employee Incentive Stock
Option Plan terminated according to its terms on September 17, 1996. After
this date no further stock options may be granted under the Plan although
previously granted options remain outstanding and exercisable under the terms
of each option. At September 30, 1997, the Company had reserved a total of
654,843 shares of common stock for issuance upon the exercise of outstanding
options previously granted under the Plan.

F-12
<PAGE>

VERDANT BRANDS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Under the terms of the 1986 Employee Incentive Stock Option plan, options to
purchase shares of the Company's common stock were granted at a price not less
than 100% of the fair market value of the stock at the date of grant. Options
have a vesting period of from three to five years and expire ten years from
the date of grant. The weighted average remaining contractual life of the
outstanding options at September 30, 1997 is 6.5 years. Options become fully
vested upon the occurrence of a change in control, as defined. Activity under
the plan is as follows:

<TABLE>
<CAPTION>
AVERAGE
OPTION EXERCISE PRICE
SHARES PER SHARE
-------- --------------
<S> <C> <C>
Balance, September 30, 1994 (at $1.75 to $3.25
per share)...................................... 488,444 $2.32
Granted........................................ 512,050 1.98
Canceled....................................... (132,247) 2.34
Exercised...................................... (917) 1.75
--------
Balance, September 30, 1995 (at $1.75 to $2.70
per share)...................................... 867,330 2.13
Granted........................................ 28,500 1.58
Canceled....................................... (62,762) 1.98
--------
Balance, September 30, 1996 (at $1.50 to $2.70
per share)...................................... 833,068 2.11
Revalued (*)................................... (.72)
Canceled....................................... (178,225) 2.39
--------
Balance, September 30, 1997 (at $1.31 per
share).......................................... 654,843 $1.31(*)
========
Exercisable, September 30, 1997.................. 409,202 $1.31
========
</TABLE>
- --------
(*) On April 29, 1997, the board of directors approved amendments to all
outstanding stock options to reduce the exercise price of each option to
$1.31 per share. Accordingly, options outstanding on that date which were
previously issued under the 1986 Plan for the purchase of up to 660,201
shares of the Company's common stock were amended to reduce the option
exercise price from an average of $1.88 per share (ranging from $1.50 to
$2.13 per share) to $1.31 per share.

Stock Option Plan for Non-Employee Directors--The Company has reserved
200,000 shares of the Company's common stock for issuance upon the exercise of
stock options granted under the Stock Option Plan for Non-Employee Directors.

F-13
<PAGE>

VERDANT BRANDS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Under provisions of the Plan, non-employee directors are granted, upon
election or appointment as a director of the Company, options for the purchase
of 10,000 shares of the Company's common stock. In addition, non-employee
directors receive, on the first day of each fiscal year while the director
remains in office, options to purchase 5,000 shares of the Company's common
stock. The exercise price of options granted under the Plan is 100% of the
fair market value of the Company's common stock on the date of grant. Options
are immediately exercisable in full and may be exercised within five years of
the date of grant. The weighted average remaining contractual life of the
outstanding options at September 30, 1997 is 2.3 years. Activity under the
plan is as follows:

<TABLE>
<CAPTION>
AVERAGE
OPTION EXERCISE PRICE
SHARES PER SHARE
------- --------------
<S> <C> <C>
Balance, September 30, 1994........................... 55,000 $2.01
Granted............................................. 30,000 2.13
Balance, September 30, 1995........................... 85,000 2.05
Granted............................................. 30,000 2.13
Balance, September 30, 1996........................... 115,000 2.07
Granted............................................. 40,000 1.88
Revalued (*)........................................ (.71)
-------
Balance, September 30, 1997........................... 155,000 $1.31(*)
=======
</TABLE>
- --------
(*) On April 29, 1997, the board of directors approved amendments to all
outstanding stock options to reduce the exercise price of each option to
$1.31 per share. Accordingly, options outstanding on that date which were
previously issued under the Plan for the purchase of up to 155,000 shares
of the Company's common stock were amended to reduce the option exercise
price from an average of $2.03 per share (ranging from $1.56 to $2.13 per
share) to $1.31 per share.

Sale of Common Stock to Officers--In exchange for full-recourse promissory
notes and the cancellation of certain incentive stock options, in April 1997
the company sold, subject to shareholder approval, 200,000 shares of its
unregistered, restricted common stock to two executive officers at a price of
$1.3125 per share. The promissory notes are secured by the stock purchased.
Under certain circumstances, the Company will provide bonuses to the two
executives sufficient to pay the annual debt service requirements of the
promissory notes, which have terms of three and five years. The Company has
recognized compensation expense relative to this matter in the amount of
$39,438 for the fiscal year ended September 30, 1997.

Stock Based Compensation--In fiscal 1997, the Company adopted Statement of
Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-
Based Compensation." As permitted by SFAS 123, the Company has elected to
continue using the "intrinsic value method" of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" for the measurement
and recognition of stock-based transactions with employees. Accordingly, no
compensation costs have been recognized for stock options issued under the
Company's stock option plans because the exercise price of options granted was
equal to the fair value of the Company's common stock on the date of grant. If
compensation cost for Company stock options plans had been determined and
recognized based on the "fair value method" under SFAS 123, the Company's net
loss and net loss per share would have been as follows:

<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Net loss:
As reported......................................... $(545,936) $(568,119)
Pro forma........................................... $(571,433) $(593,619)
Pro forma per share--basic and diluted.............. $ (.05) $ (.05)
</TABLE>

F-14
<PAGE>

VERDANT BRANDS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The fair value of options granted under the Company stock options plans
during fiscal 1997 and 1996 was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions and results:

<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Dividend yield............................................. 0 0
Expected volatility........................................ 41.48% 41.48%
Risk-free interest rate.................................... 6.55% 6.55%
Expected life of options................................... 4 years 4 years
Average fair value per share on date of grant.............. $1.31 $1.84
</TABLE>

8. PROFIT SHARING PLAN

The Company has a defined contribution plan which conforms to IRS provisions
for 401(k) plans. Employees are eligible to participate in the plan providing
they have attained the age of twenty-one and have completed thirty days of
service. Participants may contribute up to 10% of their earnings. The Company
can also make matching contributions, as determined by the Board of Directors.
The Company may also make discretionary profit sharing contributions to the
Plan as determined by the Board of Directors. The Company made employer 401(k)
matching contributions of $44,996, $37,607 and none for the years ended
September 30, 1997, 1996 and 1995, respectively. There were no employer
discretionary profit sharing contributions for the years ended September 30,
1997, 1996 and 1995.

9. INCOME TAXES

The Company accounts for income taxes as required by Statement of Financial
Standards No. 109, "Accounting for Income Taxes". The Statement requires
recognition of deferred assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred tax assets and liabilities are
determined based on the differences between the financial statements and the
tax basis of assets and liabilities using enacted tax rates in effect for the
years in which the differences are expected to reverse. Net deferred tax
assets have been offset by valuation allowances for the years ended September
30, 1997, 1996 and 1995 because it is more likely than not that the tax
benefits, which can not be carried back, could not be realized in future
years.

F-15
<PAGE>

VERDANT BRANDS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Net deferred tax assets at September 30 are comprised of the following:

<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Current:
Prepaid expenses............................... $ (29,000) $ (9,000)
Accrued expenses............................... 184,000 185,000
Reserves for doubtful accounts................. 48,000 50,000
Inventory valuation reserves................... 63,000 55,000
Expenses capitalized to inventory for tax
purposes...................................... 512,000 274,000
Sales returns and allowance reserves........... 26,000 69,000
Less valuation allowance....................... (804,000) (624,000)
----------- -----------
$ -0- $ -0-
=========== ===========
Noncurrent:
Excess of tax over book depreciation........... $ (20,000) $ (11,000)
Packaging design costs......................... 154,000 152,000
U.S. net operating loss carryforwards.......... 8,394,000 8,398,000
Foreign net operating loss carryforwards....... 226,000 394,000
U.S. and foreign tax credit carryforwards...... 490,000 704,000
Less valuation allowances...................... (9,284,000) (9,637,000)
----------- -----------
$ -0- $ -0-
=========== ===========
</TABLE>

At September 30, 1997, the Company has approximately $23,200,000 in combined
U.S. net operating loss carryforwards for federal income tax purposes. These
loss carryforwards expire between 1998 and 2013. Of the total, approximately
$4,100,000 are U.S. net operating loss carryforwards of Safer, Inc., the
Company's wholly owned subsidiary.

The use of the unexpired net operating loss carryforwards of Ringer which
were generated prior to September 30, 1990, totaling approximately $10,200,000
as of September 30, 1997, are limited to $2,025,000 in any one year under
Internal Revenue Code Section 382 because of a significant ownership change
resulting from the Company's initial public offering. The use of net operating
loss carryforwards of Ringer generated after the ownership change are not
limited.

The use of the net operating losses of Safer, Inc. are limited to
approximately $700,000 in any one year under Internal Revenue Code Section 382
because of a significant ownership change resulting from the Company's
acquisition of Safer, Inc. in January 1991.

At September 30, 1997, the Company has approximately $565,000 net operating
loss carryforwards in Canada which expire between 1999 and 2002.

10. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

The Company (paid) and received cash for the following items:

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
-----------------------------
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
Interest paid................................. $(152,727) $(68,106) $(66,690)
Interest received............................. 71,687 69,908 82,064
</TABLE>

F-16
<PAGE>

VERDANT BRANDS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Investing and financing transactions not affecting cash during the years
ended September 30, 1997, 1996 and 1995 are described below:

. In 1997, the Company issued 1,059,340 shares of its common stock and a
promissory note in the amount of $1,477,000 as consideration paid for the
acquisition of substantially all of the assets of Dexol Industries, Inc.
In connection with this issuance of common stock, the Company recorded
$1,397,006 to common stock and additional paid-in capital, which
represented the fair market value of the common stock on the date of
issuance.

. In 1997, the Company received full-recourse secured promissory notes in
an aggregate amount of $262,500 as payment for the sale of common stock
to two executive officers of the Company.

. In 1995, the Company issued 125,000 shares of its common stock as a
portion of the total consideration paid for the acquisition of
substantially all of the assets of Plant Research Laboratories. In
connection with this issuance of common stock, the Company recorded
$187,500 to common stock and additional paid-in capital, which
represented the fair market value of the common stock on the date of
issuance. Additional acquisition costs included $257,660 in cash
consideration and direct acquisition expenses.

. In 1995, the Company issued 10,000 shares of restricted common stock to
an officer in lieu of cash compensation and recorded a $13,125 increase
to compensation expense and to common stock and additional paid-in
capital which was the fair market value of the restricted stock on the
date of issuance.

11. FOREIGN OPERATIONS

International sales activity, consisting of sales outside the United States,
primarily in Canada, accounted for approximately 10%, 16% and 14% of total
sales for the years ended September 30, 1997, 1996 and 1995, respectively. A
reconciliation of fiscal 1997, 1996 and 1995 domestic and foreign activity for
net sales, net income (loss) and identifiable assets is as follows:

<TABLE>
<CAPTION>
DOMESTIC FOREIGN TOTAL
----------- ---------- -----------
<S> <C> <C> <C>
Fiscal 1997:
Net Sales............................ $16,892,897 $1,927,728 $18,820,625
Net Income (Loss).................... (528,136) (17,800) (545,936)
Identifiable Assets.................. $13,805,008 $1,072,587 $14,877,595
<CAPTION>
DOMESTIC FOREIGN TOTAL
----------- ---------- -----------
<S> <C> <C> <C>
Fiscal 1996:
Net Sales............................ $12,274,927 $2,397,857 $14,672,784
Net Income (Loss).................... (743,106) 174,987 (568,119)
Identifiable Assets.................. $10,488,502 $ 981,541 $11,470,043
<CAPTION>
DOMESTIC FOREIGN TOTAL
----------- ---------- -----------
<S> <C> <C> <C>
Fiscal 1995:
Net Sales............................ $12,223,014 $1,970,884 $14,193,898
Net Income (Loss).................... (2,231,595) 58,491 (2,173,104)
Identifiable Assets.................. $10,621,910 $1,376,738 $11,998,648
</TABLE>

F-17
<PAGE>

VERDANT BRANDS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

12. SUBSEQUENT EVENT

On December 8, 1997, the Company completed a merger with Southern Resources,
Inc. ("SRI"), a previously privately-owned Georgia-based holding company, with
approximately $25 million in annual consolidated sales, which owns 100% of the
common stock of SureCo, Inc. ("SureCo"), SRI's operating company, and Peach
County Properties, Inc. ("PCP"), a real estate subsidiary, both of which are
located in Georgia. SureCo manufactures and markets pesticides, which it sells
under a variety of proprietary and private label brand names to commercial and
consumer markets throughout North America. The merger will be accounted for
using the purchase method. The Company issued 4,500,000 shares of the
Company's restricted common stock, valued at $6,679,688, in exchange for all
of the outstanding common stock of SRI, which will be operated as a wholly-
owned subsidiary of the Company.

The following table sets forth unaudited combined net sales, net (loss) and
(loss) per share as if the business combination had been consummated at the
beginning date of the financial statements presented herein. Amounts are in
thousands, except loss per share. The 1997 and 1996 amounts include the pro
forma impact of the Dexol acquisition (Note 2).

<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
----------------
1997 1996
------- -------
<S> <C> <C>
Net sales................................................. $46,760 $53,400
Net (loss)................................................ $(1,895) $(1,549)
======= =======
Net (loss) per share--basic and diluted................... $ (.12) $ (.10)
======= =======
</TABLE>

F-18
<PAGE>

VERDANT BRANDS, INC.

CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1997
------------ -------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................ $ 423,272 $ 3,264,294
Accounts receivable.............................. 4,437,264 1,153,271
Inventories...................................... 8,803,909 2,805,661
Prepaid assets................................... 1,180,250 221,186
------------ ------------
Total current assets........................... 14,844,695 7,444,412
Assets held for sale............................... 2,273,248 --
Property, plant and equipment, net................. 630,846 430,138
Intangible assets, net............................. 13,469,697 6,653,501
Other assets....................................... 204,893 87,044
------------ ------------
Total assets................................... $ 31,423,379 $ 14,615,095
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Bank line of credit.............................. $ 3,024,910 $ --
Accounts payable................................. 7,818,030 1,273,570
Accrued expenses................................. 1,961,898 1,087,924
Current portion of long-term debt................ 1,538,866 23,207
------------ ------------
Total current liabilities...................... 14,343,704 2,384,701
Long-term debt..................................... 3,306,821 1,458,799
Shareholders' Equity:
Preferred stock, par value $.01 per share,
authorized 5,000,000 shares, no shares issued
and outstanding.................................
Common stock, par value $.01 per share,
authorized 25,000,000 shares, issued and
outstanding 16,688,061 and 12,181,270 shares,
respectively.................................... 166,881 121,813
Additional paid-in capital....................... 37,603,682 33,421,087
Accumulated deficit.............................. (23,809,763) (22,613,212)
Cumulative translation adjustment................ (187,946) 158,093)
------------ ------------
Total shareholders' equity..................... 13,772,854 10,771,595
------------ ------------
Total liabilities and shareholders' equity..... $ 31,423,379 $ 14,615,095
============ ============
</TABLE>

See notes to consolidated financial statements.

F-19
<PAGE>

VERDANT BRANDS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
-----------------------
1997 1996
----------- ----------
<S> <C> <C>
NET SALES............................................. $ 4,767,233 $3,480,731
COST OF SALES......................................... 3,130,958 1,706,499
----------- ----------
Gross Profit...................................... 1,636,275 1,774,232
OPERATING EXPENSES:
Distribution........................................ 511,727 387,111
Sales & Marketing................................... 1,032,010 817,539
General & Administration............................ 897,685 325,073
Research & Development.............................. 178,913 124,617
Amortization of intangibles......................... 147,426 93,625
----------- ----------
2,767,761 1,747,965
----------- ----------
INCOME (LOSS) BEFORE OTHER INCOME..................... (1,131,486) 26,267
OTHER INCOME (EXPENSE), NET........................... (65,065) 33,456
----------- ----------
NET INCOME (LOSS)..................................... $(1,196,551) $ 59,723
=========== ==========
Net income (loss) per common share--basic and
diluted.............................................. $ (.09) $ .01
=========== ==========
Shares used in calculating basic and diluted net
income (loss) per share.............................. 13,312,840 10,921,930
=========== ==========
</TABLE>

See notes to consolidated financial statements.

F-20
<PAGE>

VERDANT BRANDS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................... $(1,196,551) $ 59,723
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization...................... 243,071 124,682
Loss on sale of assets............................. 3,819 3,868
(Increase) in assets:
Trade accounts and notes receivable............... (2,120,013) (2,555,381)
Inventories....................................... (707,341) (318,011)
Prepaid expenses.................................. (423,847) (134,736)
Increase (decrease) in liabilities:
Accounts payable.................................. 1,613,200 1,321,280
Accrued expenses.................................. 278,605 (325,576)
----------- -----------
Net cash used in operating activities............ (2,309,057) (1,824,151)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment.................. (259,852) (66,813)
Proceeds from sale of equipment..................... 1,684
Purchase of intangible assets....................... (13,227) (10,493)
Cash paid relating to acquisitions.................. (164,495)
----------- -----------
Net cash used in investing activities............ (437,574) (75,622)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options............. 8,913
Net borrowings on lines of credit................... 12,915
Payments on long-term debt.......................... (101,606)
----------- -----------
Net cash used in investing activities............ (79,778) --
Effect of exchange rate changes on cash............. (14,613) 2,061
----------- -----------
Decrease in cash and cash equivalents................ (2,841,022) (1,897,712)
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD................................. 3,264,294 3,288,781
----------- -----------
END OF PERIOD....................................... $ 423,272 $ 1,391,069
=========== ===========
</TABLE>

See notes to consolidated financial statements.

F-21
<PAGE>

VERDANT BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)

NOTE 1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for the
transition period financial information. They should be read in conjunction
with the annual financial statements included in the Company's Annual Report
on Form 10-KSB for the year ended September 30, 1997. In the opinion of
management, the interim financial statements include all adjustments
(consisting of normal recurring accruals) necessary for a fair presentation of
the results for the interim periods presented. Operating results for the
period of October 1, 1997 through December 31, 1997 are not necessarily
indicative of the operating results to be expected in future periods.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
Earnings (Loss) Per Share--Basic
Net income (loss)............................... $(1,196,551) $ 59,723
----------- -----------
Weighted average shares......................... 13,312,840 10,921,930
----------- -----------
Net income (loss) per share..................... $ (.09) $ .01
=========== ===========
Earnings (Loss) Per Share--Assuming Dilution
Net income (loss)............................... $(1,196,551) $ 59,723
----------- -----------
Weighted average shares......................... 13,312,840 10,921,930
Dilutive impact of options and warrants......... [*] [**]
Weighted average shares and potential dilutive
shares outstanding............................. 13,312,840 10,921,930
----------- -----------
Net income (loss) per share..................... $ (.09) $ .01
=========== ===========
</TABLE>
- --------
[*] The impact of options and warrants are excluded because their effect
would be antidilutive.
[**] The impact of options and warrants are excluded because their exercise
prices exceeded the average market price for the period.

NOTE 2. CHANGE IN FISCAL YEAR

Management announced on February 9, 1998 the decision to change the
Company's fiscal year end from September 30 to December 31. In future
financial reports for reporting periods beginning January 1, 1998 the prior
year financial statements included for comparison will be presented to conform
to the period ends associated with the Company's new fiscal year.

F-22
<PAGE>

VERDANT BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 3. ACQUISITIONS

Merger with Southern Resources, Inc.

On December 8, 1997, the Company completed a merger with Southern Resources,
Inc. ("SRI"), a Georgia based corporation which, through its wholly-owned
subsidiary, SureCo, Inc., manufactures and markets pesticides to the home and
garden and professional pest control markets under the Rigo/Black Leaf(R) and
AllPro(R) brands and under various private label brand names. The Company
acquired all of the outstanding stock of SRI in exchange for 4,500,000 shares
of the Company's unregistered, restricted common stock having an aggregate
valuation of $4,218,750. The Company intends to operate SRI as a stand-alone
subsidiary.

The SRI acquisition was accounted for under the purchase method of
accounting. Accordingly, the purchase price has been allocated to the assets
acquired and liabilities assumed based on their estimated fair market values
at the date of acquisition. The excess of purchase price over the estimated
fair market values of assets acquired and liabilities assumed ("goodwill") was
approximately $2,072,000. The goodwill is being amortized on a straight-line
basis over twenty years. SRI's operations are included in the Company's
consolidated statements of operations from the effective date of the
acquisition which, for accounting purposes, is December 1, 1997. The Company
is in the process of validating fair values of assets acquired and liabilities
assumed. As part of this process, the Company has recorded a preliminary
allocation of the purchase price to the assets acquired and liabilities
assumed based on initial estimates of fair values. Upon completion of this
valuation process, the Company may adjust the preliminary allocation of
purchase price based on final determination of fair values.

Acquisition of the assets of Dexol Industries, Inc.

In March 1997, the Company completed the acquisition of substantially all of
the assets of Dexol Industries, Inc. ("Dexol"), a California based
manufacturer and marketer of home and garden pesticides sold under the
Dexol(R) and various private label brand names, for an aggregate purchase
price of $3,012,790, plus a contingent performance based earnout valued at up
to $455,000, payable in shares of the Company's restricted common stock (the
"Dexol Acquisition"). The purchase price was comprised of the issuance of
1,059,340 shares of the Company's restricted common stock valued at
$1,397,005, the issuance of a promissory note to Dexol with a principal amount
of $1,477,000 bearing simple interest at an annual rate of prime plus 3/4% and
estimated transaction costs of $138,785.

The Dexol Acquisition was accounted for under the purchase method of
accounting. Accordingly, the purchase price has been allocated to the assets
acquired and liabilities assumed based on their estimated fair market values
at the date of acquisition. The excess of purchase price over estimated fair
market value of net assets acquired ("goodwill") of approximately $1,685,000
is being amortized on a straight-line basis over twenty years. Since the
acquisition, the Company has operated the acquired business as its Dexol
division and has continued marketing Dexol products. Dexol division operations
are included in the Company's consolidated statements of operations since the
effective date of the acquisition of March 1, 1997.

NOTE 4. Sales of the Company's products are generally greater during the
period of January 1 through June 30 of each year due to seasonal factors.

NOTE 5. All comparative data reflect application of consistent accounting
principles and contain no prior period adjustments.

F-23
<PAGE>

VERDANT BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 6. Inventory consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1997
------------ -------------
<S> <C> <C>
Raw Materials..................................... $5,148,988 $1,697,454
Finished Goods.................................... 3,654,921 1,108,207
---------- ----------
$8,803,909 $2,805,661
========== ==========
</TABLE>

NOTE 7. LONG-TERM DEBT

<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Term loan...................................................... $ 3,025,241
Notes payable.................................................. 1,805,241
Capital lease obligations...................................... 15,205
Less current portion........................................... (1,538,866)
-----------
$ 3,306,821
===========
</TABLE>

NOTE 8. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid (received) for interest during the period for:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Interest paid.......................................... $ 93,255 $ 718
Interest received...................................... (28,570) (34,359)
</TABLE>

As discussed in Note 3, the Company completed the acquisition of SRI in a
non-cash transaction by issuing 4,500,000 shares of the Company's
unregistered, restricted common stock.

NOTE 9. PRO FORMA FINANCIAL INFORMATION

The following table sets forth unaudited pro forma sales, net loss before
taxes, net loss and loss per share for the Company as if the Verdant, Dexol
and SRI businesses had been combined at the beginning of the periods shown.
This pro forma financial information is provided for illustrative purposes
only. It is not necessarily indicative of actual operating results that would
have occurred had the acquisition been in effect for the periods presented and
is not necessarily indicative of results which may be obtained in the future.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
-----------------------
1997 1996
----------- ----------
<S> <C> <C>
Net Sales.......................................... $ 6,111,102 $8,464,930
Net loss........................................... (3,858,321) (809,643)
Loss per share--basic and diluted.................. $ (0.22) $ (0.05)
</TABLE>

F-24
<PAGE>

VERDANT BRANDS, INC.

CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................ $ 159,115 $ 423,272
Accounts receivable.............................. 14,702,485 4,437,264
Inventories...................................... 11,068,799 8,803,909
Prepaid assets................................... 747,287 1,180,250
------------ ------------
Total current assets........................... 26,677,686 14,844,695
Assets held for sale............................... 2,112,691 2,273,248
Property and equipment (net)....................... 596,240 630,846
Intangible assets (net)............................ 13,199,639 13,469,697
Other assets....................................... 150,967 204,893
------------ ------------
Total assets................................... $ 42,737,223 $ 31,423,379
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Bank line of credit.............................. $ 7,609,641 $ 3,024,910
Accounts payable................................. 10,132,958 7,818,030
Accrued expenses................................. 2,314,785 1,961,898
Current portion of long-term debt................ 301,703 1,538,866
------------ ------------
Total current liabilities...................... 20,359,087 14,343,704
Long-Term Debt..................................... 7,123,003 3,306,821
Shareholders' Equity:
Common Stock, par value $.01 per share,
authorized 25,000,000 shares, issued and
outstanding 16,690,261 and 16,688,061 shares,
respectively.................................... 166,903 166,881
Additional paid-in capital....................... 37,869,047 37,603,682
Receivable from sale of stock.................... (249,375)
Accumulated deficit.............................. (22,295,666) (23,809,763)
Cumulative translation adjustment................ (235,776) (187,946)
------------ ------------
Total shareholders' equity..................... 15,255,133 13,772,854
------------ ------------
Total liabilities and shareholders' equity..... $ 42,737,223 $ 31,423,379
============ ============
</TABLE>

See notes to unaudited consolidated financial statements.

F-25
<PAGE>

VERDANT BRANDS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------
1998 1997
------------ ------------
<S> <C> <C>
NET SALES......................................... $ 31,745,288 $ 12,197,159
COST OF SALES..................................... 20,049,368 6,511,481
------------ ------------
Gross Profit.................................. 11,695,920 5,685,678
OPERATING EXPENSES:
Distribution.................................... 3,049,607 1,314,826
Sales & Marketing............................... 3,526,982 2,414,204
General & Administration........................ 1,927,579 1,111,023
Product Development & Registrations............. 1,091,432 647,551
------------ ------------
9,595,600 5,487,604
------------ ------------
INCOME BEFORE OTHER EXPENSE....................... 2,100,320 198,074
OTHER EXPENSE, NET................................ (586,223) (67,575)
------------ ------------
INCOME BEFORE INCOME TAXES........................ 1,514,097 130,499
INCOME TAXES......................................
NET INCOME........................................ $ 1,514,097 $ 130,499
============ ============
Net income per common share--basic and diluted.... $ .09 $ .01
============ ============
Shares used in calculating basic net income per
share............................................ 16,688,654 11,525,617
============ ============
Shares used in calculating diluted net income per
share............................................ 16,870,346 11,554,577
============ ============
</TABLE>

See notes to unaudited consolidated financial statements.

F-26
<PAGE>

VERDANT BRANDS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
---------------------------
1998 1997
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................... $ 1,514,097 $ 130,499
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization................... 768,071 329,532
Loss on disposal of intangible assets........... 5,055 72,217
Loss on disposal of assets...................... 7,144 1,529
(Increase) decrease in assets:
Trade accounts and notes receivable............ (10,169,598) 1,027,005
Inventories.................................... (2,275,694) 582,808
Prepaid expenses............................... 232,809 (77,166)
Increase (decrease) in liabilities:
Accounts payable............................... 2,552,839 (2,461,549)
Accrued expenses............................... 129,037 527,068
------------- ------------
Net cash used in (provided by) operating
activities................................... (7,236,240) 131,943
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment............... (96,269) (9,535)
Proceeds from sale of equipment.................. 1,265 5,705
Purchase of intangible assets.................... (75,707) (23,112)
------------- ------------
Net cash used in investing activities......... (170,711) (26,942)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from bank line of credit.......... 8,584,731
Cash received in Dexol acquisition............... 124,073
Proceeds from issuance of common stock........... 16,012
Principal payments on long-term debt............. (1,449,791) (6,400)
------------- ------------
Net cash received from financing activities... 7,150,952 117,673
Effect of exchange rate changes on cash.......... (8,158) 505
------------- ------------
Increase (decrease) in cash and cash
equivalents.................................. (264,157) 223,179
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD.............................. 423,272 1,391,069
------------- ------------
END OF PERIOD.................................... $ 159,115 $ 1,614,248
============= ============
</TABLE>

See notes to unaudited consolidated financial statements.

F-27
<PAGE>

VERDANT BRANDS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997

NOTE 1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Verdant
Brands, Inc. (formerly Ringer Corporation) have been prepared in accordance
with generally accepted accounting principles for interim financial
information. They should be read in conjunction with the annual financial
statements included in the Company's Annual Report on Form 10-KSB for the
prior fiscal year ended September 30, 1997 and the Company's Transition Report
on Form 10-QSB for the transition period from October 1, 1997 through December
31, 1997. In the opinion of management, the interim consolidated financial
statements include all adjustments (consisting of normal recurring accruals)
necessary for a fair presentation of the results for the interim periods
presented. Operating results for the six months ended June 30, 1998 are not
necessarily indicative of the operating results to be expected for the fiscal
year ending December 31, 1998. Certain reclassifications were made to prior
year financial statements to be consistent with those classifications used in
the current year. These reclassifications had no effect on shareholders'
equity or net income or loss as previously reported.

Effective December 15, 1997, the Company adopted Statement on Financial
Standard No. 128, "Earnings Per Share". Earnings per share for prior year
periods have been restated for the adoption of SFAS No. 128. The following
table reflects the calculation of basic and diluted earnings per share.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------
1998 1997
----------- -----------
<S> <C> <C>
Earnings Per Share--Basic
Net income....................................... $ 1,514,097 $ 130,499
----------- -----------
Weighted average shares.......................... 16,688,654 11,525,617
----------- -----------
Net income per share............................. $ .09 $ .01
=========== ===========
Earnings Per Share--Assuming Dilution
Net income....................................... $ 1,514,097 $ 130,499
----------- -----------
Weighted average shares.......................... 16,688,654 11,525,617
Dilutive impact of options and warrants.......... 181,692 28,960
----------- -----------
Weighted average shares and potential dilutive
shares outstanding.............................. 16,870,346 11,554,577
----------- -----------
Net income per share............................. $ .09 $ .01
=========== ===========
</TABLE>

NOTE 2. CHANGE IN FISCAL YEAR

In February 1998, management announced its decision to change the Company's
fiscal year end from September 30 to December 31. In connection therewith, the
Company filed a Transition Report on Form 10-QSB for the period from October
1, 1997 through December 31, 1997 to transition to the beginning of its new
fiscal year which began on January 1, 1998. Comparative prior period financial
information has been conformed to the new year end.

F-28
<PAGE>

VERDANT BRANDS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 3. ACQUISITIONS

Merger with Southern Resources, Inc.

On December 8, 1997, a subsidiary of Verdant Brands, Inc. (the "Company")
merged with Southern Resources, Inc. ("SRI") which, on that date, became a
wholly-owned subsidiary of the Company. Prior to the merger, SRI was privately
held. SRI is a Fort Valley, Georgia-based corporation with annual consolidated
sales in 1997 of approximately $25 million, which, through its wholly-owned
subsidiary, SureCo, Inc., manufactures and markets traditional liquid and
granular pesticides. Its products are sold under a variety of proprietary and
private label brand names to commercial and consumer retail markets throughout
North America. Commercial pesticides are sold principally under the AllPro (R)
brand to specialty agricultural, turf ornamental and professional pest control
distributors. Consumer products are sold into the consumer retail market
principally under the Rigo/Black Leaf (R) brand as well as under various
private label store brands. The Company is currently operating SRI as a stand-
alone subsidiary.

The Company acquired all of the outstanding stock of SRI in exchange for
4,500,000 shares of the Company's restricted common stock with an aggregate
valuation of $4,218,750. The SRI acquisition was accounted for using the
purchase method of accounting rather than the pooling-of-interest method as
originally announced. The change in accounting methods was required because of
management's decision to dispose of certain assets and activities of the
combined business entities. Such a disposal precludes the pooling of interest
method of accounting. The Company has not yet finalized its analysis of the
full financial impact associated with its disposal plans.

The SRI purchase price has been allocated to the assets acquired and
liabilities assumed based on their estimated fair market values at the date of
acquisition. The excess of purchase price over the estimated fair market
values of assets acquired and liabilities assumed ("goodwill") totals
approximately $2,072,000. The goodwill is being amortized on a straight-line
basis over twenty years. SRI's operations are included in the Company's
consolidated statements of operations subsequent to the effective date of the
acquisition which, for accounting purposes, is December 1, 1997. The Company
is completing the process of establishing fair values of assets acquired and
liabilities assumed. As part of this process, during the three months ended
March 31, 1998, the Company reallocated $4,950,000 of the purchase price from
goodwill to product registrations and trademarks, which are being amortized
over twenty years. Since the Company has not formally completed the valuation
process, further adjustments to the allocation of purchase price based on a
final determination of fair values may occur.

Acquisition of the assets of Dexol Industries, Inc.

In March 1997, the Company completed the acquisition of substantially all of
the assets of Dexol Industries, Inc. ("Dexol"), a California-based
manufacturer and marketer of home and garden pesticides sold under the
Dexol(R) and various private label brand names, for an aggregate purchase
price of approximately $3,012,790 (the "Dexol Acquisition"). The purchase
price was comprised of the issuance of 1,059,340 shares of the Company's
restricted common stock valued at $1,397,005, the issuance of a promissory
note to Dexol with a principal amount of $1,477,000 bearing simple interest at
an annual rate of prime plus 3/4% and estimated transaction costs of $138,785.

The Dexol Acquisition was accounted for under the purchase method of
accounting. Accordingly, the purchase price has been allocated to the assets
acquired and liabilities assumed based on their estimated fair market values
at the date of acquisition. The excess of purchase price over estimated fair
market value of net assets acquired ("goodwill") of approximately $1,840,000
is being amortized on a straight-line basis over twenty years. Since the
acquisition, the Company has operated the acquired business as its Dexol
division and has continued marketing Dexol products. Dexol division operations
are included in the Company's consolidated statements of operations from the
effective date of the acquisition which, for accounting purposes, is March 1,
1997.

F-29
<PAGE>

VERDANT BRANDS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 4. Sales of the Company's products are greater during the period of
January 1 through June 30 of each year due to seasonal factors.

NOTE 5. All comparative data reflect application of consistent accounting
principles. A total of $195,000 in estimated co-op advertising expense
accruals remaining from 1997 were reversed during the quarter based on actual
co-op claims received.

NOTE 6. Inventory consists of the following:

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
<S> <C> <C>
Raw Materials....................................... $ 7,219,360 $5,148,988
Finished Goods...................................... 3,849,439 3,654,921
----------- ----------
$11,068,799 $8,803,909
=========== ==========
</TABLE>

NOTE 7. LONG-TERM DEBT

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
---------- ------------
<S> <C> <C>
Line of credit, long-term portion.................. $4,000,000
Term loans......................................... 1,587,418 $ 3,025,241
Notes payable...................................... 1,824,451 1,805,241
Capital lease obligations.......................... 12,837 15,205
Less current portion............................... (301,703) (1,538,866)
---------- -----------
$7,123,003 $ 3,306,821
========== ===========
</TABLE>

NOTE 8. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid (received) for interest during the period for:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------
1998 1997
-------- --------
<S> <C> <C>
Interest paid............................................ $554,468 $116,164
Interest received........................................ (6,095) (14,198)
</TABLE>

F-30
<PAGE>

VERDANT BRANDS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 9. PRO FORMA FINANCIAL INFORMATION

The following table sets forth unaudited pro forma sales, net income before
taxes, net income and income per share for the Company as if the Verdant
Brands, Inc., Dexol and SRI businesses had been combined at the beginning of
the three months and six months periods ended June 30, 1997. This pro forma
financial information is provided for illustrative purposes only. It is not
necessarily indicative of actual operating results that would have occurred
had the acquisition been in effect for the periods presented and is not
necessarily indicative of results which may be obtained in the future. The
operations of Dexol and SRI are included in the Company's statements of
operations for the six months ended June 30, 1998, therefore pro forma
information is not applicable for those periods.

<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
1997
--------------
<S> <C>
Net sales..................................................... $29,373,000
Net income.................................................... 801,000
Income per share-basic and diluted............................ $ 0.05
</TABLE>

NOTE 10. ACCOUNTING STANDARD

The Company has adopted Statement of Financial Accounting Standard No. 130,
"Reporting Comprehensive Income," for its fiscal year beginning January 1,
1998. Total comprehensive income for the six month period ended June 30, 1998
was $1,466,267. Components of comprehensive income include net income and
foreign currency translation adjustments.

NOTE 11. SUBSEQUENT EVENT

On September 8, 1998, the Company entered into a merger agreement pursuant
to which it will acquire Consep, Inc by exchanging 0.95 of one share of its
common stock for each outstanding share of common stock of Consep, Inc. The
proposed merger is subject to, among other things, the approval of Consep's
shareholders, the approval of Verdant's shareholders and applicable third-
party consents and approvals. The merger is expected to be completed by the
end of 1998.

* * * *

F-31
<PAGE>

INDEPENDENT AUDITOR'S REPORT

Board of Directors
Southern Resources, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Southern
Resources, Inc. and Subsidiaries as of October 3, 1997 and September 27, 1996,
and the related consolidated statements of income and retained earnings and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statements preparation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Southern
Resources, Inc. and Subsidiaries at October 3, 1997 and September 27, 1996,
and the results of operations and cash flows for the years then ended in
conformity with generally accepted accounting principles.

As discussed in Note 6, the Company is a party to a governmental action and
lawsuit related to contamination discovered on and near the Company's plant
site. Management believes that the contamination arose prior to the purchase
of the plant site by the company from an unaffiliated predecessor corporate
owner. The former owner of the plant site has cooperated with governmental
authorities and initiated remedial activities. Management believes that the
governmental and legal actions should not result in loss to the Company.
Accordingly, no provision for losses related to these actions have been made
in the accompanying consolidated financial statements.

As discussed in Note 9, all of the outstanding common stock of Southern
Resources, Inc. has been exchanged for common stock of a publicly traded
corporation subsequent to October 3, 1997.

Smith & Howard, P.C.

Atlanta, Georgia
November 14, 1997, except for Note 9 as to which the date is December 8, 1997

F-32
<PAGE>

SOUTHERN RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

OCTOBER 3, 1997 AND SEPTEMBER 27, 1996

<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Current Assets
Cash............................................... $ 2,780 $ 119,820
Accounts receivable--trade, less allowance for
doubtful accounts of $15,816 and $12,265 in 1997
and 1996, respectively (Notes 4 and 5)............ 3,726,946 3,327,662
Inventories (Notes 2, 3, 4 and 5).................. 4,800,043 5,059,878
Prepaid expenses................................... 260,067 295,324
Deferred income taxes (Note 7)..................... 64,677 118,184
Prepaid income taxes............................... 19,403 --
Other.............................................. 159,971 99,749
----------- -----------
Total Current Assets............................. 9,033,887 9,020,617
Property and Equipment, at Cost (Notes 3 and 5)
Land............................................... 43,879 43,879
Buildings and improvements......................... 482,428 482,428
Machinery and equipment............................ 2,989,961 2,833,509
----------- -----------
3,516,268 3,359,816
Less accumulated depreciation...................... (1,589,848) (1,242,613)
----------- -----------
1,926,420 2,117,203
Other Assets (Note 3)
Trademarks, less accumulated amortization of
$40,540 and $30,000 in 1997 and 1996,
respectively...................................... 111,952 120,000
Product registrations, less accumulated
amortization of $80,000 and $60,000 in 1997 and
1996, respectively................................ 220,000 240,000
Deferred loan fees, less accumulated amortization
of $151,431 and $75,605 in 1997 and 1996,
respectively...................................... 168,207 237,566
Deferred income taxes (Note 7)..................... 12,646 --
Other.............................................. 160,209 81,985
----------- -----------
686,214 679,551
----------- -----------
$11,633,321 $11,817,371
=========== ===========
</TABLE>

The accompanying notes are an integral part of this financial statement.

F-33
<PAGE>

SOUTHERN RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS--(CONTINUED)

OCTOBER 3, 1997 AND SEPTEMBER 27, 1996

<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable.................................... $ 3,884,607 $ 3,269,190
Accrued expenses and other current liabilities...... 445,161 546,969
Borrowings under lines of credit (Note 4)........... 3,859,355 --
Current portion of long-term debt (Note 5).......... 1,668,243 1,208,084
Due to stockholders (Note 8)........................ 170,892 356,268
Income taxes payable................................ -- 9,539
----------- -----------
10,028,258 5,390,050
Borrowings Under Lines of Credit (Note 4)............. -- 3,917,464
Long-Term Debt, Net of Current Portion (Note 5)....... 1,566,840 1,991,459
Note and Accrued Interest Payable--Stockholder (Note
8)................................................... 327,127 232,372
Deferred Income Taxes (Note 7)........................ -- 165,748
Contingencies (Note 6)
Stockholders' Equity
Common stock--par value $1, authorized 100,000
shares, issued and outstanding 500 shares.......... 500 500
Additional paid-in capital.......................... 500 500
Retained earnings (accumulated deficit)............. (289,904) 119,278
----------- -----------
(288,904) 120,278
----------- -----------
$11,633,321 $11,817,371
=========== ===========
</TABLE>

The accompanying notes are an integral part of this financial statement.

F-34
<PAGE>

SOUTHERN RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS

YEARS ENDED OCTOBER 3, 1997 AND SEPTEMBER 27, 1996

<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Sales............................................... $25,034,085 $20,791,647
Cost of Sales....................................... 20,786,922 17,097,731
----------- -----------
Gross Profit.................................... 4,247,163 3,693,916
Selling, General and Administrative Expenses........ 3,846,877 2,612,536
----------- -----------
Income from Operations.......................... 400,286 1,081,380
Other Income (Expense)
Interest expense.................................. (926,919) (688,607)
Loss on disposal of equipment..................... -- (1,543)
Other............................................. (7,436) 10,522
----------- -----------
(934,355) (679,628)
----------- -----------
Income (Loss) before Income Taxes............... (534,069) 401,752
Provision (Credit) for Income Taxes (Note 7)
Current........................................... -- 12,373
Deferred.......................................... (124,887) 125,538
----------- -----------
(124,887) 137,911
----------- -----------
Net Income (Loss)............................... (409,182) 263,841
Retained Earnings (Accumulated Deficit) at Beginning
of Year............................................ 119,278 (144,563)
----------- -----------
Retained Earnings (Accumulated Deficit) at End of
Year............................................... $ (289,904) $ 119,278
=========== ===========
</TABLE>

The accompanying notes are an integral part of this financial statement.

F-35
<PAGE>

SOUTHERN RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED OCTOBER 3, 1997 AND SEPTEMBER 27, 1996

<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities
Cash received from customers..................... $ 24,584,235 $ 20,663,058
Cash paid to suppliers and employees............. (23,436,561) (18,735,049)
Income taxes (paid) refunded..................... (28,942) 2,077
Interest paid.................................... (854,308) (635,423)
Other income (expense)........................... (7,436) 10,522
------------ ------------
Net Cash Provided by Operating Activities...... 256,988 1,305,185
------------ ------------
Cash Flows from Investing Activities
Cash paid in acquisition of Rigo/Black Leaf...... -- (2,335,000)
Acquisitions of property and equipment........... (156,452) (111,457)
(Increase) decrease in other assets.............. (173,838) (109,072)
------------ ------------
Net Cash Required by Investing Activities...... (330,290) (2,555,529)
------------ ------------
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt......... 649,235 --
Principal payments on long-term debt............. (657,008) (318,603)
Borrowings (repayments) under lines of credit,
net............................................. (58,109) 1,592,605
Increase in note payable--stockholder............ 22,144 56,854
------------ ------------
Net Cash Provided (Required) by Financing
Activities.................................... (43,738) 3,172,928
------------ ------------
Net Increase (Decrease) in Cash.................... (117,040) 80,512
Cash at Beginning of Year.......................... 119,820 39,308
------------ ------------
Cash at End of Year................................ $ 2,780 $ 119,820
============ ============
</TABLE>

The accompanying notes are an integral part of this financial statement.

F-36
<PAGE>

SOUTHERN RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)

YEARS ENDED OCTOBER 3, 1997 AND SEPTEMBER 27, 1996

<TABLE>
<CAPTION>
1997 1996
--------- ----------
<S> <C> <C>
Reconciliation of Net Income (Loss) to Net Cash Pro-
vided By
Operating Activities:
Net Income (Loss)...................................... $(409,182) $ 263,841
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided by
Operating Activities:
Bad debts expense.................................... 50,566 80,161
Depreciation and amortization........................ 583,569 413,884
Interest expense accrued as long-term debt........... 72,611 53,184
Loss on disposal of equipment........................ -- 1,543
Provision (credit) for deferred income taxes......... (124,887) 125,538
Increase in accounts receivable...................... (449,850) (128,589)
Decrease in inventories.............................. 259,835 831,719
Increase in prepaid expenses and other current
assets.............................................. (24,965) (157,708)
(Increase) decrease in prepaid income taxes.......... (19,403) 4,911
Increase (decrease) in accounts payable.............. 615,417 (261,897)
Increase (decrease) in accrued liabilities........... (101,808) 69,059
Decrease in due to stockholders...................... (185,376) --
Increase (decrease) in income taxes payable.......... (9,539) 9,539
--------- ----------
Total Adjustments...................................... 666,170 1,041,344
--------- ----------
Net Cash Provided by Operating Activities.............. $ 256,988 $1,305,185
========= ==========
</TABLE>

Supplementary Schedule of Non-Cash Investing and Financing Activities:

During the year ended October 3, 1997 the Company refinanced outstanding
long-term debt in the amount of $987,782 with a portion of the proceeds from a
$1,650,000 term note payable.

Further, the Company issued long-term debt of $2,177,072 bearing interest at
8% as partial payment for the acquisition of the Rigo/Black Leaf consumer
pesticide division of Wilbur Ellis Company. The long-term debt calls for
monthly principal payments of $67,000 plus accrued interest.

During the year ended September 27, 1996, the Company financed the
acquisition of equipment through a capital lease in the amount of $68,452.

The accompanying notes are an integral part of this financial statement.

F-37
<PAGE>

SOUTHERN RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Business Operations

The accompanying consolidated financial statements include the accounts of
Southern Resources, Inc. and its wholly-owned subsidiaries SureCo, Inc. and
Peach County Property, Inc., collectively referred to herein as the Company.
All material inter-company transactions and balances have been eliminated in
consolidation.

The Company is engaged in the manufacture and marketing of specialty
pesticide products to consumer and commercial users and provides packing
services for companies marketing their own brands of consumer and commercial
pesticides. The Company's principal markets are throughout North America and
the Caribbean.

During the year ended October 3, 1997, 17% and 14% of the Company's sales
were to two separate customers, and 16% of the Company's purchases were from
one vendor.

Fiscal Year

The Company's fiscal year ends on the Friday nearest September 30. The
accompanying consolidated financial statements include results of operations
for fifty-three weeks for the year ended October 3, 1997 and fifty-two weeks
for the year ended September 27, 1996.

Inventories

Inventories are valued at the lower of cost, determined on a first-in,
first-out basis, or market.

Property and Equipment

Property and equipment are recorded at cost, less accumulated depreciation.
When the assets are retired or otherwise disposed of, the costs less
accumulated depreciation are removed from the accounts and any resulting gain
or loss is reflected in income.

Depreciation and amortization are provided over the estimated useful lives
using the straight-line method for financial reporting purposes and primarily
accelerated methods for income tax reporting purposes.

NOTE 2--INVENTORIES

Inventories consisted of the following at October 3, 1997 and September 27,
1996:

<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Raw materials.......................................... $2,421,544 $2,506,802
Finished goods......................................... 2,378,499 2,553,076
---------- ----------
$4,800,043 $5,059,878
========== ==========
</TABLE>

NOTE 3--ACQUIRED ASSETS

In April 1996, the Company acquired the inventories, certain equipment and
product registrations of the Rigo/Black Leaf division of Wilbur-Ellis Company
(Rigo/Black Leaf) for a total purchase price of $4,177,072. The purchase price
was allocated to the inventories ($3,827,013), equipment ($119,092), and
prepaid product registration cost ($230,967) based upon book values, which
estimated their fair values, at the acquisition date. The total purchase price
for the aforementioned assets was satisfied with a cash payment of $2,000,000
and the Company's note payable to the seller for $2,177,072 (see Note 5).
Included in the assets purchased were inventories (products, labels, and
packaging) used in connection with the seller's seed treatment products. The

F-38
<PAGE>

SOUTHERN RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

seller must repurchase, at the Company's cost, all such unused inventories at
the earlier of the satisfaction of the Company's note payable to the seller or
April 1999.

The acquisition was accounted for as a purchase business combination.
Rigo/Black Leaf operations are included in the Company's consolidated
statement of income from the effective date of the acquisition of April 28,
1996. The following table sets forth unaudited pro forma sales, income before
taxes and net income (loss) for the Company as if the Company and Rigo/Black
Leaf had been combined at the beginning of the periods shown. This pro forma
financial information is provided for illustrative purposes only. It is not
necessarily indicative of results which may be obtained in the future (000s).

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 27, 1996
------------------
(UNAUDITED)
<S> <C>
Net sales................................................. $28,209
Income before taxes....................................... 377
Income (loss)............................................. 229
</TABLE>

In connection with the Rigo/Black Leaf acquisition, four shareholders of the
Company owning all of the outstanding shares of the Company collectively
agreed to sell 20% of their shares of Company stock to an employee who was
previously employed by Rigo/Black Leaf's prior owner which, if purchased by
the employee, would result in his owning 20% of the Company's outstanding
common stock. As a condition precedent to purchase such stock, the employee
would be required to enter into certain agreements under which the employee
would be subject to cross guarantees and indemnities to which the other
shareholders are obligated. The purchase price for such stock is initially
$700,000 as of April 1996 and increases thereafter by a factor of 6% per annum
compounded monthly for each month of time passing until the purchase date,
which cannot be later than the date at which there has been a change of
control or April 1998 whichever is later. For accounting purposes, the share
purchase is a variable option which is being accounted for over the period of
the agreement. Management believes the prescribed purchase price of the stock
represented its estimated fair market value as of April 1996 and September
1996.

NOTE 4--LINES OF CREDIT

During 1996 the Company arranged a new $7,000,000 working capital facility,
increased to $8,000,000 during 1997, with another commercial finance
corporation which replaced its $2,500,000 line and provided funding in the
amount of $2,000,000 used to acquire assets (see Note 3). Advances under the
lines are limited to 80% of eligible trade accounts receivable and 60% of
eligible inventories, with advances related to inventories limited to
$2,600,000. Borrowings under the lines bear interest at the commercial
financial corporation's reference rate plus 2.25% (an effective interest rate
of 10.75% at October 3, 1997), are secured by accounts receivable,
inventories, and certain intangible assets including product registrations and
trademarks and are guaranteed by the stockholders of the Company. Since the
line of credit agreement is not subject to review until April 1998,
outstanding borrowings under the lines of $3,917,464 are classified as a
noncurrent liability at September 27, 1996, while outstanding borrowings under
the lines of $3,859,355 are classified as a current liability at October 3,
1997. The lines of credit include covenants which limit management
compensation increases, loans to stockholders or employees and annual capital
expenditures. The Company was in compliance with the covenants for the year
ended October 3, 1997.

F-39
<PAGE>

SOUTHERN RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 5--LONG-TERM DEBT

Long-term debt consisted of the following as of October 3, 1997 and September
27, 1996:

<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
Term loan with a commercial lending company in the
amount of $1,650,000 secured by the Company's
machinery and equipment and securities pledged by
one of the Company's stockholders and guaranteed
by the Company and the Company's stockholders;
principal and interest payable monthly through
October 2004. Interest on the term loan is at a
rate of the 13-week Treasury Bills plus 5.5%..... $1,650,000 $ --
Term loan in the amount of $2,177,072 issued in
connection with acquired assets (see Note 3);
secured by inventories and accounts receivable;
monthly principal installments of $67,000 plus
interest at 8% due through March 1998 with all
remaining unpaid principal ($703,072) and accrued
interest due April 1998. This note is subject to
a subordination agreement in favor of the
Company's working capital lender which provides,
among other things, that service of this
indebtedness can occur only after the Company is
current on the payment of all of its other
obligations for borrowed monies.................. 1,334,190 1,909,072
Term loan in the amount of $1,000,000 assumed in
connection with acquired assets of a Company in
October--500,000 1993. Terms modified during 1996
to provide that the loan be secured by certain
production equipment; monthly principal
installments of $8,333 plus accrued interest from
January 1997 through December 1997, monthly
principal installments of $16,667 plus accrued
interest from January 1998 through December 1999.
Interest on the term loan is at a rate of 10%.
Outstanding principal and accrued interest
satisfied with a portion of the proceeds received
from the $1,650,000 term loan executed during
1997............................................. -- 500,000
Term loan with bank secured by machinery and
equipment; principal and interest payments,
$12,503 at September 27, 1996, due monthly
through December 1998. Interest on the term loan
is at a rate of prime plus 1.5% adjusted
quarterly for changes in the prime rate.
Outstanding principal and accrued interest
satisfied with a portion of the proceeds received
from the $1,650,000 term loan executed during
1997............................................. -- 302,020
Term loan with bank secured by machinery and
equipment; principal and interest payments,
$1,723 at September 27, 1996, due monthly through
October 2002. Interest on the term loan is at a
rate of prime plus 2% adjusted quarterly for
changes in the prime rate. Outstanding principal
and accrued interest satisfied with a portion of
the proceeds received from the $1,650,000 term
loan executed during 1997........................ -- 92,368
</TABLE>

F-40
<PAGE>

SOUTHERN RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Term loan with bank secured by machinery and
equipment; principal and interest payments, $3,061
at September 27, 1996, due monthly through July
1999. Interest on the term loan is at a rate of
prime plus 2% adjusted quarterly for changes in the
prime rate. Outstanding principal and accrued
interest satisfied with a portion of the proceeds
received from the $1,650,000 term loan executed
during 1997......................................... -- 87,690
Term loan with bank secured by real property;
principal and interest payments, $3,071 at September
27, 1996, due monthly through February 2000.
Interest on the loan is at a rate of 10.5%.......... 74,931 102,938
Term loan with bank secured by securities pledged by
one of the Company's stockholders and guaranteed by
the Company's stockholders. Interest to be paid on
the principal balance at a rate of 10.5% through
December 1997 when loan is due in full.............. 100,100 --
Term loan with financial institution secured by
equipment; principal and interest payments, $1,269
at September 27, 1996, due monthly through February
2000. Interest on the loan is at a rate of 11.6%.
Outstanding principal and accrued interest satisfied
with a portion of the proceeds received from the
$1,650,000 term loan executed during 1997........... -- 41,964
Capital lease; principal and interest (at 12.52%)
payments totaling $1,541 due monthly through
November 2000....................................... 47,090 59,250
Capital lease; principal and interest (at 10.4%)
payments totaling $2,998 due monthly through
September 1998. Outstanding principal and accrued
interest satisfied with a portion of the proceeds
received from the $1,650,000 term loan executed
during 1997......................................... -- 64,812
Capital lease; principal and interest (at 17.29%)
payments totaling $851 due monthly through April
2000. Outstanding principal and accrued interest
satisfied with a portion of the proceeds received
from the $1,650,000 term loan executed during 1997.. -- 27,139
Other................................................ 28,772 12,290
---------- ----------
$3,235,083 $3,199,543
========== ==========
</TABLE>

The above is categorized as follows:

<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Senior Long-Term Debt................................. $1,900,893 $1,290,471
Subordinated Long-Term Debt........................... 1,334,190 1,909,072
---------- ----------
3,225,083 3,199,543
Less: Current Portion................................. 1,668,243 1,208,084
---------- ----------
$1,566,840 $1,991,459
========== ==========
</TABLE>

F-41
<PAGE>

SOUTHERN RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Aggregate maturities of long-term debt by fiscal year are as follows:

<TABLE>
<CAPTION>
<S> <C>
1998............................................................... $1,668,243
1999............................................................... 238,501
2000............................................................... 239,314
2001............................................................... 234,224
2002............................................................... 260,372
Thereafter......................................................... 594,429
----------
$3,235,083
==========
</TABLE>

The Company is subject to financial covenants under its term loan agreement
with a commercial lending company. Such covenants relate to working capital,
current ratio, and a ratio of net worth to total liabilities. The Company was
not in compliance with one of the covenants at October 3, 1997; however, the
lender has waived such noncompliance until March 31, 1998.

NOTE 6--CONTINGENCIES

In August 1990 the United States Environmental Protection Agency (EPA) added
to its National Priorities List a site which is constituted in part by the
land on which the Company's Fort Valley, Georgia facility is located. In July
1993 the EPA advised the Company that it may be responsible for certain
contamination discovered both on and off this site. The Company denied
responsibility and advised the EPA that the Company did not cause the
contamination and that it had indemnities from the former owner who has since
cooperated with the EPA in completing the investigative activities and
initiating the remedial activities required by the EPA.

In August 1993 the Company and its affiliates were named co-defendants in a
lawsuit filed by neighbors of the site seeking unspecified monetary and
injunctive relief alleging property damage arising out of chemical formulation
activities at the Fort Valley, Georgia facility. Since the alleged property
damage arose prior to the facility being owned by the Company or its
affiliates, management of the Company denies any liability to the plaintiffs
and contends that any damage suffered by the plaintiffs arose out of action of
the prior owners of the facility.

The Company believes that the above actions are without merit and is
vigorously defending its position. Accordingly, no provision for losses or
expenses related to the above actions has been made in the accompanying
financial statements.

NOTE 7--INCOME TAXES

Deferred income taxes are provided with respect to certain items which are
recognized in one period for financial reporting purposes and another period
for income tax purposes. Such temporary differences relate primarily to
depreciation of property and equipment, trademarks and product registration
costs, allowance for doubtful accounts, inventory reserves and carrying costs
and certain expense accruals.

F-42
<PAGE>

SOUTHERN RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's net deferred income tax (asset) liability as of October 3,
1997 and September 27, 1996 are as follows:

<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Deferred Income Tax (Asset) Liability:
Tax over book depreciation............................ $ 338,671 $ 336,651
Trademarks and product registration costs............. 13,200 27,093
Net operating loss carryforwards...................... (300,556) (134,035)
Alternative minimum tax credit carryforwards.......... (63,961) (63,961)
--------- ---------
(12,646) 165,748
========= =========
Deferred Income Tax Asset:
Allowance for doubtful accounts....................... 3,922 3,046
Inventory reserves.................................... 12,400 12,400
Inventory carrying costs.............................. 54,878 35,135
Expense accruals...................................... -- 67,603
Other................................................. (6,523) --
--------- ---------
64,677 118,184
--------- ---------
Net Deferred Income Tax (Asset) Liability............ $ (77,323) $ 47,564
========= =========

Significant components of the provision (credit) for income taxes in the
accompanying consolidated statement of income for the years ended October 3,
1997 and September 27, 1996, are as follows:

<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Current
Federal............................................... $ -- $ 10,826
State................................................. -- 1,547
--------- ---------
$ -- $ 12,373
========= =========
Deferred
Federal............................................... $ (92,508) $ 92,990
State................................................. (32,379) 32,548
--------- ---------
$(124,887) $ 125,538
========= =========

The components of the net provision (credit) for deferred income taxes are
as follows for the years ended October 3, 1997 and September 27, 1996:

<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Tax over book depreciation............................. $ 2,020 $ 45,488
Trademarks and product registration costs.............. (13,893) (54)
Benefits of operating loss carryforwards............... (166,521) 26,016
Allowance for doubtful accounts........................ (876) 5,093
Inventory reserves..................................... -- (2,046)
Inventory carrying costs............................... (19,743) (7,081)
Expense Accruals....................................... 67,603 70,495
Alternative minimum tax credit carryforwards........... -- (12,373)
Other.................................................. 6,523 --
--------- ---------
$(124,887) $ 125,538
========= =========
</TABLE>

F-43
<PAGE>

SOUTHERN RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 8--RELATED PARTY TRANSACTIONS

Due to stockholders at October 3, 1997 and September 27, 1996 of $170,892
and $356,268, respectively, represents cumulative management fees due two of
the Company's stockholders at September 30, 1994. Such amounts are noninterest
bearing and due on demand but have no specified payment dates.

The note and accrued interest payable--stockholder is due on demand and
includes interest at the same rate as the Company incurs under its lines of
credit (see Note 4). Since the noteholder's intent is not to demand payment
within twelve months, the amounts are included as noncurrent liabilities in
the accompanying consolidated balance sheets as of October 3, 1997 and
September 27, 1996.

NOTE 9--SUBSEQUENT EVENT

During 1997, the Company entered into a letter of intent to exchange all of
the outstanding shares of the Company's common stock for those of Ringer
Corporation, a publicly-traded corporation in Bloomington, Minnesota. The
transaction was effected on December 8, 1997. As a result, the Company
continues as an independently operated, but wholly owned, subsidiary or Ringer
Corporation.

F-44
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders
Dexol Industries, Inc.

We have audited the accompanying balance sheets of Dexol Industries, Inc. as
of September 30, 1996 and 1995, and the related statements of operations,
shareholders' equity (deficit), and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Dexol Industries, Inc. as
of September 30, 1996 and 1995, and the results of its operations and cash
flows for the years then ended, in conformity with generally accepted
accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial
statements, the Company incurred net losses of $969,326 and $1,894,708 and had
negative cash flows from operations of $239,124 and $2,505,680 for the years
ended September 30, 1996 and 1995, respectively. These factors, among others,
as discussed in Note 1 to the financial statements, raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.

Singer Lewak Greenbaum & Goldstein
LLP

Los Angeles, California
June 9, 1997

F-45
<PAGE>

DEXOL INDUSTRIES, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
----------------------
1996 1995
---------- ----------
<S> <C> <C>
ASSETS (NOTE 5)
Current assets
Cash (Note 2).......................................... $ 376,922 $ 26,647
Accounts receivable, net of allowance for doubtful
accounts of $147,130 and $34,000 (Note 7)............. 1,731,980 2,427,699
Inventories (Note 3)................................... 3,157,390 4,447,905
Prepaid expenses and other current assets.............. 171,813 464,886
---------- ----------
Total current assets.................................. 5,438,105 7,367,137
Furniture and equipment, net of accumulated depreciation
of $845,211 and $771,568 (Note 4)...................... 196,491 183,704
Investment in subsidiary (Note 10)...................... 357,358 --
Package design costs, net of accumulated amortization of
$69,031 and $38,797.................................... 381,205 396,392
Formulae and trademarks, net of accumulated amortization
of $191,382 and $187,382............................... 28,000 32,000
---------- ----------
Total assets.......................................... $6,401,159 $7,979,233
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable....................................... $2,630,055 $3,329,583
Other accrued expenses................................. 343,835 1,305,660
Current portion of notes payable to related parties
(Note 5).............................................. 2,246,597 2,160,397
---------- ----------
Total current liabilities............................. 5,220,487 6,795,640
Notes payable to related parties, net of current portion
(Note 5)............................................... 1,490,218 523,813
---------- ----------
Total liabilities..................................... 6,710,705 7,319,453
---------- ----------
Commitments and contingencies (Note 6)
Shareholders' equity (deficit)
Preferred stock, $1 par value 60,000 shares authorized,
none issued and outstanding........................... -- --
Common stock, $1 par value 240,000 shares authorized,
158,595 shares issued and outstanding................. 158,595 158,595
Additional paid-in capital............................. 87,079 87,079
(Accumulated deficit) retained earnings................ (555,220) 414,106
---------- ----------
Total shareholders' equity (deficit).................. (309,546) 659,780
---------- ----------
Total liabilities and shareholders' equity (deficit).. $6,401,159 $7,979,233
========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-46
<PAGE>

DEXOL INDUSTRIES, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
Revenues (Note 7)................................... $12,719,327 $20,203,448
Cost of goods sold.................................. 10,191,468 14,727,174
----------- -----------
Gross profit........................................ 2,527,859 5,476,274
Selling, general, and administrative expenses....... 3,283,279 7,348,831
----------- -----------
Loss from operations................................ (755,420) (1,872,557)
----------- -----------
Other income (expenses)
Interest expense.................................. (323,306) (311,059)
Equity in unconsolidated subsidiary............... 37,358 --
Other............................................. 72,842 (5,499)
----------- -----------
Total other income (expenses)................... (213,106) (316,558)
----------- -----------
Loss before provision for (benefit from) income
taxes.............................................. (968,526) (2,189,115)
Provision for (benefit from) income taxes........... 800 (294,407)
----------- -----------
Net loss........................................ $ (969,326) $(1,894,708)
=========== ===========
Net loss per share.............................. $ (6.11) $ (11.95)
=========== ===========
Weighted average shares outstanding................. 158,595 158,595
=========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-47
<PAGE>

DEXOL INDUSTRIES, INC.

STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER 30,
-----------------------------------------------------
RETAINED
COMMON STOCK ADDITIONAL EARNINGS TOTAL
---------------- PAID-IN (ACCUMULATED EQUITY
SHARES AMOUNT CAPITAL DEFICIT) (DEFICIT)
------- -------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance, October 1,
1994................... 158,595 $158,595 $87,079 $ 2,308,814 $ 2,554,488
Net loss.............. (1,894,708) (1,894,708)
------- -------- ------- ----------- -----------
Balance, September 30,
1995................... 158,595 158,595 87,079 414,106 659,780
Net loss.............. (969,326) (969,326)
------- -------- ------- ----------- -----------
Balance, September 30,
1996................... 158,595 $158,595 $87,079 $ (555,220) $ (309,546)
======= ======== ======= =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-48
<PAGE>

DEXOL INDUSTRIES, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
-----------------------
1996 1995
---------- -----------
<S> <C> <C>
Cash flows from operating activities
Net loss............................................ $ (969,326) $(1,894,708)
Adjustments to reconcile net loss to net cash used
in operating activities
Depreciation and amortization..................... 149,606 115,639
Equity in unconsolidated subsidiary............... (37,358) --
(Increase) decrease in
Accounts receivable................................ 695,719 (1,356,204)
Inventories........................................ 1,290,515 (1,982,890)
Prepaid expenses and other current assets.......... 293,073 (152,823)
Increase (decrease) in
Accounts payable................................... (699,528) 2,018,419
Other accrued expenses............................. (961,825) 746,887
---------- -----------
Net cash used in operating activities............. (239,124) (2,505,680)
---------- -----------
Cash flows from investing activities
Payments for purchases of furniture and equipment... (89,362) (4,746)
Increase in package design costs.................... (53,844) (341,309)
---------- -----------
Net cash used in investing activities............. (143,206) (346,055)
---------- -----------
Cash flows from financing activities
Proceeds from the issuance of notes payable......... 850,000 2,650,000
Repayments of long-term debt........................ (117,395) (6,028)
---------- -----------
Net cash provided by financing activities......... 732,605 2,643,972
---------- -----------
Net increase (decrease) in cash................... 350,275 (207,763)
Cash--beginning of year............................... 26,647 234,410
---------- -----------
Cash--end of year..................................... $ 376,922 $ 26,647
========== ===========
Supplemental disclosures of cash flow information
Interest paid....................................... $ 286,153 $ 219,076
========== ===========
Income taxes refunded............................... $ (295,207) $ (193,827)
========== ===========
</TABLE>

Supplemental schedule of non-cash investing and financing activities:

In 1995, the Company entered into a note payable with a lender for machinery
and equipment in the amount of $34,210.

In 1996, the Company acquired an investment in subsidiary from a related
party in exchange for a note payable of $320,000.

In 1996, the line of credit of $2,350,000 was restructured and replaced with
a note payable in the amount of $1,500,000 and a revolving line of credit of
$850,000. As of September 30, 1996, the note payable and the line of credit
had outstanding balances of $1,485,601 and $1,397,000, respectively.

The accompanying notes are an integral part of these financial statements.

F-49
<PAGE>

DEXOL INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 1996

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Line of Business

The Company was incorporated in 1931 as Destruxol Ltd. and changed its name
to Dexol Industries, Inc. in 1968. The Company manufactures a variety of home
and garden pesticides which are distributed throughout the United States.

Basis of Presentation

As discussed in Note 11, the Company sold substantially all its assets to
Ringer Corporation ("Ringer") pursuant to a sales and purchase agreement dated
March 31, 1997. Accordingly, the financial statements present Dexol
Industries, Inc. on an unconsolidated basis to reflect the financial position,
results of operations, and cash flows of the operating business purchased by
Ringer. The Company's wholly-owned subsidiary, Dexol Maryland, Inc. has been
presented using the equity method as this subsidiary was not purchased by
Ringer.

The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles which contemplate continuation of the
Company as a going concern. However, the Company experienced net losses of
$969,326 and $1,894,708 and had negative cash flows from operations of
$239,124 and $2,505,680 for the years ended September 30, 1996 and 1995,
respectively. These factors, among others, raise substantial doubt about the
Company's ability to continue as a going concern.

In view of these matters, realization of a major portion of the assets in
the accompanying balance sheets is dependent upon continued operations of the
Company, which in turn is dependent upon the Company's ability to meet its
financing requirements and the success of its future operations. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or amounts and classification of
liabilities that might be necessary should the Company be unable to continue
in existence.

Revenue Recognition

Revenue from the sale of products is recognized at the time of sale to its
customer.

Advertising

The Company expenses advertising costs as incurred. Advertising costs, which
includes co-operative advertising, for the years ended September 30, 1996 and
1995 were $1,024,484 and $1,797,779, respectively.

Package Design Costs

The Company capitalized costs associated with the production of new label
designs. The costs capitalized are being amortized over the estimated useful
lives of seven years. Amortization expense for the years ended September 30,
1996 and 1995 was $69,031 and $38,797, respectively.

Formulae and Trademarks

Formulae and trademarks are carried at cost, less accumulated amortization.
The Company provides for amortization using the straight-line method over the
estimated useful lives of ten years. Amortization expense for the years ended
September 30, 1996 and 1995 was $4,000 and $4,000, respectively.

F-50
<PAGE>

DEXOL INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

SEPTEMBER 30, 1996

Income Taxes

The Company utilizes Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes," which requires the recognition of
deferred tax liabilities and assets for the expected future tax consequences
of events that have been included in the financial statements or tax returns.
Under this method, deferred income taxes are recognized for the tax
consequences in future years of differences between the tax bases of assets
and liabilities and their financial reporting amounts at each year end based
on enacted tax laws and statutory tax rates applicable to the periods in which
the differences are expected to affect taxable income. Valuation allowances
are established, when necessary, to reduce deferred tax assets to the amount
expected to be realized. The provision for income taxes represents the tax
payable for the period and the change during the period in deferred tax assets
and liabilities.

Net Loss Per Share

Net loss per share is based on the weighted average number of common and
common equivalent shares outstanding during the year.

Cash Equivalents

For purposes of the statements of cash flows, the Company considers all
highly-liquid investments purchased with original maturities of three months
or less to be cash equivalents.

Inventories

Inventories are stated at the lower of cost (first-in, first-out basis) or
market and consist primarily of materials, labor, and overhead. At September
30, 1996 and 1995, the reserve for inventory obsolescence was $71,730 and
$84,280, respectively.

Furniture and Equipment

Furniture and equipment are stated at cost, less accumulated depreciation.
The Company provides for depreciation and amortization using the straight-line
method over the estimated useful lives of five to ten years or the term of the
lease, whichever is less, as follows:

<TABLE>
<S> <C>
Machinery and equipment........................................ 5 to 8 years
Furniture and fixtures......................................... 5 to 8 years
Truck.......................................................... 5 years
Leasehold improvements......................................... 5 to 10 years
</TABLE>

Maintenance, repairs, and renewals are expensed as incurred. Expenditures
for additions and major improvements are capitalized. Gains or losses on the
sale of furniture and equipment are recognized in the statements of
operations.

Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and

F-51
<PAGE>

DEXOL INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

SEPTEMBER 30, 1996

disclosures of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reported period. Actual results could differ from those estimates.

Fair Value of Financial Instruments

The Company measures its financial assets and liabilities in accordance with
generally accepted accounting principles. For certain of the Company's
financial instruments, including cash, accounts receivable, accounts payable,
and accrued expenses, the carrying amounts approximate fair value due to their
short maturities. The amounts shown for notes payable approximate fair value
because current interest rates offered to the Company for debt of similar
maturities are substantially the same.

NOTE 2--CASH

The Company maintains cash balances at financial institutions located in
California. Accounts at each institution are insured by the Federal Deposit
Insurance Corporation up to $100,000. Uninsured balances aggregated to
$235,919 and $310,187 at September 30, 1996 and 1995, respectively. The
Company has not experienced any losses in such accounts and believes it is not
exposed to any significant credit risk on cash and cash equivalents.

NOTE 3--INVENTORIES

As of September 30, inventories comprised of the following:

<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Raw materials.......................................... $1,797,846 $2,369,611
Finished goods......................................... 1,359,544 2,078,294
---------- ----------
Total................................................ $3,157,390 $4,447,905
========== ==========
</TABLE>

NOTE 4--FURNITURE AND EQUIPMENT

As of September 30, furniture and equipment consist of the following:

<TABLE>
<CAPTION>
1996 1995
---------- --------
<S> <C> <C>
Machinery and equipment................................. $ 853,334 $763,732
Furniture and fixtures.................................. 69,158 69,158
Truck................................................... 31,746 31,746
Leasehold improvements.................................. 87,464 90,636
---------- --------
1,041,702 955,272
Less accumulated depreciation........................... 845,211 771,568
---------- --------
Total................................................. $ 196,491 $183,704
========== ========
</TABLE>

F-52
<PAGE>

DEXOL INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

SEPTEMBER 30, 1996

NOTE 5--NOTES PAYABLE--RELATED PARTIES

The Company and Gunlock Corporation ("Gunlock") are related parties as they
have common ownership. The following is a summary of the transactions with the
related parties:

<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Note payable to Gunlock dated January 20, 1995.
Interest accrues at 18% and is due and payable in
full on January 1, 1997. The note is secured by
substantially all of the assets of the Company...... $ 500,000 $ 500,000
Line of credit with Gunlock which accrues interest at
a prime rate (8.75% at September 30, 1995) plus
5.75%. This rate is 5% over the rate Wells Fargo
Bank charges Gunlock for its borrowing from the
bank. Interest is paid monthly. The Company was
permitted to borrow up to a maximum of $2,500,000.
During the fiscal year 1996, the line of credit was
restructured and replaced with a note payable in the
amount of $1,500,000 and a line of credit with
maximum borrowings of $1,500,000.................... -- 2,150,000
Note payable in the amount of $1,500,000, payable in
monthly principal installments of $1,600 plus
interest at prime (8.25% at September 30, 1996) plus
5.75%. The note is due and payable in full on
December 15, 2000 and is secured by substantially
all the assets of the Company. (a).................. 1,485,605 --
Line of credit bearing interest at prime plus 5.75%
payable monthly. The line of credit permits
borrowing up to a maximum of $1,500,000 repayable no
later than December 15, 1996. (a)................... 1,397,000 --
Note payable to a company owned by an officer of
Gunlock, payable in 36 monthly installments of
$1,088 including interest of 9%, maturing in
December 1997. The note is secured by certain
equipment........................................... 34,210 34,210
Note payable to an officer of Gunlock, due on demand,
dated October 1, 1995 with interest at 8%. The note
is unsecured........................................ 320,000 --
---------- ----------
3,736,815 2,684,210
Less current portion................................. 2,246,597 2,160,397
---------- ----------
Long-term portion.................................... $1,490,218 $ 523,813
========== ==========
</TABLE>

Interest expense to all related parties was $323,306 and $311,059 for the
years ended September 30, 1996 and 1995, respectively.

(a) Subsequent to September 30, 1996, Gunlock informed the Company that
it will combine the $1,500,000 note payable and the $1,500,000 line of
credit into one note for $3,000,000. Interest payable monthly at 5.75% over
prime is due and payable in full on December 15, 2000.

The following is a schedule by years of future maturities of long-term debt:

<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30,
-------------
<S> <C>
1997........................................................... $2,246,597
1998........................................................... 30,573
1999........................................................... 31,640
2000........................................................... 19,200
2001........................................................... 1,408,805
----------
Total........................................................ $3,736,815
==========
</TABLE>

F-53
<PAGE>

DEXOL INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

SEPTEMBER 30, 1996

NOTE 6--COMMITMENTS AND CONTINGENCIES

Leases--Related Party

The main office and production facilities in Torrance, California are leased
from Gunlock. The lease extends to July 31, 2000. Amounts due to Gunlock
relating to this lease agreement which are included in accounts payable are
$68,675 and $40,819 at September 30, 1996 and 1995, respectively.

Minimum future rental commitments under this lease are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30,
-------------
<S> <C>
1997............................................................... $164,820
1998............................................................... 164,820
1999............................................................... 164,820
2000............................................................... 137,350
--------
Total............................................................ $631,810
========
</TABLE>

Rent expense was $250,500 and $274,882 for the years ended September 30,
1996 and 1995, respectively.

Environmental Liabilities

The Company is not aware of any environmental liabilities that would have a
material impact on the Company's financial position, results of operations, or
cash flows.

Litigation

The Company is subject to legal proceedings which arise in the ordinary
course of its business. In the opinion of management, the amount of ultimate
liability with respect to these actions will not materially affect the
financial position, results of operations or cash flows of the Company.

NOTE 7--SALES

Major Customers

During the year ended September 30, 1996, the Company had one major customer
which accounted for approximately 43% of net sales. At September 30, 1996, the
amount due from this major customer amounted to $637,794.

During the year ended September 30, 1995, the Company had one major customer
which accounted for approximately 53% of net sales. At September 30, 1995, the
amount due from this major customer amounted to $924,459.

F-54
<PAGE>

DEXOL INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

SEPTEMBER 30, 1996

NOTE 8--INCOME TAXES

A reconciliation of the expected income tax computed using the federal
statutory income tax rate to the Company's effective income tax rate is as
follows:

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------
1996 1995
------ ------
<S> <C> <C>
Income tax computed at federal statutory tax rate............. (34.0%) (34.0%)
Net operating loss carryforward............................... 34.0 --
Carryback of net operating loss............................... -- 18.5
------ ------
Total....................................................... -- % (15.5%)
====== ======
</TABLE>

Significant components of the Company's deferred tax assets and liabilities
for income taxes consist of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1996 1995
--------- ----------
<S> <C> <C>
Deferred tax assets
Allowance for doubtful accounts.................... $ 59,000 $ 14,000
Inventory reserves................................. 29,000 34,000
Interest due to related party...................... 52,000 37,000
Net operating loss carryforwards................... 854,000 165,000
--------- ----------
994,000 250,000
Valuation allowance................................ (967,000) (219,000)
--------- ----------
27,000 31,000
Deferred tax liabilities
Depreciation....................................... (27,000) (31,000)
--------- ----------
Net deferred tax asset (liability)............... $ -- $ --
========= ==========

The components of the income tax provision are as follows:

<CAPTION>
SEPTEMBER 30,
---------------------
1996 1995
--------- ----------
<S> <C> <C>
Current
Federal............................................ $ -- $ (295,207)
State.............................................. 800 800
--------- ----------
800 (294,407)
========= ==========
Deferred
Federal............................................ -- --
State.............................................. -- --
--------- ----------
Total............................................ $ 800 $ (294,407)
========= ==========
</TABLE>

The Company has unused net operating loss carryforwards of approximately
$2,200,000 and $990,000 for federal and state income tax purposes,
respectively, that begin to expire in 2010 and 1999, respectively.

F-55
<PAGE>

DEXOL INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

SEPTEMBER 30, 1996

NOTE 9--RETIREMENT PLAN

The Company sponsors a defined contribution retirement plan covering
substantially all of its employees. Contributions are made at the discretion
of the Board of Directors. No contributions were made for the years ended
September 30, 1996 and 1995.

NOTE 10--UNCONSOLIDATED SUBSIDIARY

On October 1, 1995, the Company purchased all of the outstanding stock of
Dexol Maryland, Inc. ("Maryland") from a related party in exchange for a
demand note in the amount of $320,000 with interest at 8%. The financial
statements of Maryland have not been consolidated into these financial
statements as discussed in Note 1.

The following is selected unaudited financial data of Maryland as of and for
the year ended September 30, 1996:

<TABLE>
<S> <C>
Cash.............................................................. $993,156
Land.............................................................. $134,062
Notes payable..................................................... $608,150
Taxes payable..................................................... $151,645
Shareholders' equity.............................................. $367,423
Net income........................................................ $ 37,358
</TABLE>

Maryland's only activity during the year was the collection of a note
receivable with interest and payment of operating expenses.

NOTE 11--SUBSEQUENT EVENTS

On March 31, 1997, the Company completed a transaction with Ringer
Corporation ("Ringer") whereby the Company sold substantially all of its
assets relating to its home and garden pesticide business including patents,
trademarks, customer lists, and goodwill. The proceeds from the sale of the
assets consist of Ringer assuming certain specified liabilities of the
Company, the issuance of a $1,476,000 promissory note to the Company, and the
issuance of restricted Ringer common stock.

F-56
<PAGE>

DEXOL INDUSTRIES, INC.

CONDENSED BALANCE SHEET
(UNAUDITED)
AS OF FEBRUARY 28,

<TABLE>
<CAPTION>
1997
----------
<S> <C>
ASSETS
Current assets
Cash............................................................... $ 124,073
Accounts receivable................................................ 2,220,075
Inventories........................................................ 2,941,354
Prepaid expenses and other current assets.......................... 228,835
----------
Total current assets.............................................. 5,514,337
Furniture and equipment, net........................................ 158,140
Investment in subsidiary............................................ 357,358
Package design costs, net........................................... 365,118
Formulae and trademarks, net........................................ 26,334
----------
Total assets...................................................... $6,421,287
==========
</TABLE>

<TABLE>
<S> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable................................................... $2,775,226
Other accrued expenses............................................. 413,029
Current portion of notes payable to related parties................ 2,686,160
----------
Total current liabilities......................................... 5,874,415
Notes payable to related parties, net of current portion............ 1,477,600
----------
Total liabilities................................................. 7,352,015
----------
</TABLE>

<TABLE>
<S> <C>
Shareholders' equity (deficit)
Preferred stock, $1 par value 60,000 shares authorized, none
issued and outstanding........................................... --
Common stock, $1 par value 240,000 shares authorized, 158,595
shares
issued and outstanding........................................... 158,595
Additional paid-in capital........................................ 87,079
Accumulated deficit............................................... (1,176,402)
----------
Total shareholders' equity (deficit)............................. (930,728)
----------
Total liabilities and shareholders' equity (deficit)............. $6,421,287
==========
</TABLE>

See the accompanying notes to the interim financial statements.

F-57
<PAGE>

DEXOL INDUSTRIES, INC.

CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
FIVE MONTHS ENDED FEBRUARY 28,

<TABLE>
<CAPTION>
1997
----------
<S> <C>
Revenues........................................................... $2,972,694
Cost of goods sold................................................. 2,029,519
----------
Gross profit....................................................... 943,175
Selling, general, and administrative expenses...................... 1,486,437
----------
Loss from operations............................................... (543,262)
----------
Other income (expenses)
Interest expense.................................................. (76,320)
Other............................................................. (1,600)
----------
Total other income (expenses)................................... (77,920)
----------
Loss before provision for (benefit from) income taxes.............. (621,182)
Provision for (benefit from) income taxes.......................... --
----------
Net loss........................................................... $ (621,182)
==========
Net loss per share................................................. $ (3.92)
==========
Weighted average shares outstanding................................ 158,595
==========
</TABLE>

See the accompanying notes to the interim financial statements.

F-58
<PAGE>

DEXOL INDUSTRIES, INC.

CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
FIVE MONTHS ENDED FEBRUARY 28,

<TABLE>
<CAPTION>
1997
---------
<S> <C>
Cash flows from operating activities
Net loss................................................... $(621,182)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation and amortization............................. 60,511
(Increase) decrease in
Accounts receivable....................................... (488,095)
Inventories.............................................. 216,036
Prepaid expenses and other current assets................ (57,022)
Increase (decrease) in
Accounts payable.......................................... 145,171
Other accrued expenses................................... 69,194
---------

Net cash used in operating activities.................. (675,387)
---------
Cash flows from investing activities
Increase in package design costs........................... (4,407)
---------
Net cash used in investing activities.................. (4,407)
---------
Cash flows from financing activities
Proceeds from the issuance of notes payable................ 439,563
Repayments of long-term debt............................... (12,618)
---------
Net cash provided by financing activities.............. 426,945
---------
Net increase (decrease) in cash............................. (252,849)
Cash--beginning of period................................... 376,922
---------
Cash--end of period......................................... $ 124,073
=========
Supplemental disclosures of cash flow information
Interest paid.............................................. $ 110,137
=========
</TABLE>

See the accompanying notes to the interim financial statements.

F-59
<PAGE>

DEXOL INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
FEBRUARY 28, 1997

NOTE 1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information. They should be read in conjunction
with the annual financial statements included elsewhere herein for the
years ended September 30, 1996 and 1995. In the opinion of management,
the interim financial statements include all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation of the
results for the interim periods presented. Operating results through
the five month period ended February 28, 1997 are not necessarily
indicative of the operating results for the year ending September 30,
1997.

Net loss per share is calculated using the weighted average common
shares outstanding.

NOTE 2.
All comparative data reflect application of consistent accounting
principles and contain no prior period adjustments.

NOTE 3. INVENTORIES

Inventory consists of the following:

<TABLE>
<CAPTION>
FEBRUARY
28,
1997
-----------
<S> <C>
Raw Materials................................................ $ 1,602,864
Finished Goods............................................... 1,038,490
-----------
$ 2,641,354
===========
NOTE 4. LONG-TERM DEBT
<CAPTION>
FEBRUARY
28,
1997
--------
<S> <C>
Notes payable to related parties............................. $ 4,163,760
Less current portion......................................... 2,686,160
-----------
$ 1,477,600
===========
</TABLE>

NOTE 5. SUBSEQUENT EVENT

On March 31, 1997, the Company sold substantially all of its assets to
Ringer Corporation. The purchase price was comprised of the receipt of
1,059,340 shares of the Ringer Corporation restricted common stock
valued at $1,397,005, the receipt of a promissory note from Ringer
Corporation with a principal amount of $1,477,000 bearing simple
interest at an annual rate of prime plus 3/4%.

NOTE 6. UNCONSOLIDATED SUBSIDIARY

On October 1, 1995, the Company purchased all of the outstanding stock
of Dexol Maryland, Inc. ("Maryland") from a related party in exchange
for a demand note in the amount of $320,000 with interest at 8%. The
financial statements of Maryland have not been consolidated into these
financial statements to reflect the financial position, results of
operations, and cash flows of the operating business purchased by
Ringer Corporation as discussed in note 5.

F-60
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Consep, Inc. and Subsidiaries:

We have audited the accompanying consolidated balance sheets of Consep, Inc.
and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations, shareholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Consep,
Inc. and subsidiaries as of December 31, 1997 and 1996, and the results of
their operations, and their cash flows for each of the years in the three-year
period ended December 31, 1997 in conformity with generally accepted
accounting principles.

KPMG Peat Marwick LLP

Portland, Oregon
February 13, 1998

F-61
<PAGE>

CONSEP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 1,615,773 $ 2,443,508
Short-term investments............................ 69,334 103,167
Accounts receivable, net.......................... 4,733,525 3,601,912
Other receivables................................. 458,283 296,358
Inventories, net (note 3)......................... 9,316,144 7,993,706
Prepaid expenses.................................. 372,023 966,102
------------ ------------
Total current assets........................... 16,565,082 15,404,753
Property, plant and equipment, net (note 4)........ 5,520,640 4,020,456
Notes receivable and other assets.................. 57,620 258,865
Intangible assets, net (note 5).................... 1,519,344 1,545,246
Goodwill, net (note 2)............................. 2,014,874 2,181,901
------------ ------------
Total assets................................... $ 25,677,560 $ 23,411,221
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank lines (note 6)............................... $ 1,492,973 $ 1,170,000
Accounts payable.................................. 4,581,462 2,526,325
Current portion of notes payable (note 7)......... 527,625 312,821
Current portion of obligations under capital lease
(note 11)........................................ 31,647 34,369
Accrued liabilities............................... 925,568 646,135
Customer deposits................................. 734,148 282,581
------------ ------------
Total current liabilities...................... 8,293,423 4,972,231
Notes payable, excluding current portion (note 7).. 2,133,560 1,153,553
Obligations under capital lease, excluding current
portion (note 11)................................. 14,559 17,516
Deferred gain on sale of property (note 11)........ -- 238,075
Mandatory stock warrant obligation (note 8)........ 19,500 19,500
------------ ------------
Total liabilities.............................. 10,461,042 6,400,875
------------ ------------
Commitments and contingencies (notes 11, 12 and 13)
Shareholders' equity (note 8):
Preferred stock, $.01 par value. Authorized
3,000,000 shares, no shares issued or outstanding
at 1997 and 1996................................. -- --
Common stock, non-voting, $.01 par value.
Authorized 657,601 shares, no shares issued or
outstanding at 1997 and 1996..................... -- --
Common stock, $.01 par value. Authorized
15,000,000 shares, issued and outstanding
9,460,151 and 9,431,203 shares at 1997 and 1996,
respectively..................................... 94,602 94,312
Additional paid-in capital........................ 44,313,127 44,256,367
Accumulated deficit............................... (29,177,621) (27,355,600)
Foreign currency translation adjustment........... (13,590) 15,267
------------ ------------
Total shareholders' equity..................... 15,216,518 17,010,346
------------ ------------
Total liabilities and shareholders' equity..... $ 25,677,560 $ 23,411,221
============ ============
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

F-62
<PAGE>

CONSEP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenues (note 15)..................... $39,204,329 $33,229,229 $30,843,734
Cost of revenues (note 15)............. 29,786,976 25,241,986 23,094,064
----------- ----------- -----------
Gross margin........................... 9,417,353 7,987,243 7,749,670
----------- ----------- -----------
Operating expenses:
Research and development (note 12).... 1,203,502 1,454,180 1,059,048
Selling, general and administrative... 10,077,898 9,051,036 7,996,758
----------- ----------- -----------
Total operating expenses........... 11,281,400 10,505,216 9,055,806
----------- ----------- -----------
Operating loss......................... (1,864,047) (2,517,973) (1,306,136)
----------- ----------- -----------
Other income (expense):
Interest expense...................... (424,739) (324,017) (284,283)
Interest income....................... 157,275 159,024 245,403
Other, net............................ 309,490 200,079 58,537
----------- ----------- -----------
Net other income................... 42,026 35,086 19,657
----------- ----------- -----------
Net loss........................... $(1,822,021) $(2,482,887) $(1,286,479)
=========== =========== ===========
Basic and diluted net loss per share
(note 1).............................. $ (0.19) $ (0.31) $ (0.19)
=========== =========== ===========
Weighted average number of shares
outstanding (note 1).................. 9,450,963 7,963,358 6,761,623
=========== =========== ===========
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

F-63
<PAGE>

CONSEP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
FOREIGN
PREFERRED STOCK COMMON STOCK ADDITIONAL CURRENCY TOTAL
------------------ ----------------- PAID-IN ACCUMULATED TRANSLATION SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT EQUITY
------- -------- --------- ------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1994................... -- $ -- 6,263,653 $62,636 $35,978,675 $(23,586,234) $(15,131) $12,439,946
Common stock issued in
secondary public
offering.............. -- -- 1,100,000 11,000 3,078,375 -- -- 3,089,375
Exercise of stock
options............... -- -- 34,213 342 58,297 -- -- 58,639
Business acquisitions
(note 2).............. -- -- 171,671 1,717 352,354 -- -- 354,071
Foreign currency
translation
adjustment............ -- -- -- -- -- -- 25,928 25,928
Net loss............... -- -- -- -- -- (1,286,479) -- (1,286,479)
------- -------- --------- ------- ----------- ------------ -------- -----------
Balance at December 31,
1995................... -- -- 7,569,537 75,695 39,467,701 (24,872,713) 10,797 14,681,480
Common stock issued in
secondary public
offering.............. -- -- 1,755,563 17,556 4,587,399 -- -- 4,604,955
Exercise of stock
options............... -- -- 85,698 857 152,686 -- -- 153,543
Common stock issued
under Employee Stock
Purchase Plan......... -- -- 20,405 204 48,581 -- -- 48,785
Foreign currency
translation
adjustment............ -- -- -- -- -- -- 4,470 4,470
Net loss............... -- -- -- -- -- (2,482,887) -- (2,482,887)
------- -------- --------- ------- ----------- ------------ -------- -----------
Balance at December 31,
1996................... -- -- 9,431,203 94,312 44,256,367 (27,355,600) 15,267 17,010,346
Exercise of stock
options............... -- -- 4,400 44 1,056 -- -- 1,100
Common stock issued
under Employee Stock
Purchase Plan......... -- -- 24,548 246 55,704 -- -- 55,950
Foreign currency
translation
adjustment............ -- -- -- -- -- -- (28,857) (28,857)
Net loss............... -- -- -- -- -- (1,822,021) -- (1,822,021)
------- -------- --------- ------- ----------- ------------ -------- -----------
Balance at December 31,
1997................... -- $ -- 9,460,151 $94,602 $44,313,127 $(29,177,621) $(13,590) $15,216,518
======= ======== ========= ======= =========== ============ ======== ===========
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

F-64
<PAGE>

CONSEP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss............................... $(1,822,021) $(2,482,887) $(1,286,479)
Adjustments to reconcile net loss to
net cash provided by (used) in
operating activities:
Depreciation and amortization........ 1,171,893 1,071,925 881,784
Provision for bad debts.............. 228,144 40,171 164,544
Inventory reserve.................... 275,428 383,307 148,042
(Gain) loss on disposal of
equipment........................... 2,188 16,526 (50,467)
Other non-cash items................. 240,574 (10,890) (31,507)
Changes in assets and liabilities, net
of amounts acquired:
Short-term investments.............. 33,833 33,332 1,514,864
Accounts receivable................. (1,421,268) (292,239) (244,658)
Other receivables................... (161,925) (77,379) 58,210
Inventories......................... (1,627,104) (450,769) (2,097,823)
Prepaid expenses.................... 587,164 (580,053) 46,091
Accounts payable.................... 2,086,009 85,409 (460,477)
Accrued liabilities................. 319,921 63,070 (324,627)
Other assets........................ (28,873) (3,000) 66,667
Customer deposits................... 451,573 (168,646) (110,866)
----------- ----------- -----------
Net cash provided by (used) in
operating activities.............. 335,536 (2,372,123) (1,726,702)
----------- ----------- -----------
INVESTING ACTIVITIES:
Acquisition of intangible assets...... (226,439) (289,818) (396,915)
Acquisition of property, plant and
equipment............................ (1,423,012) (1,077,473) (477,404)
Acquisition of subsidiary companies,
net of cash acquired................. -- -- (74,136)
Net proceeds from sale of property,
plant and equipment.................. 14,400 8,350 88,050
(Increase) decrease in notes
receivable, net of payments
received............................. 286,663 273,265 (34,900)
----------- ----------- -----------
Net cash used in investing
activities........................ (1,348,388) (1,085,676) (895,305)
----------- ----------- -----------
FINANCING ACTIVITIES:
Increase (decrease) in bank lines..... 323,391 (541,533) 233,897
Increase in notes payable............. 250,000 215,000 141,516
Principal payments on notes payable
and capital lease obligations........ (445,020) (650,149) (584,997)
Proceeds from sale of common stock,
net.................................. 57,050 4,807,283 3,148,014
----------- ----------- -----------
Net cash provided by financing
activities........................ 185,421 3,830,601 2,938,430
----------- ----------- -----------
Effect of exchange rate changes on
cash and cash equivalents............ (304) 1,111 (613)
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents.................. (827,735) 373,913 315,810
Cash and cash equivalents at beginning
of period............................. 2,443,508 2,069,595 1,753,785
----------- ----------- -----------
Cash and cash equivalents at end of
period................................ $ 1,615,773 $ 2,443,508 $ 2,069,595
=========== =========== ===========
Supplemental disclosures of cash flow
information:
Cash paid during the period for
interest.............................. $ 432,646 $ 324,818 $ 295,915
=========== =========== ===========
Cash paid during the period for taxes.. $ 14,661 $ 10,446 $ 12,403
=========== =========== ===========
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

F-65
<PAGE>

CONSEP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Cash Equivalents and Short-Term Investments

For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents. Similar investments with original maturities
beyond three months are considered short-term investments and are carried at
cost, which approximates market value.

(b) Principles of Consolidation

The consolidated financial statements include the accounts of Consep, Inc.
and its wholly-owned subsidiaries, Pacoast, Inc. (Pacoast), Valley Green
Center, Inc., Consep de Mexico, S.A. de C.V. (CdM), Chemfree Environment Inc.
(Chemfree), Richard Hunt, Inc., d.b.a. Sierra Ag Chemical (Sierra Ag), Consep
GmbH, and Farchan Laboratories, Inc. (Farchan). All significant intercompany
transactions and balances have been eliminated in consolidation.

Accounts receivable are shown net of allowance for doubtful accounts of
$920,785 and $857,775 at December 31, 1997 and 1996, respectively. The Company
sells its products through agribusiness distributors, consumer products
distributors and retailers and to agricultural growers, primarily in the
Central Valley of California. The Company performs continuing credit
evaluations of its customers and generally does not require collateral.

(d) Inventories

Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method.

(e) Property, Plant and Equipment

Property, plant and equipment are recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the assets ranging
from three to twenty years. Leasehold improvements are amortized over the
shorter of the estimated life of the asset or the term of the related lease.

(f) Patents, Trademarks, Technology and Registrations

Patents are amortized over seventeen years, technology over five to ten
years, catalog rights over five years, and trademarks and product
registrations over their useful lives, all using the straight-line method.

(g) Goodwill

Goodwill, which represents the excess of the purchase price over the fair
value of net assets acquired, is amortized over periods ranging from twenty to
twenty-five years using the straight-line method. The Company assesses the
recoverability of this intangible asset by determining whether the
amortization of the goodwill balance over its remaining life can be recovered
through discounted projected future cash flows of the operations or assets
from which the goodwill arose. Amortization charged to operations was
$114,290, $123,641 and $125,571 for the years ended December 31, 1997, 1996
and 1995, respectively.

F-66
<PAGE>

CONSEP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(h) Income Taxes

Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and has credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

(i) Net Loss Per Common Share

In 1997, the Company adopted Statement of Financial Accounting Standards No.
128. Accordingly, "basic net loss per share" and "dilutive net loss per share"
for the year ended December 31, 1997 and for all prior periods presented were
computed using the weighted average number of common shares outstanding during
each year, with diluted net income per share including the effect of
potentially dilutive common shares.

Potentially dilutive common shares related to stock options are anti-
dilutive in a net loss situation and, therefore, were not included in diluted
net loss per share in the accompanying financial statements.

(j) Foreign Currency Translation

The Canadian dollar is the functional currency of Chemfree, the Company's
Canadian subsidiary. Assets and liabilities of Chemfree are translated to U.S.
dollars at current exchange rates, and revenues and expenses are translated
using weighted average rates of exchange. Adjustments arising from foreign
currency translation are included as a separate component of shareholders'
equity. Foreign currency transaction gains and losses are included as a
component of other income and expense and arise primarily from U.S.-dollar-
based amounts held by Chemfree and Mexican-peso-based amounts held by CdM, the
Company's Mexican subsidiary. There are no foreign currency translation
effects arising from CdM as the U.S. dollar is the functional currency of this
subsidiary.

(k) Use of Estimates

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.

(l) Reclassifications

Certain reclassifications have been made in the accompanying consolidated
financial statements for 1995 and 1996 to conform with the 1997 presentation.

(m) Stock Option Plan

Prior to January 1, 1996, the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. As such, compensation expense would be recorded on the date
of grant only if the current market price of the underlying stock exceeded the
exercise price. On January 1, 1996 the Company adopted SFAS No. 123,
"Accounting for Stock-Based Compensation," which permits entities to recognize
as expense over the vesting period the fair value of all stock-based awards on
the date of grant. As allowed under SFAS No. 123, the Company has continued to
apply the provisions of APB Opinion No. 25 and provide pro forma net

F-67
<PAGE>

CONSEP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

income and pro forma earnings per share disclosures for employee stock option
grants made in 1994 and 1995 and future years as if the fair-value-based
method defined in SFAS No. 123 had been applied.

(n) Financial Instruments

The carrying amounts of cash equivalents, short-term investments, trade
receivables, accounts payable, customer deposits and short-term borrowings
approximate fair value because of the short-term nature of these instruments.
The fair market value of the Company's long-term debt approximates its
carrying value as the interest rates on borrowings are based on floating rate
or the interest rates approximate the current market interest rate.

(2) ACQUISITION

In February 1995, the Company acquired all of the outstanding capital stock
of Farchan, a Florida-based specialty chemicals manufacturer which is
currently supplying pheromones, a major raw material used in the Company's
proprietary products, to the Company. The purchase price of the acquisition
was approximately $589,000, consisting of 171,671 shares of the Company's
common stock valued at $354,000, a non-competition agreement with the former
majority shareholder of Farchan valued at approximately $161,000, and direct
costs of the acquisition of approximately $74,000.

Pursuant to the Agreement and Plan of Merger, the Company covenants that the
171,671 shares issued to effect the merger (the "Original Shares") will have
an aggregate market value of at least $1 million (the "Guaranteed Value") for
at least three consecutive trading days during the period from February 1,
1997 to January 31, 1998. If the Original Shares do not reach the Guaranteed
Value during the period specified, then the following shall apply: (i) if as
of January 31, 1998, the Original Shares have an aggregate market value of
less than the Guaranteed Value but more than $950,000, then the Company shall
issue additional shares of its common stock to the extent necessary to make
the aggregate value of the Original Shares, plus the additional shares, equal
to $1 million; (ii) if as of January 31, 1998, the Original Shares have an
aggregate market value of less than $950,000 but more than $500,000, then the
Company shall, at the Company's option, either (a) issue additional shares of
its common stock, up to a maximum of 171,670 additional shares, to the extent
necessary to make the aggregate value of the Original Shares, plus the
additional shares, equal to $1 million, or (b) deliver the acquired Farchan
shares to the previous Farchan shareholders in exchange for the Original
Shares; (iii) if as of January 31, 1998, the Original Shares have an aggregate
market value of less than $500,000, then either (a) the Company shall issue an
additional 171,670 shares of its common stock to the previous Farchan
shareholders, or (b) if the Company does not elect to deliver such additional
shares by February 15, 1998, then the previous Farchan shareholders shall have
the option to elect between the remedies provided in (ii)(a) and (ii)(b)
above. Such election by the previous Farchan shareholders must occur before
March 1, 1998. Pursuant to this agreement the Company issued an additional
171,671 shares on February 12, 1998 to conclude this transaction and preclude
any future obligations.

The aggregate purchase price, less the fair market value of net assets
acquired of approximately $482,000, has been recognized as goodwill and is
being amortized over 20 years on a straight-line basis. The operating results
of Farchan are included in the Company's consolidated results from February 1,
1995.

The above acquisition was accounted for as a purchase.

F-68
<PAGE>

CONSEP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(3) INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1996
---------- ----------
<S> <C> <C>
Raw materials......................................... $1,998,509 $2,196,006
Work in process....................................... -- 44,963
Finished goods--proprietary........................... 4,640,578 3,528,880
Finished goods--distribution.......................... 3,227,485 2,717,836
---------- ----------
9,866,572 8,487,685
Less reserve for obsolescence..................... 550,428 493,979
---------- ----------
$9,316,144 $7,993,706
========== ==========
</TABLE>

(4) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1996
---------- ----------
<S> <C> <C>
Land................................................... $ 872,986 $ 502,481
Buildings.............................................. 2,397,184 1,308,625
Machinery and equipment................................ 3,538,533 2,860,568
Furniture and fixtures................................. 1,203,284 1,088,977
Vehicles............................................... 1,082,250 927,892
Leasehold improvements................................. 124,615 314,876
---------- ----------
9,218,852 7,003,419
Less accumulated depreciation and amortization..... 3,698,212 2,982,963
---------- ----------
$5,520,640 $4,020,456
========== ==========
</TABLE>

(5) INTANGIBLE ASSETS

Intangible assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
USEFUL LIVES 1997 1996
------------ ---------- ----------
<S> <C> <C> <C>
Patents, technology and trademarks...... 5--20 years $1,011,483 $ 928,939
Product registrations................... 10--20 years 891,564 798,466
Other................................... 3--10 years 462,886 436,946
---------- ----------
2,365,933 2,164,351
Less accumulated amortization........... 846,589 619,105
---------- ----------
$1,519,344 $1,545,246
========== ==========
</TABLE>

F-69
<PAGE>

CONSEP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(6) BANK LINES

In December 1997, the Company renewed its $7.5 million bank line of credit
which matures December 10, 1998 and is secured by substantially all of the
Company's current assets. Maximum borrowings under the credit line cannot
exceed 70% of eligible accounts receivable and between 40% and 50% of eligible
inventory from certain of the Company's distribution operations. Interest is
payable monthly at the bank's prime rate (8.50% at December 31, 1997) plus
1.5%. At December 31, 1997, the Company had approximately $1.5 million
outstanding under this line.

In addition to the $7.5 million bank line of credit, the Company's Chemfree
subsidiary has a working capital bank line of credit of approximately $37,000.
Interest is payable monthly at the bank's prime rate (6.00% at December 31,
1997) plus 2.0%. At December 31, 1997, there was approximately $14,000
outstanding under this line.

Under the terms of the $7.5 million credit agreement, the Company is
required to maintain certain financial ratios and other financial conditions.
At December 31, 1997, $1,479,000 was outstanding under this line of credit and
the Company was not in complete compliance with the financial covenants. The
Company has obtained a waiver of compliance for the quarter ended December 31,
1997.

(7) NOTES PAYABLE

Notes payable consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1996
---------- ----------
<S> <C> <C>
Mortgages payable at interest rates ranging from prime
plus 1.5% to 8.85%, secured, payable in monthly
installments through June, 2007...................... $1,682,530 $ 595,160
Various notes payable at interest rates ranging from
6.9% to 12.9%, secured by equipment and vehicles,
payable in monthly installments with various maturity
dates through July, 2002............................. 463,236 411,122
Notes payable at interest rates of prime plus 1.5%,
secured by substantially all of the Company's current
assets with the outstanding balances at December 31,
1997 reducing the amount available under the $7.5
million bank line of credit, payable in monthly
installments through July, 2000...................... 357,709 206,042
Notes payable at an interest rate of 10%, unsecured,
payable upon demand.................................. 21,917 39,917
Notes payable to former shareholders of Sierra Ag and
Farchan, interest ranging from 8% to 9%, payable
semi-monthly or in annual installments with maturity
dates through 2000 (The former shareholders of Sierra
Ag and Farchan are currently employed by those
subsidiaries.)....................................... 135,793 214,133
---------- ----------
2,661,185 1,466,374
Less current maturities............................... 527,625 312,821
---------- ----------
Notes payable, excluding current maturities....... $2,133,560 $1,153,553
========== ==========
</TABLE>

The aggregate maturities of notes payable for the five years ending after
December 31, 1997 are as follows: 1998--$527,625; 1999--$455,478; 2000--
$347,397; 2001--$195,609; and 2002--$180,922.

F-70
<PAGE>

CONSEP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(8) SHAREHOLDERS' EQUITY

(a) Common Stock

In October 1995, the Company completed a secondary public offering of its
common stock. This offering resulted in net proceeds to the Company of
approximately $3.1 million upon the sale of 1,100,000 shares of common stock.

In October 1996, the Company completed a follow-on public offering of its
common stock. This offering resulted in net proceeds to the Company of
approximately $4.6 million upon the sale of 1,755,563 shares of common stock.

(b) Stock Option Plans

Under the Company's 1992 Stock Incentive Plan (the "1992 Plan"), options may
be granted to employees and certain other individuals to purchase a maximum of
339,267 shares of common stock. Both incentive and nonqualified stock options
may be granted under the 1992 Plan. Options granted pursuant to the 1992 Plan
become exercisable in various increments determined at the time of grant and
generally expire ten years from the date of grant.

Under the Company's 1993 Stock Incentive Plan (the "1993 Plan"), options may
be granted to employees and certain other individuals to purchase a maximum of
370,000 shares of common stock. Both incentive and nonqualified stock options
may be granted under the 1993 Plan. Options granted pursuant to the 1993 Plan
become exercisable in various increments determined at the time of grant and
generally expire ten years from the date of grant.

Under the Company's 1993 Stock Option Plan for Nonemployee Directors (the
"1993 Director Plan"), options are automatically granted to certain
nonemployee directors immediately following the Company's annual shareholders'
meetings. Annually, each eligible nonemployee director receives an option to
purchase 2,000 shares of the Company's common stock under the 1993 Director
Plan. Options granted under the 1993 Director Plan are exercisable upon grant
and expire ten years from date of grant. The annual number of shares of common
stock for which options may be granted under the 1993 Director Plan is limited
to 24,000.

Under the Company's 1997 Stock Incentive Plan (the "1997 Plan"), options may
be granted to employees and certain other individuals to purchase a maximum of
300,000 shares of common stock. Both incentive and nonqualified stock options
may be granted under the 1997 Plan. Options granted pursuant to the 1997 Plan
become exercisable in various increments determined at the time of grant and
generally expire ten years from the date of grant. In February 1998, the
Company's Board of Directors authorized an amendment to the 1997 Plan, subject
to shareholder approval, whereby the number of shares reserved for future
issuance under the 1997 Plan was increased by 300,000.

At December 31, 1997, the Company has reserved an aggregate of 980,756 of
its common stock for future issuance upon exercise of stock options pursuant
to the 1992 Plan, the 1993 Plan, the 1993 Director Plan and the 1997 Plan.
Options under the Company's four plans specified above are generally granted
at no less than the market value of the Company's common stock at the date of
grant.

F-71
<PAGE>

CONSEP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Stock options outstanding and transactions involving the Company's stock
option plans are summarized as follows:

<TABLE>
<CAPTION>
AGGREGATE EXERCISE
EXERCISE PRICE PER
NUMBER PRICE SHARE
------- ---------- ----------
<S> <C> <C> <C>
Balance at December 31, 1994................ 429,729 $ 891,591 $0.25-5.25
Options granted........................... 140,749 406,591 2.63-3.00
Options canceled.......................... (7,900) (22,550) 2.25-3.25
Options exercised......................... (34,213) (58,639) 0.25-2.25
------- ---------- ----------
Balance at December 31, 1995................ 528,365 $1,216,993 $0.25-5.25
Options granted........................... 181,566 589,599 2.25-4.25
Options canceled.......................... (92,200) (288,702) 1.75-5.25
Options exercised......................... (85,698) (153,543) 0.25-3.25
------- ---------- ----------
Balance at December 31, 1996................ 532,033 $1,364,347 $0.25-4.63
Options granted........................... 235,626 367,439 1.50-3.25
Options canceled.......................... (16,000) (46,850) 2.25-3.25
Options exercised......................... (4,400) (1,100) 0.25-0.25
------- ---------- ----------
Balance at December 31, 1997................ 747,259 $1,683,836 $0.50-4.63
======= ========== ==========
</TABLE>

At December 31, 1997, the range of exercise prices and weighted average
remaining contractual life of outstanding options was $0.50-$4.63 and 7.84
years, respectively. At December 31, 1997 and 1996, the number of options
exercisable was 384,312 and 280,712, respectively, and the weighted average
exercise price of those options was $2.35 and $2.06, respectively.

The Company applies APB Opinion No. 25 in accounting for its Plans and,
accordingly, no compensation cost has been recognized for its stock options in
the financial statements. If the Company had elected to recognize compensation
cost based on the fair value of the options granted at grant date as
prescribed by SFAS No. 123, net loss and loss per share would have been
increased to the pro forma amounts indicated in the table below:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Net loss--as reported............... $(1,822,021) $(2,482,887) $(1,286,479)
Net loss--pro forma................. (1,857,419) (2,577,593) (1,324,853)
Net loss per share--basic and dilut-
ed--as reported.................... $ (0.19) $ (0.31) $ (0.19)
Net loss per share--basic and dilut-
ed--pro forma...................... (0.20) (0.32) (0.20)
</TABLE>

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1996
------- -------
<S> <C> <C> <C>
Expected dividend yield.................................. 0.00% 0.00%
Expected stock price volatility.......................... 94.63% 92.15%
Risk-free interest rate.................................. 5.56% 5.57%
Expected life of options................................. 7 years 7 years
</TABLE>

The weighted average fair value of options granted during 1997 and 1996 is
$1.56 and $3.25 per share, respectively.

F-72
<PAGE>

CONSEP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

In 1988, the Company issued warrants for $250,000 to purchase 28,571 shares
of its preferred stock. The warrants carry a mandatory repurchase element
which converts to term debt if the Company is unable to meet the repurchase
schedule. The repurchase price of the warrants exceeded the initial issuance
price, therefore, the difference has been accreted to additional paid-in
capital over the term of the warrants. As of December 31, 1997, the Company
has repurchased 25,571 of these warrants. The remaining 3,000 warrants, which
were converted into warrants to purchase common stock in conjunction with the
Company's IPO in February 1994, carry an exercise price of $6.50 per share and
are required to be repurchased by the Company in April 1999 for $19,500.

The Company has also issued warrants to purchase 48,000 shares of its
preferred stock, which were converted into warrants to purchase 48,000 shares
of the Company's common stock upon the closing of the Company's February 1994
IPO. The exercise price of these warrants is $6.25 per share. Warrants to
purchase 19,200 shares of the Company's common stock expired unexercised on
February 1, 1995. Of the remaining warrants to purchase 28,800 shares of the
Company's common stock, 16,000 expire October 20, 1999 and 12,800 expire
February 1, 2000. All such remaining warrants were exercisable as of December
31, 1997.

In December 1993, the Company issued warrants to purchase 50,001 shares of
its common stock at an exercise price of $6.00 per share. These warrants were
issued in conjunction with a $3 million loan commitment provided by certain of
the Company's shareholders. The loan commitment expired unused upon the
closing of the Company's IPO in February 1994. The warrants, all of which were
outstanding and none of which had been exercised as of December 31, 1997,
expire December 20, 1998.

In October 1996, the Company issued warrants to purchase 175,556 shares of
common stock to an investment banking firm in connection with underwriting
services rendered to the Company with respect to its follow-on public offering
in October 1996. These warrants carry an exercise price of $3.60 per share and
expire October 23, 2001. These warrants became exercisable on October 23, 1997
and all were outstanding and none had been exercised as of December 31, 1997.

(D) EMPLOYEE STOCK PURCHASE PLAN

During 1995, the Company established an employee stock purchase plan (the
"Plan") whereby eligible employees are able to purchase shares of the
Company's common stock at prices no less than 85% of the fair market value of
the Company's common stock determined at certain specified dates. At December
31, 1997, the Company has reserved 150,000 shares of its common stock for
issuance under the Plan. During 1997 and 1996, 24,548 and 20,405 shares,
respectively, were purchased pursuant to the Plan. During 1995, there were no
shares purchased under this plan.

F-73
<PAGE>

CONSEP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(9) INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The tax effects of
significant items comprising the Company's deferred tax assets and liabilities
at December 31, 1997 and 1996 were as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
Deferred tax assets:
Inventories...................................... $ 1,091,000 $ 707,000
Allowance for doubtful accounts.................. 163,000 206,000
Tax credit carryforwards......................... 291,000 283,000
Net operating loss carryforwards................. 8,498,000 8,459,000
Valuation allowance.............................. (9,820,000) (9,256,000)
Other............................................ 186,000 106,000
----------- -----------
Total deferred tax assets...................... 409,000 505,000
----------- -----------
Deferred tax liabilities:
Tax basis depreciation and amortization.......... 409,000 505,000
----------- -----------
Total deferred tax liabilities................. 409,000 505,000
----------- -----------
Net deferred tax assets........................ $ -- $ --
=========== ===========
</TABLE>

The valuation allowance for deferred tax assets as of January 1, 1996 was
$8,209,500. The net change in total valuation allowance for the years ended
December 31, 1997 and 1996 was an increase of $564,000 and $1,046,500,
respectively.

The provision for income taxes differs from the "expected" tax benefit
(computed by applying the federal statutory income tax rate to net loss before
taxes) as follows:

<TABLE>
<CAPTION>
DECEMBER
31,
-----------
1997 1996
---- ----
<S> <C> <C>
Expected statutory federal tax benefit......................... (34)% (34)%
Change in valuation allowance.................................. 35 42
State income tax, net of federal............................... (5) (5)
Expiration of state net operating losses....................... 4 --
Other.......................................................... -- (3)
--- ---
Effective tax rate............................................. -- % -- %
=== ===
</TABLE>

F-74
<PAGE>

CONSEP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The Company has available at December 31, 1997 unused investment credits,
research and development tax credits, and operating loss carryforwards, which
may reduce taxable income in future periods and expire as follows:

<TABLE>
<CAPTION>
STATE FEDERAL
------------- ------------------------------------
RESEARCH
OPERATING AND OPERATING
YEAR OF LOSS INVESTMENT DEVELOPMENT LOSS
EXPIRATION CARRYFORWARDS CREDITS CREDITS CARRYFORWARDS
---------- ------------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
1998................... $1,244,000 $ -- $ -- $ --
1999................... 1,035,000 600 18,000 1,358,000
2000................... 180,000 14,000 50,000 1,696,000
2001................... 388,000 3,600 31,000 971,000
2002................... -- -- -- 789,000
2003................... 278,000 -- -- 1,076,000
2004................... 1,028,000 -- -- 1,240,000
2005................... 603,000 -- 39,000 484,000
2006................... 417,000 -- 16,000 1,614,000
2007................... 784,000 -- 39,000 2,776,000
2008................... 1,219,000 -- -- 4,074,000
2009................... 1,133,000 -- 43,000 3,471,000
2010................... 200,000 -- 10,000 710,000
2011................... 430,000 -- 37,000 1,435,000
2012................... -- -- 8,000 --
---------- ------- -------- -----------
$8,939,000 $18,200 $291,000 $21,694,000
========== ======= ======== ===========
</TABLE>

In addition, the Company has available a combined foreign net operating loss
carryforward of approximately $1,592,000 in Austria, Canada and Mexico which
will expire in various years.

A provision of the Tax Reform Act of 1986 required the utilization of net
operating losses and credits be limited when there is a change of more than
50% in ownership of the Company. Such a change occurred with the sales of
stock in 1988, 1989, 1992 and 1996. Accordingly, the utilization of the net
operating loss carryforwards generated from periods prior to March 25, 1988,
the period March 26, 1988 to November 14, 1989, the period November 15, 1989
to July 15, 1992 and the period July 16, 1992 to October 29, 1996 is limited;
the amounts subject to the limitation are approximately $4,200,000,
$1,500,000, $5,000,000 and $10,700,000, respectively.

(10) EMPLOYEE SAVINGS PLAN

The Company sponsors a defined contribution plan (the "Plan") covering all
full-time domestic employees. Employees may contribute up to 15% of their
compensation to the Plan. The Company may also make discretionary
contributions to the Plan for the benefit of all eligible employees. Company
matching contributions vest over six years.

(11) LEASES

The Company leases certain assets under various capital leasing
arrangements. Included in property, plant and equipment in the accompanying
consolidated balance sheets are $146,235 and $128,810 of assets under capital
lease at December 31, 1997 and 1996, respectively, net of related accumulated
amortization of $67,164 and $67,910, respectively.

F-75
<PAGE>

CONSEP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Capital lease obligations are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1997 1996
------- -------
<S> <C> <C>
Leases of certain manufacturing equipment with lease
periods expiring through February 2000, with interest
ranging from 15.0% to 35.0%.............................. $46,206 $49,650
Lease of certain office and computer equipment with lease
period expiring in March 1997, at interest of 13.7%...... -- 2,235
------- -------
Total obligations under capital lease..................... 46,206 51,885
Less current portion.................................... 31,647 34,369
------- -------
Obligations under capital lease, less current portion..... $14,559 $17,516
======= =======
</TABLE>

During February 1994, the Company sold and leased back the Company's
headquarters building. The selling price was $1,250,000 and the lease term for
the lease-back is ten years. The sale/lease-back transaction resulted in a
deferred gain of approximately $396,000, which was being amortized as an
offset to operating expenses over the term of the lease on a straight-line
basis. The lease included annual payments of approximately $140,000 for the
initial three years of the lease, with three percent increases in years four,
seven and ten of the lease. In June 1997, the Company re-purchased the
facility for approximately $1,500,000 and the remaining deferred gain of
approximately $195,000 was applied against the purchase price of the facility.

The Company also leases certain office and operating facilities, and certain
other equipment under operating leases with remaining terms ranging from one
to five years. Rental expense for all operating leases, net of the deferred
gain amortization related to the sale/lease-back transaction discussed above,
amounted to $234,699, $288,685 and $296,369 for the years ended December 31,
1997, 1996 and 1995, respectively.

Minimum lease payments under leases expiring subsequent to December 31, 1997
with original terms of one year or more are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR ENDING DECEMBER 31, LEASES LEASES
------------------------ ------- ---------
<S> <C> <C>
1998.................................................... $36,792 $130,574
1999.................................................... 12,192 97,835
2000.................................................... 4,141 30,683
2001.................................................... -- 22,232
2002.................................................... -- 103
------- --------
Total minimum lease payments.......................... 53,125 $281,427
========
Less amount representing interest....................... (6,919)
-------
Present value of net minimum lease payments........... $46,206
=======
</TABLE>

(12) COMMITMENTS

In November 1993, the Company entered into a License Agreement ("the
Agreement") with Bend Research, Inc. ("Bend Research") whereby the Company
will fund certain research performed by Bend Research and will obtain
exclusive licenses to sell products utilizing the technology developed through
the research provided under the Agreement. Under the terms of the Agreement,
the Company is to fund a minimum of $600,000 of research annually through the
term of the Agreement, which is twenty years. The Agreement can be terminated
upon 60 days prior notice by the Company. Bend Research invoiced the Company
$78,011,

F-76
<PAGE>

CONSEP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

$246,804 and $375,565 for research and development work performed during the
years ended December 31, 1997, 1996 and 1995, respectively. Payments by the
Company to Bend Research for research and development services provided to the
Company totaled $77,673 in 1997, which amount has been acknowledged by Bend
Research to satisfy the Company's obligation to Bend Research for research and
development services. For certain products sold by the Company utilizing
technology provided under the Agreement, the Company is required to pay
royalties to Bend Research based upon a percentage of product margins
attributable to the provided technology as defined in the Agreement. During
January 1995, royalties for the term of the Agreement related to certain
products incorporating technology provided by Bend Research were prepaid by
the Company. Such prepaid royalties totaled $121,000 and are being amortized
as the related products are sold by the Company. In addition, Bend Research
and the Company agreed to reduce the annual commitment described above from
$600,000 to $191,500 in 1996 and from $600,000 to $125,000 in 1997. During
1998, the annual commitment was waived with no minimum requirement. For years
subsequent to 1998, the $600,000 annual commitment will again be in effect.

The Company was incorporated by Bend Research in 1984. Bend Research owns
less than 5% of the Company's common stock as of December 31, 1997. Walter C.
Babcock, the President, Chief Executive Officer, and Chairman of the Board of
Bend Research, is also a director of the Company and serves on the Company's
Scientific Advisory Board. Dr. Babcock is also a shareholder of Bend Research
and the Company. Volker G. Oakey, the President, Chief Executive Officer, and
Chairman of the Board of the Company is also a director of Bend Research and
is a shareholder of the Company.

In April 1996, the Company entered into a five-year purchase agreement with
a supplier in exchange for exclusive selling rights to this product in the
United States, Canada and Mexico. The agreement requires the Company to
purchase approximately $200,000 per year of this product for five years. The
agreement automatically renews every three years thereafter for an additional
three-year term.

During October 1994, the Company entered into a license agreement to make,
use, and sell certain consumer products. Pursuant to this license agreement,
the Company is required to pay the licensor guaranteed minimum royalties of
$25,000 per year through September 1999.

During 1993, the Company entered into a non-compete agreement with a
previous shareholder of a business acquired by the Company. Pursuant to this
non-compete agreement, the Company is required to make quarterly payments of
$5,000 through January 2000.

(13) CONTINGENCIES

In October 1996, a building owned by the Company's Farchan subsidiary was
destroyed by fire and the Company has not reached a settlement with its former
insurance carrier for the claims associated with its additional expenses for
outside pheromone purchases. As a result, the Company has filed a lawsuit
against the insurance carrier in the United States District Court to recover
its claims.

(14) NON-CASH INVESTING AND FINANCING ACTIVITIES

The following is a summary of non-cash investing and financing activities
for the three years ended December 31, 1997, 1996 and 1995:

December 31, 1997:

During the year ended December 31, 1997, the Company acquired a building for
$1,495,000, of which $1,125,000 was financed by the issuance of a note
payable. The Company also acquired vehicles and equipment for $259,371 through
the issuance of notes and capital leases payable. In addition, during 1997,
the Company wrote down the carrying value of an unfinished specialty chemicals
facility held for re-sale by $200,000.

F-77
<PAGE>

CONSEP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

December 31, 1996:

During the year ended December 31, 1996, the Company acquired a building for
$396,055 and acquired vehicles for $182,045 through the issuance of notes
payable. Also, during 1996, the Company converted $499,959 of trade accounts
receivable to notes receivable.

December 31, 1995:

Effective February 1, 1995, the Company acquired all of the outstanding
capital stock of Farchan as follows:

<TABLE>
<S> <C>
Fair value of assets acquired................................... $1,135,684
Issuance of 171,671 shares of the Company's common stock........ 354,071
Issuance of notes payable in conjunction with non-compete
agreement...................................................... 160,816
Cash paid....................................................... 74,136
----------
Liabilities assumed .......................................... $ 546,661
==========
</TABLE>

During the year ended December 31, 1995, the Company also acquired $103,088
of equipment through the issuance of notes payable.

(15) BUSINESS SEGMENT INFORMATION

The Company's operations have been classified into three business segments:
domestic proprietary products, foreign proprietary products and distribution
operations. Proprietary products include products manufactured by the Company,
and distribution operations include the distribution and sale of agrichemicals
and other agricultural products by the Company's distribution subsidiaries.
Proprietary products manufactured by the Company which are sold through the
Company's wholly-owned distribution subsidiaries are included in proprietary
products in the following table. Summarized financial information by business
segment for the years ended December 31, 1997, 1996 and 1995 is as follows:

<TABLE>
<CAPTION>
PROPRIETARY PRODUCTS
----------------------- DISTRIBUTION
DOMESTIC FOREIGN OPERATIONS(1) TOTAL
----------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1997:
Revenues................. $10,351,905 $2,610,677 $26,241,747 $39,204,329
Cost of revenues......... 6,359,843 1,930,883 21,496,250 29,786,976
Operating income (loss).. (2,263,589) (613,747) 1,013,289 (1,864,047)
Transfers................ 1,918,309 1,454,410 174 3,372,893
Total assets............. 12,370,484 3,067,331 10,239,745 25,677,560
Depreciation and
amortization............ 662,221 109,787 399,885 1,171,893
Capital expenditures..... 2,180,755 60,118 371,510 2,612,383
DECEMBER 31, 1996:
Revenues................. $ 8,431,056 $1,987,476 $22,810,697 $33,229,229
Cost of revenues......... 5,278,965 1,406,346 18,556,675 25,241,986
Operating income (loss).. (2,654,365) (839,605) 975,997 (2,517,973)
Transfers................ 1,414,402 231,003 3,925 1,649,330
Total assets............. 11,764,452 3,374,907 8,271,862 23,411,221
Depreciation and
amortization............ 610,226 89,612 372,087 1,071,925
Capital expenditures..... 1,245,375 91,024 304,616 1,641,015
DECEMBER 31, 1995:
Revenues................. $ 7,611,108 $1,774,004 $21,458,622 $30,843,734
Cost of revenues......... 4,467,421 1,011,406 17,615,237 23,094,064
Operating income (loss).. (1,866,238) (29,204) 589,306 (1,306,136)
Transfers................ 1,093,833 99,644 3,957 1,197,434
Total assets............. 10,395,536 2,486,026 8,677,012 21,558,574
Depreciation and
amortization............ 414,909 82,282 384,593 881,784
Capital expenditures..... 398,247 34,864 147,382 580,493
</TABLE>
- --------
(1) The distribution operations business segment consists only of domestic
distribution operations.

F-78
<PAGE>

CONSEP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

During the years ended December 31, 1997, 1996 and 1995, export sales of the
Company's proprietary products and sales of proprietary products occurring
outside of the United States totaled $3,332,346, $2,522,164 and $2,217,266,
respectively.

(16) VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END
OF PERIOD EXPENSES DEDUCTIONS OTHER OF PERIOD
---------- ---------- ---------- ----- ----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
1997:
Allowance for doubtful
accounts................. $857,775 228,144 165,134(1) -- 920,785
Inventory valuation
reserve.................. 493,979 275,428 218,979(2) -- 550,428
Product warranty reserve.. 7,834 94,469 87,202(3) -- 15,101
YEAR ENDED DECEMBER 31,
1996:
Allowance for doubtful
accounts................. $834,128 40,171 16,524(1) -- 857,775
Inventory valuation
reserve.................. 261,883 383,307 151,211(2) -- 493,979
Product warranty reserve.. 58,292 52,329 102,787(3) -- 7,834
YEAR ENDED DECEMBER 31,
1995:
Allowance for doubtful
accounts................. $681,198 164,544 11,614(1) -- 834,128
Inventory valuation
reserve.................. 227,239 148,042 113,398(2) -- 261,883
Product warranty reserve.. 82,179 83,494 107,381(3) -- 58,292
</TABLE>
- --------
(1) Deductions primarily represent accounts written off during the period.
(2) Deductions primarily represent inventory scrapped during the period.
(3) Deductions primarily represent warranty credits given to customers for
products returned under warranty.

F-79
<PAGE>

CONSEP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $ 437,576 $ 1,615,773
Short-term investments.......................... 68,334 69,334
Accounts receivable, net........................ 9,926,168 4,733,525
Other receivables............................... 489,470 458,283
Inventories, net (note 2)....................... 9,987,821 9,316,144
Prepaid expenses................................ 484,994 372,023
------------ ------------
Total current assets.......................... 21,394,363 $ 16,565,082
Property, plant and equipment, net................ 5,680,683 5,520,640
Notes receivable and other assets................. 60,571 57,620
Intangible assets, net............................ 1,447,379 1,519,344
Goodwill, net..................................... 1,957,811 2,014,874
------------ ------------
Total assets.................................. $ 30,540,807 $ 25,677,560
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank lines (note 3)............................. $ 3,975,000 $ 1,492,973
Accounts payable................................ 7,324,376 4,581,462
Current portion of notes payable and leases
payable........................................ 495,897 559,272
Accrued liabilities............................. 1,365,015 925,568
Customer deposits............................... 171,575 734,148
------------ ------------
Total current liabilities..................... 13,331,863 8,293,423
Notes and leases payable, excluding current
maturities....................................... 2,042,051 2,148,119
Mandatory stock warrant obligation................ 19,500 19,500
------------ ------------
Total liabilities............................. 15,393,414 10,461,042
------------ ------------
Shareholders' equity:
Common stock.................................... 96,577 94,602
Additional paid-in capital...................... 44,226,742 44,313,127
Accumulated deficit............................. (29,117,120) (29,177,621)
Foreign currency translation adjustment......... (58,806) (13,590)
------------ ------------
Total shareholders' equity.................... 15,147,393 15,216,518
Total liabilities and shareholders' equity.... $ 30,540,807 $ 25,677,560
============ ============
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

F-80
<PAGE>

CONSEP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
30,
------------------------
1998 1997
----------- -----------
<S> <C> <C>
Revenues............................................ $22,777,724 $24,605,875
Cost of revenues.................................... 16,922,542 17,739,937
----------- -----------
Gross margin.................................... 5,855,182 6,865,938
----------- -----------
Operating expenses (note 4):
Research and development.......................... 824,808 614,116
Selling, general and administrative............... 4,763,350 5,427,297
----------- -----------
Total operating expenses........................ 5,588,158 6,041,413
----------- -----------
Operating income.................................... 267,024 824,525
----------- -----------
Other income (expense):
Interest expense.................................. (291,639) (170,703)
Interest income................................... 63,207 51,997
Other, net........................................ 21,909 208,184
----------- -----------
Net other income (loss)......................... (206,523) 89,478
----------- -----------
Net income...................................... $ 60,501 $ 914,003
=========== ===========
Basic and diluted net income per share (note 5)..... $ 0.01 $ 0.10
=========== ===========
Weighted average number of shares used in the
computation of (note 5):
Basic earnings per share.......................... 9,606,574 9,443,793
=========== ===========
Diluted earnings per share........................ 9,639,608 9,543,889
=========== ===========
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

F-81
<PAGE>

CONSEP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)

<TABLE>
<CAPTION>
PREFERRED FOREIGN
STOCK COMMON STOCK ADDITIONAL CURRENCY TOTAL
------------- ----------------- PAID-IN ACCUMULATED TRANSLATION SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT EQUITY
------ ------ --------- ------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1997................... -- $-- 9,460,151 $94,602 $44,313,127 $(29,177,621) $(13,590) $15,216,518
Additional shares
issued under Farchan
merger agreement...... -- -- 171,671 1,717 (1,717) -- -- --
Exercise of stock
options............... -- -- 12,000 120 44,880 -- -- 45,000
Additional costs
related to the
acquisition of Sierra
Ag.................... -- -- -- -- (150,000) -- -- (150,000)
Common stock issued
under Employee Stock
Purchase Plan......... -- -- 13,842 138 20,452 -- -- 20,590
Foreign currency
translation
adjustment............ -- -- -- -- -- -- (45,216) (45,216)
Net income............. -- -- -- -- -- 60,501 -- 60,501
--- ---- --------- ------- ----------- ------------ -------- -----------
Balance at June 30,
1998................... -- $-- 9,657,664 $96,577 $44,226,742 $(29,117,120) $(58,806) $15,147,393
=== ==== ========= ======= =========== ============ ======== ===========
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

F-82
<PAGE>

CONSEP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
30,
------------------------
1998 1997
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income.......................................... $ 60,501 $ 914,003
Adjustments to reconcile net income to net cash used
in operating activities:
Depreciation and amortization..................... 635,647 574,015
Provision for bad debts........................... 188,842 72,038
Inventory reserve................................. 75,113 61,077
(Gain) loss on disposal of equipment.............. 6,636 (362)
Other non-cash items.............................. 47,651 184,102
Changes in assets and liabilities, net of amounts
acquired:
Short-term investments.......................... 1,000 500
Accounts receivable............................. (5,413,684) (6,379,108)
Other receivables............................... (31,187) (388,664)
Inventories..................................... (761,571) (2,186,403)
Prepaid expenses................................ (114,138) 555,944
Accounts payable................................ 2,773,746 3,125,248
Accrued liabilities............................. 440,400 458,091
Other assets.................................... 1,263 6,461
Customer deposits............................... (562,574) (185,346)
----------- -----------
Net cash used in operating activities......... (2,652,355) (3,188,404)
----------- -----------
INVESTING ACTIVITIES:
Acquisition of intangible assets.................... (67,152) (39,920)
Acquisition of property, plant and equipment........ (575,107) (934,047)
Additional costs related to acquisitions of
subsidiaries....................................... (177,744) --
Net proceeds from sale of property, plant and
equipment.......................................... 5,500 --
(Increase) decrease in notes receivable, net of
payments received.................................. (5,428) 51,216
----------- -----------
Net cash used in investing activities......... (819,931) (922,751)
----------- -----------
FINANCING ACTIVITIES:
Increase in bank lines.............................. 2,482,017 4,414,340
Increase in notes payable........................... 75,000 250,000
Principal payments on notes payable and capital
lease obligations.................................. (300,918) (196,228)
Proceeds from sale of common stock, net............. 65,590 31,819
----------- -----------
Net cash provided by financing activities..... 2,321,689 4,499,931
----------- -----------
Effect of exchange rate changes on cash and cash
equivalents........................................ (27,600) 54
----------- -----------
Net increase (decrease) in cash and cash
equivalents.................................. (1,178,197) 388,830
Cash and cash equivalents at beginning of period.... 1,615,773 2,443,508
----------- -----------
Cash and cash equivalents at end of period.......... $ 437,576 $ 2,832,338
=========== ===========
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

F-83
<PAGE>

CONSEP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1--BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles. However, certain
information or footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the Securities
and Exchange Commission. In the opinion of management, the statements include
all adjustments necessary (which are of a normal and recurring nature) for the
fair presentation of the results of the interim periods presented. These
financial statements should be read in conjunction with the Company's audited
consolidated financial statements for the year ended December 31, 1997, as
included in the Company's 1997 Annual Report to Shareholders.

NOTE 2--INVENTORIES

Inventories, stated at the lower of cost or market, consist of:

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
---------- ------------
<S> <C> <C>
Raw materials........................................ $2,024,768 $1,998,509
Finished goods--proprietary.......................... 4,595,788 4,640,578
Finished goods--distribution......................... 3,953,069 3,227,485
---------- ----------
10,573,625 9,866,572
Less reserve for obsolescence........................ 585,804 550,428
---------- ----------
$9,987,821 $9,316,144
========== ==========
</TABLE>

NOTE 3--BANK LINES

The Company has operated under a $7.5 million bank line of credit which
matures in December 1998 and is secured by substantially all of the Company's
current assets. Maximum borrowings under the credit line cannot exceed 70% of
eligible accounts receivable and between 40% and 50% of eligible inventory
from certain of the Company's distribution operations. Under the terms of the
credit agreement, the Company is required to maintain certain financial ratios
and other financial conditions. At June 30, 1998, $3,975,000 was outstanding
under this line of credit and the Company was not in compliance with the
tangible net worth, the debt to tangible net worth ratio and the quick ratio
covenants. The Company has obtained a waiver of compliance for the quarter
ended June 30, 1998. In connection with the Bank's waiver, the line of credit
has been reduced to $5.0 million from the $7.5 million originally available.

NOTE 4--OPERATING EXPENSES

Research and development and selling, general and administrative expenses
are allocated to the Company's proprietary product operations. Distribution
expenses consist entirely of selling, general and administrative costs of the
Company's distribution operations.

NOTE 5--NET INCOME PER COMMON SHARE

For the six months ended June 30, 1998 and 1997, basic net income per common
share is based upon the weighted average number of common shares outstanding
during each period, with diluted net income per share including the effect of
potentially dilutive common shares.

F-84
<PAGE>

CONSEP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 6--COMPREHENSIVE INCOME

During the first quarter of 1998, the Company adopted SFAS No. 130,
"Reporting Comprehensive Income" which establishes standards for the reporting
and display of comprehensive income and its components. The following is a
reconciliation of net income to comprehensive income:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------
JUNE 30, JUNE 30,
1998 1997
-------- --------
<S> <C> <C>
Net income............................................. $60,501 $914,003
Other comprehensive income (loss), net of tax Foreign
currency translation adjustments...................... (45,215) (10,272)
------- --------
Comprehensive income................................... $15,286 $903,731
======= ========
</TABLE>

NOTE 7--SUPPLEMENTAL STATEMENTS OF CASH FLOW DISCLOSURES

Cash paid for interest and income taxes was as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED INCOME
JUNE 30, INTEREST TAXES
---------------- -------- ------
<S> <C> <C>
1998 $289,601 $ 5,062
1997 $172,392 $11,844
</TABLE>

Following is a summary of non-cash investing and financing activities of the
Company for the six months ended June 30, 1998 and 1997:

During the six months ended June 30, 1998, the Company acquired vehicles
for $55,455 through the issuance of notes payable.

During the six months ended June 30, 1997, the Company acquired equipment
and vehicles for $178,393 through the issuance of notes and leases payable.
In June 1997, the Company completed the purchase of its headquarters and
manufacturing facility which was partially financed by a $1,125,000 note
payable to a bank.

In addition, as a result of the Company's intention to sell its
unfinished specialty chemicals manufacturing plant in Alachua, Florida, the
Company recorded a $175,000 write down to adjust the facility's carrying
value to the estimated fair market value.

NOTE 8--NEW ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information". The
Statement changes the way public companies report segment information in
annual financial statements and also requires those companies to report
selected segment information in interim financial reports to shareholders. The
Company plans to adopt the statement for the year ended December 31, 1998.

NOTE 9--SUBSEQUENT EVENTS

On September 8, 1998 the Company entered into an Agreement and Plan of
Merger with Verdant Brands, Inc., (formerly Ringer Corporation) providing for
the merger of the Company with a wholly-owned subsidiary of Verdant Brands,
Inc. in a 0.95 for one stock swap. The proposed merger is subject to, among
other things, the approval of Consep's shareholders, the approval of Verdant's
shareholders and applicable third-party consents and approvals. The proposed
merger is expected to be completed by December 31, 1998.

F-85
<PAGE>

APPENDIX A

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER, dated September 8, 1998, (the "AGREEMENT
DATE") by and among Verdant Brands, Inc., a Minnesota corporation ("PARENT"),
Consep Acquisition, Inc., an Oregon corporation and wholly owned subsidiary of
Parent ("MERGER SUB"), and Consep, Inc., an Oregon corporation (the
"COMPANY").

WHEREAS, the respective boards of directors of the Company, Parent and
Merger Sub have determined that it is in the best interests of Company, Parent
and Merger Sub and their respective shareholders to consummate the merger of
Merger Sub and the Company (the "MERGER") upon the terms and subject to the
conditions of this Agreement;

WHEREAS, as a result of the Merger, all of the outstanding common stock,
$.01 par value, of the Company ("COMPANY COMMON STOCK"), will be converted
into the right to receive common stock, $.01 par value, of Parent ("PARENT
COMMON STOCK");

WHEREAS Parent, Merger Sub, and the Company desire to make certain
representations, warranties, covenants, and agreements in connection with the
Merger and also to prescribe various conditions to the Merger; and

WHEREAS, for federal income Tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368(a) of
the United States Internal Revenue Code of 1986, as amended (the "CODE");

NOW, THEREFORE, in consideration of the representations, warranties,
covenants, and agreements, the parties agree as follows:

ARTICLE I

The Merger

1.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, at the Effective Time, Merger Sub shall be merged with and
into the Company in accordance with the Business Corporation Act of the State
of Oregon ("OREGON LAW"), whereupon the separate existence of Merger Sub shall
cease, and the Company shall continue as the surviving corporation (the
"SURVIVING CORPORATION").

1.2 Articles of Merger; Effective Time. As soon as practicable after
satisfaction or, to the extent permitted hereunder, waiver of all conditions
to the Merger set forth in Article VII, the parties shall cause the Merger to
be consummated by filing articles of merger (the "ARTICLES OF MERGER") with
the Secretary of State of the State of Oregon and make all other filings or
recordings required by Oregon Law in connection with the Merger and the
transactions contemplated by this Agreement. The Merger shall become effective
at such time as the Articles of Merger are duly filed with the Secretary of
State of the State of Oregon or at such later time as may be agreed by the
parties in writing and specified in the Articles of Merger (the "EFFECTIVE
TIME").

1.3 Effect of Merger. From and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers, and franchises
and be subject to all of the restrictions, disabilities, and duties of the
Company and Merger Sub, all as provided under Oregon Law.

1.4 Closing. The closing of the Merger (the "CLOSING") will take place at
10:00 a.m., Pacific time, on a date to be specified by the parties, which
shall be no later than the second business day after satisfaction or waiver of
the conditions set forth in Article VII (the "CLOSING DATE"), at a time and
place and by a method mutually agreed to by the parties.

A-1
<PAGE>

1.5 Articles of Incorporation; Bylaws. At the Effective Time, the articles
of incorporation and bylaws of the Merger Sub as in effect immediately prior
to the Effective Time, shall be the articles of incorporation and bylaws of
the Surviving Corporation, except that Article I of such articles of
incorporation shall be amended to read as follows: "The name of the
corporation is Consep, Inc."

1.6 Officers and Directors. The officers of the Company immediately prior to
the Effective Time shall be the initial officers of the Surviving Corporation.
The initial directors of the Surviving Corporation shall be Stanley Goldberg,
Volker G. Oakey and Mark G. Eisenschenk.

ARTICLE II

Conversion of Securities; Exchange of Certificates

2.1 Conversion of Securities. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of
Company Common Stock or any shares of capital stock of Merger Sub:

(a) Exchange Ratio. Subject to the provisions of Section 2.4, each share of
Company Common Stock issued and outstanding immediately prior to the Effective
Time (other than (i) any shares to be canceled pursuant to Section 2.1(b))
shall be converted, subject to the provisions of Section 2.5(e), into the
right to receive ninety-five one hundredths (0.95) of one share (the "EXCHANGE
RATIO") of Parent Common Stock (such shares of Parent Common Stock being
hereinafter referred to as the "MERGER CONSIDERATION").

(b) Cancellation of Shares. Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time and owned by Parent,
Merger Sub or the Company or any direct or indirect subsidiary of Parent,
Merger Sub or the Company shall be canceled and extinguished without any
conversion thereof and no payment shall be made with respect thereto.

(c) Stock of Merger Sub. Each share of common stock, $.01 par value per
share, of Merger Sub ("MERGER SUB COMMON STOCK") issued and outstanding
immediately prior to the Effective Time shall be converted into one validly
issued, fully paid and nonassessable share of Common Stock of the Surviving
Corporation.

2.2 Rights of Holders of Company Common Stock. On and after the Effective
Time and until surrendered for exchange, each outstanding stock certificate
which immediately prior to the Effective Time represented shares of Company
Common Stock shall, except as provided in Section 2.4(e), be deemed for all
purposes to evidence ownership of and to represent the right to receive the
number of whole shares of Parent Common Stock into which such shares of
Company Common Stock shall have been converted. The record holder of such
outstanding certificate shall, after the Effective Time, be entitled to vote
the shares of Parent Common Stock into which such shares of Company Common
Stock shall have been converted on any matters on which the holders of record
of Parent Common Stock, as of any date subsequent to the Effective Time, shall
be entitled to vote. In any matters relating to such certificates, Parent may
rely conclusively upon the record of shareholders maintained by the Company
containing the names and addresses of the holders of record of Company Common
Stock at the Effective Time.

2.3 Adjustments to Exchange Ratio. The Exchange Ratio set forth in Section
2.1 shall be adjusted to reflect fully the effect of any stock split, reverse
split, stock dividend (including any dividend or distribution of securities
convertible into Company Common Stock or Parent Common Stock), reorganization,
recapitalization or other like change with respect to Company Common Stock or
Parent Common Stock occurring after the Agreement Date and prior to the
Effective Time.

2.4 Exchange of Certificates.

(a) Exchange Agent. As of the Effective Time, Parent shall deposit with
Norwest Bank Minnesota, National Association or such other bank or trust
company as may be designated by Parent and as is

A-2
<PAGE>

reasonably acceptable to the Company (the "Exchange Agent") certificates
representing the shares of Parent Common Stock issuable pursuant to Section
2.1 (such shares of Parent Common Stock, together with any dividends or
distributions with respect thereto, being hereinafter referred to as the
"EXCHANGE FUND"). The Exchange Agent shall hold the Exchange Fund for the
benefit of holders of shares of Company Common Stock. The Exchange Agent shall
distribute the Exchange Fund pursuant to Section 2.1 in exchange for
outstanding shares of Company Common Stock (other than Dissenting Shares).
Except as contemplated by Section 2.4(f), the Exchange Fund shall not be used
for any other purpose. Parent shall make available to the Exchange Agent from
time to time as needed, cash sufficient to pay cash in lieu of fractional
shares pursuant to Section 2.4(e).

(b) Exchange Procedures. As promptly as practicable after the Effective
Time, Parent shall cause the Exchange Agent to mail to each holder of record
of a certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "CERTIFICATES")
whose shares were converted into the right to receive shares of Parent Common
Stock pursuant to Section 2.1(a) a letter of transmittal in customary form.
The letter of transmittal shall specify that delivery of Certificates shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent. The Exchange Agent shall
accompany the letter of transmittal with instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing shares
of Parent Common Stock. Upon surrender of a Certificate for cancellation to
the Exchange Agent, together with such letter of transmittal, duly executed,
and such other documents as the Exchange Agent may reasonably require, the
holder of such Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Parent Common Stock
(rounded down to the nearest whole share) which such holder has the right to
receive pursuant to the provisions of this Article II (after taking into
account all the shares of Company Common Stock then held by such holder under
all such Certificates so surrendered), cash in lieu of fractional shares of
Parent Common Stock to which such holder is entitled pursuant to Section
2.4(e), and any dividends or other distributions to which such holder is
entitled pursuant to Section 2.4(c). The Exchange Agent shall forthwith cancel
the Certificates so surrendered. If there is a transfer of share ownership
which is not registered in the transfer records of the Company, a certificate
representing the proper number of shares of Parent Common Stock may be issued
to a person other than the person in whose name the Certificate so surrendered
is registered, if, upon presentation to the Exchange Agent, such Certificate
shall be properly endorsed or otherwise be in proper form for transfer and the
person requesting such payment shall pay any transfer or other Taxes required
by reason of the issuance of shares of Parent Common Stock to a person other
than the registered holder of such Certificate or establish to the reasonable
satisfaction of Parent that such Tax has been paid or is not applicable.
Except as provided in Section 2.4, until surrendered as contemplated by this
Section 2.4(b), each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
Certificate representing shares of Parent Common Stock, cash in lieu of any
fractional shares of Parent Common Stock as contemplated by this Section 2.4,
and any dividends or other distributions to which such holder is entitled
pursuant to Section 2.4(c). No interest will be paid or will accrue on any
cash payable pursuant to Sections 2.4(c) or 2.4(e).

(c) Distributions with Respect to Unexchanged Shares. Parent will pay no
dividends and make no other distributions with respect to Parent Common Stock
with a record date after the Effective Time to the holder of any unsurrendered
Certificate with respect to the shares of Parent Common Stock represented
thereby, and Parent will make no cash payment in lieu of fractional shares to
any such holder pursuant to Section 2.4(e) until the holder of record of such
Certificate surrenders such Certificate. Following surrender of any such
Certificate, the Exchange Agent, on behalf of Parent, shall pay to the record
holder of the Certificate representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of any cash payable in lieu of a fractional share of
Parent Common Stock to which such holder is entitled pursuant to Section
2.4(e) and the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole shares of
Parent Common Stock and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time
but prior to such surrender and a payment date subsequent to such surrender
payable with respect to such whole shares of Parent Common Stock.

A-3
<PAGE>

(d) No Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of
Company Common Stock in accordance with the terms hereof (including any cash
paid pursuant to Section 2.4(c) or 2.4(e)) shall be deemed to have been issued
in full satisfaction of all rights pertaining to such shares of Company Common
Stock.

(e) No Fractional Shares.

(i) No certificates or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the
owner thereof to vote or to any rights of a shareholder of Parent.

(ii) Notwithstanding any other provision of this Agreement, each holder
of shares of Company Common Stock exchanged for shares of Parent Common
Stock pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of Parent Common Stock (after taking into
account all Certificates delivered by such holder) shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part
of a share of Parent Common Stock multiplied by the closing price of Parent
Common Stock on the Closing Date.

(f) Termination of Exchange Fund. The Exchange Agent shall deliver any
portion of the Exchange Fund that remains undistributed to the holders of the
Certificates for two years after the Effective Time to Parent, upon demand.
Any holders of the Certificates who have not theretofore complied with this
Article II shall thereafter look only to Parent for payment of their claim for
Parent Common Stock, any cash in lieu of fractional shares of Parent Common
Stock, and any dividends or distributions with respect to Parent Common Stock.

(g) No Liability. None of Parent, Merger Sub, the Company or the Exchange
Agent shall be liable to any person in respect of any shares of Parent Common
Stock (or dividends or distributions with respect thereto) or cash in the
Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat, or similar law.

(h) Investment of Exchange Fund. The Exchange Agent shall invest any cash
included in the Exchange Fund in deposit accounts, as directed by Parent, on a
daily basis. The Exchange Agent shall pay any interest and other income
resulting from such investments to Parent.

(i) Lost Certificates. If any Certificate shall have been lost, stolen, or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen, or destroyed, and, if required by the
Surviving Corporation, upon the delivery to the Exchange Agent of a bond in
such sum as the Surviving Corporation may direct as indemnity against any
claim that may be made against it with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen, or destroyed
Certificate the shares of Parent Common Stock and any cash in lieu of
fractional shares, and unpaid dividends and distributions on shares of Parent
Common Stock deliverable in respect thereof, pursuant to this Agreement.

2.5 Stock Options.

(a) Company Stock Options Outstanding. Each option to purchase shares of
Company Common Stock (a "COMPANY OPTION") under the Company's 1992 Stock
Incentive Plan, 1993 Stock Incentive Plan, 1993 Stock Option Plan for
Nonemployee Directors, or 1997 Stock Incentive Plan, each as amended (the
"OPTION PLANS"), outstanding immediately prior to the Effective Time shall
remain outstanding following the Effective Time.

(b) Assumption by Parent. At the Effective Time, Parent shall assume each
Company Option by virtue of the Merger and without any further action on the
part of the Company or the holders thereof. Parent shall assume each such
option in such manner that Parent (i) is a corporation "assuming a stock
option in a transaction to which Section 424(a) applies" within the meaning of
Section 424 of the Code or (ii) to the extent that Section 424 of the Code
does not apply to any such Company Option, would be such a corporation were
Section 424 of the Code applicable to such Company Option. In the case of any
Company Option to which Section 422 of the Code applies, the option price per
share, the number of shares purchasable pursuant to such Company Option and
the terms and conditions of exercise thereof shall be determined in order to
comply with Section 424(a) of the Code.

A-4
<PAGE>

(c) Terms of Company Options. From and after the Effective Time, all
references to the Company in the Company Options and the related stock option
agreements shall be deemed to refer to Parent. After the Effective Time, each
Company Option assumed by Parent shall be exercisable upon the same terms and
conditions as were in effect under the Company Options and the related option
agreements immediately prior to the Effective Time, except that (i) each
Company Option shall be exercisable for that whole number of shares of Parent
Common Stock (rounded down to the nearest whole share) equal to the number of
shares of Company Common Stock subject to such Company Option immediately
prior to the Effective Time multiplied by the Exchange Ratio, and (ii) the
option price per share of Parent Common Stock shall be an amount equal to the
option price per share of Company Common stock subject to such Company Option
in effect immediately prior to the Effective Time divided by the Exchange
Ratio (the option price per share, as so determined, being rounded upward to
the nearest full cent).

2.6 Warrants.

(a) Company Warrants Outstanding. Each outstanding warrant to purchase
shares of Company Common Stock (a "COMPANY WARRANT") outstanding immediately
prior to the Effective Time shall remain outstanding following the Effective
Time. To the extent permitted by the terms of the Company Warrants, at the
Effective Time, Parent shall assume each Company Warrant, by virtue of the
Merger and without any further action on the part of the Company or the
holders thereof.

(b) Terms of Company Warrants. To the extent permitted by the terms of the
Company Warrants, from and after the Effective Time, all references to the
Company in the Company Warrants and the related warrant agreements shall be
deemed to refer to Parent. After the Effective Time, each Company Warrant
assumed by Parent shall be exercisable upon the same terms and conditions as
were in effect under the Company Warrants and the related warrant agreements
immediately prior to the Effective Time, except that, to the extent permitted
by the terms of the Company Warrants, (i) each Company Warrant shall be
exercisable for that whole number of shares of Parent Common Stock (rounded
down to the nearest whole share) equal to the number of shares of Company
Common Stock subject to such Company Warrant immediately prior to the
Effective Time multiplied by the Exchange Ratio and (ii) the warrant price per
share of Parent Common Stock shall be an amount equal to the warrant price per
share of Company Common stock subject to such Company Warrant in effect
immediately prior to the Effective Time divided by the Exchange Ratio (the
warrant price per share, as so determined, being rounded upward to the nearest
full cent).

2.7 Notices to Option and Warrant Holders. As soon as practicable after the
Effective Time, Parent shall deliver to each holder of a Company Option or
Company Warrant, an appropriate notice setting forth such holder's rights
pursuant thereto. Parent shall notify such holders that the Company Option or
Company Warrant, as the case may be, shall continue in effect on the same
terms and conditions (including anti-dilution provisions, and subject to the
adjustments required by Sections 2.5 and 2.6 after giving effect to the
Merger). Parent shall comply with the terms of each Company Option or Company
Warrant. Parent shall use reasonable efforts to ensure that each Company
Option and Company Warrant, to the extent it qualifies for special Tax
treatment prior to the Effective Time (including, without limitation, Section
422 of the Code), shall continue so to qualify after the Effective Time.
Parent shall take all corporate action necessary to reserve for issuance a
sufficient number of shares of Parent Common Stock for delivery pursuant to
the terms set forth in Sections 2.5 and 2.6. After the Effective Time (but in
no event later than 90 days after the Effective Time), Parent shall file a
Registration Statement on Form S-8 with respect to the shares of Parent Common
Stock subject to Company Options, and shall use its reasonable efforts to
maintain the effectiveness of such registration statement (and maintain the
current status of the prospectus contained therein) for so long as such
options remain outstanding.

A-5
<PAGE>

ARTICLE III

Representations And Warranties
Of The Company

The Company represents and warrants to Parent and Merger Sub that, except as
set forth in, and qualified by, the Company disclosure schedules attached to
this Agreement (the "COMPANY DISCLOSURE SCHEDULES"), which schedules identify
exceptions by specific section reference):

3.1 Corporate Existence and Power. The Company is a corporation duly
organized and existing under the laws of the State of Oregon. The Company has
all corporate power required to carry on its business as now conducted. The
Company is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the character of the property it
owns or leases or the nature of its activities makes such qualification
necessary, except for those jurisdictions in which the failure to be so
qualified would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole (a "COMPANY MATERIAL ADVERSE EFFECT"). For
purposes of this Agreement, a "Company Material Adverse Effect" means (i) a
material adverse effect on the business, assets (including intangible assets),
liabilities, financial condition, or results of operations of the Company and
any of its subsidiaries, taken as a whole, or on the ability of the Surviving
Corporation following the Merger to continue the business of the Company and
any of its subsidiaries, taken as a whole, substantially as currently
conducted or proposed to be conducted, or (ii) a material impairment of the
ability of the Company to perform any of its obligations under this Agreement
or to consummate the Merger. The Company has delivered to Parent correct and
complete copies of the Company's articles of incorporation and bylaws in
effect as of the Agreement Date.

3.2 Subsidiaries. Schedule 3.2 lists each subsidiary of the Company,
together with its jurisdiction of incorporation or organization. All
outstanding shares of capital stock of each such subsidiary have been duly
authorized and validly issued and are fully paid and nonassessable. The
Company owns all of such shares, free and clear of pledges, claims, Liens,
charges, encumbrances, and security interests of any nature whatsoever (each,
a "LIEN"). No options, warrants, or other rights to acquire any securities of
any type of any of such subsidiaries are outstanding as of the Agreement Date.
Except for the capital stock of its subsidiaries and except for ownership
interests set forth in Schedule 3.2, the Company does not own, directly or
indirectly, any capital stock or other ownership interest in any corporation,
partnership, joint venture, or other entity.

3.3 Corporate Authorization. The Company's execution, delivery, and
performance of this Agreement and its consummation of the transactions
contemplated hereby are within its corporate powers. Except for approval by
the affirmative vote of the holders of a majority of the outstanding shares of
Company Common Stock required for the Merger, the Company has duly authorized
the Merger. The Company has duly and validly executed and delivered this
Agreement. Assuming this Agreement constitutes the valid and binding agreement
of Parent and Merger Sub, this Agreement constitutes a valid and binding
agreement of the Company enforceable against the Company in accordance with
its terms.

3.4 Governmental Authorization. Except as set forth on Schedule 3.4, the
Company's execution, delivery and performance of this Agreement and its
consummation of the Merger require no action by, or in respect of, or filing
with, any federal, state, local, or foreign governmental body, agency,
official, or authority (including courts, administrative agencies,
commissions, self-regulatory agencies, or authorities or other governmental
authorities or instrumentalities) (each, a "GOVERNMENTAL ENTITY") other than:
(a) filing the Articles of Merger in accordance with Oregon Law; (b)
compliance with applicable requirements of the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder (the
"EXCHANGE ACT"); (c) compliance with the rules or regulations of the NASDAQ
National Market; and (d) compliance with the securities laws of various
states.

3.5 Non-Contravention. The Company's execution, delivery, and performance of
this Agreement does not, and its consummation of the transactions contemplated
hereby will not: (a) contravene or conflict with the

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articles of incorporation or bylaws of the Company; (b) assuming compliance
with the matters referred to in Section 3.4, contravene, conflict with, or
constitute a violation of any provision of any law, regulation, judgment,
injunction, order, or decree binding on or applicable to the Company, other
than such as would not, individually or in the aggregate, have a Company
Material Adverse Effect; (c) assuming compliance with the matters set forth in
Section 3.4 constitute a breach, violation, or a default under, or give rise
to a right of termination, cancellation, or acceleration of any right or
obligation of the Company or to a loss of any benefit to which the Company is
entitled under any provision of, any agreement, contract, or other instrument
binding upon the Company or any license, franchise, permit or other similar
authorization held by the Company, other than such as would not, individually
or in the aggregate, have a Company Material Adverse Effect; or (d) result in
the creation or imposition of any Lien on any asset of the Company, other than
such as would not, individually or in the aggregate, have a Company Material
Adverse Effect. Schedule 3.5 sets forth a complete, and correct list of all
consents, approvals, and authorizations the Company is required to obtain from
any non-Governmental Entity in connection with this Agreement, the Merger, and
the transactions contemplated hereby, other than those with respect to which
the failure of the Company to obtain such consent, approval, or authorization,
individually or in the aggregate, would not have a Company Material Adverse
Effect.

3.6 Capitalization. The authorized capital stock of the Company consists of
15,000,000 shares of Company Common Stock, 657,601 shares of non-voting common
stock, $.01 par value ("NON-VOTING COMMON STOCK") and 3,000,000 shares of
preferred stock, $.01 par value ("COMPANY PREFERRED STOCK" and, together with
Company Common Stock and the Non-Voting Common Stock, "COMPANY CAPITAL
STOCK"). As of the Agreement Date, 9,667,357 shares of Company Common Stock
are outstanding and no shares of Non-Voting Common Stock or Company Preferred
Stock are outstanding. As of the Agreement Date, Company Options to purchase
an aggregate of 735,359 shares of Company Common Stock are outstanding, and
Company Warrants to purchase an aggregate of 257,357 shares of Company Common
Stock are outstanding. The Company has duly reserved for issuance pursuant to
the exercise of options under existing plans or warrants a total of 1,526,113
shares of Company Common Stock, including 992,716 shares for issuance upon
exercise of the Company Options and Company Warrants. All outstanding shares
of Company Capital Stock have been duly authorized and validly issued and are
fully paid and nonassessable. The Company issued all such shares in compliance
with all applicable federal and state securities laws. The Company Common
Stock is registered pursuant to Section 12(g) of the Exchange Act and has been
approved for listing on the NASDAQ National Market. Except as set forth in
this Section 3.6 and except for changes since the Agreement Date resulting
from the exercise of the Company Options outstanding on the Agreement Date,
(i) no shares of Company Capital Stock or other voting securities of the
Company are outstanding, (ii) no securities of the Company convertible into or
exchangeable for shares of Company Capital Stock or other voting securities of
the Company are outstanding, and (iii) no options or other rights to acquire
from the Company, and no obligation of the Company to issue, any Company
Capital Stock, voting securities or securities convertible into or
exchangeable for Company Capital Stock or other voting securities of the
Company are outstanding (the items in clauses (i), (ii) and (iii) being
referred to collectively as the "COMPANY SECURITIES").

3.7 SEC Documents. The Company has filed all required reports, schedules,
forms, statements, and other documents with the Securities and Exchange
Commission (the "SEC") since July 1, 1994 (together with subsequent documents
filed by the Company before the Agreement Date that revise or supersede such
earlier filed documents, the "COMPANY SEC DOCUMENTS"). As of their respective
dates, the Company SEC Documents complied as to form in all material respects
with the requirements of the Securities Act of 1933, as amended (the
"SECURITIES ACT") or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Company SEC
Documents. As of their respective dates none of the Company SEC Documents
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the
Company SEC Documents complied as of their respective dates of filing with the
SEC as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles (except, in

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the case of unaudited statements, as permitted by Form 10-Q of the Exchange
Act) applied on a consistent basis during the periods involved (except as may
be indicated in the notes thereto), and fairly present the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of its operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). Except as set forth in the Company SEC
Documents, and except for liabilities and obligations incurred in the ordinary
course of business consistent with past practice, the Company has no
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by generally accepted accounting principles
to be set forth on a consolidated balance sheet of the Company or in the notes
thereto which, individually or in the aggregate, would have a Company Material
Adverse Effect.

3.8 Absence of Certain Changes or Events. Except as disclosed in the Company
SEC Documents, and except as expressly contemplated by this Agreement or set
forth in Schedule 3.8, since the date of the most recent audited financial
statements included in the Company SEC Documents, the Company and each of its
subsidiaries have conducted their respective businesses only in the ordinary
course, and neither the Company nor any of its subsidiaries has:

(a) with the exception of seasonal business changes in the ordinary course,
suffered any material adverse change in the assets, financial condition,
operating results, distributor, customer, employee or supplier relations,
business condition or prospects of the Company or any of its subsidiaries, nor
any other event or occurrence or development of a state of circumstances or
facts which has had a Company Material Adverse Effect;

(b) borrowed any amount or incurred or become subject to any liability in
excess of $5,000, except (i) current liabilities incurred in the ordinary
course of business and (ii) liabilities under contracts entered into in the
ordinary course of business;

(c) mortgaged, pledged or subjected to any Lien any of its assets with a
fair market value in excess of $5,000, except (i) Liens for current property
Taxes not yet delinquent, (ii) Liens imposed by law and incurred in the
ordinary course of business for obligations not yet delinquent with respect to
claims by carriers, warehousemen, laborers, materialmen and the like, (iii)
Liens in respect of pledges or deposits under workers' compensation laws, or
(iv) Liens voluntarily created in the ordinary course of business, all of
which Liens aggregate less than $25,000;

(d) discharged or satisfied any Lien or paid any liability, in each case
with a value in excess of $5,000, other than current liabilities (including
the current portion of long-term liabilities) paid in the ordinary course of
business;

(e) sold, assigned or transferred (including, without limitation, transfers
to any employees, affiliates or shareholders) any tangible assets with a fair
market value in excess of $5,000, or canceled any debts or claims, in each
case in the ordinary course of business;

(f) sold, assigned or transferred (including, without limitation, transfers
to any employees, affiliates or shareholders) any patents, trademarks, trade
names, copyrights, trade secrets or other intangible assets;

(g) disclosed, to any person other than Parent or Merger Sub and authorized
representatives of Parent or Merger Sub, any proprietary confidential
information, other than pursuant to a confidentiality agreement prohibiting
the use or further disclosure of such information, which agreement is
identified in the Schedule 3.8 and is in full force and effect on the date
hereof;

(h) waived any rights of material value or suffered any extraordinary losses
or adverse changes in collection loss experience, whether or not in the
ordinary course of business or consistent with past practice;

(i) declared or paid any dividends or other distributions with respect to
any shares of its capital stock other than to the Company or a Subsidiary or
redeemed or purchased, directly or indirectly, any shares of its capital stock
or any options, warrants or other rights to purchase the same;

(j) with the exception of securities issued upon the exercise of options and
warrants to purchase such securities, issued, sold or transferred any of its
equity securities, securities convertible into or exchangeable for its equity
securities or options, warrants or other rights to acquire its equity
securities, or any bonds or debt securities;

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(k) taken any other action or entered into any other transaction other than
in the ordinary course of business and in accordance with past custom and
practice, or entered into any transaction with any Insider (as defined in
Section 3.20 other than employment arrangements otherwise disclosed in this
Agreement and the Company Disclosure Schedules, or the transactions expressly
contemplated by this Agreement;

(l) suffered any material theft, damage, destruction or loss of or to any
property or properties owned or used by it, whether or not covered by
insurance;

(m) made or granted any bonus, or any wage, salary or compensation increase
to any director, officer, employee or consultant whose annual compensation in
the preceding fiscal year exceeded $50,000, or made or granted any increase in
any employee benefit plan or arrangement, or amended or terminated any
existing employee benefit plan or arrangement, or adopted any new employee
benefit plan or arrangement or made any commitment or incurred any liability
to any labor organization;

(n) made any single capital expenditure or commitment therefor in excess of
$5,000;

(o) made any loans or advances to, or guarantees for the benefit of, any
persons in excess of $5,000;

(p) made any charitable contributions or pledges in excess of $5,000;

(q) made any change in accounting principles or practices from those
utilized in the preparation of the Company SEC Documents;

(r) experienced any amendment, modification or termination of any existing,
or entered into any new, contract, agreement, plan, lease, license, permit or
franchise which is, either individual or in the aggregate, material to its
business, operations, financial position or prospects, other than in the
ordinary course of business;

(s) experienced any labor dispute;

(t) experienced any change in any assumption underlying or method of
calculating any bad debt, inventory, contingency or other reserve;

(u) written off as uncollectible any note or account receivable, or canceled
any debts, other than in the ordinary course of business and consistent with
past practice;

(v) failed to replace or replenish inventory or supplies as such inventory
or supplies may have been depleted from time to time, collect accounts
receivable, pay accounts payable and has not shortened or lengthened the
customary payment cycles for any of its payables or receivables or otherwise
managed its working capital accounts other than in the ordinary course of
business and in a manner consistent with past practice;

(w) experienced any writedown or writeup of (or failed to writedown or
writeup in accordance with GAAP) the value of any inventories, receivables or
other assets, or revalued any of its assets;

(x) failed to maintain all material assets in accordance with good business
practice and in good operating condition and repair, ordinary wear and tear
excepted;

(y) experienced any lapse or termination of any material permit that was
issued or relates to its business, including any failure to renew any such
permit; or

(z) discontinued or altered, in any material respect, its advertising or
promotional activities or its pricing and purchasing policies.

3.9 Title to Properties.

(a) The real property listed as owned ("COMPANY OWNED PROPERTY") or leased
("COMPANY LEASED PROPERTY") in Schedule 3.9 constitutes all of the real
property now used or occupied by the Company or any Subsidiary, and ever owned
used or occupied in the past by the Company or any Subsidiary (including any
and all structures, fixtures or other improvements thereon, the "COMPANY REAL
PROPERTY"). Schedule 3.9 includes the record title holder, location, uses
thereof and the Company or any subsidiary indebtedness thereon, if any, for
all Company Real Property. The Company or one of its subsidiaries has good and
marketable fee simple title to all Company Owned Property, except for recorded

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easements, covenants and other restrictions; utility easements; building
restrictions; zoning restrictions; and other easements, covenants and
restrictions existing generally with respect to properties of a similar
character, all of which are shown on Schedule 3.9 and there are no outstanding
options to purchase the Company Owned Property. The Company Real Property has
access, sufficient for the conduct of the business of the Company as now
conducted or as presently proposed to be conducted, to public roads and to all
utilities, including electricity, sanitary and storm sewer, potable water,
natural gas and other utilities, used in the operation of the business of the
Company at that location. All structures, fixtures and other improvements on
all Company Owned Property are within the lot lines and do not encroach on the
properties of any other Person, and the use and operation of all Company Owned
Property are not in violation of any applicable building, zoning, safety,
environmental, subdivision and other laws, ordinances, regulations, codes,
permits, licenses and certificates and all restrictions and conditions
affecting title. Except as described in Schedule 3.9, no portion of any
Company Owned Property is located in a flood plain, flood hazard area or
designated wetlands area. Since January 1, 1992, neither the Company nor any
Subsidiary has received any written or oral notice of assessments for public
improvements against any Company Owned Property or any written or oral notice
or order by any governmental body, any insurance company that has issued a
policy with respect to any of such properties or any board of fire
underwriters or other body exercising similar functions (other than as
disclosed in the insurance reports disclosed hereunder) that (i) relates to
material violations of building, safety or fire ordinances or regulations,
(ii) claims any material defect or deficiency with respect to any of such
properties or (iii) requests that performance of any material repairs,
alterations or other work to or in any of such properties or in the streets
bounding the same. Complete and correct copies of all material written reports
on such matters from any insurance company that has issued a policy with
respect to any of such properties since January 1, 1992 have been delivered to
Parent. To the knowledge of the Company, there is no pending condemnation,
expropriation, eminent domain or similar proceeding affecting all or any
portion of the Company Real Property.

(b) The leases for the Company Leased Property (the "COMPANY LEASES") are in
full force and effect, and the Company or one of its subsidiaries holds a
valid and existing leasehold interest under each of the Company Leases for the
term set forth in Schedule 3.9. the Company has delivered to Parent complete
and accurate copies of each of the Company Leases, and none of the Company
Leases has been modified in any respect, except to the extent that such
modifications are disclosed by the copies delivered to Parent. Neither the
Company nor any of its subsidiaries is in material default, and to the
knowledge of the Company no circumstances exist which, if unremedied, would,
either with or without notice or the passage of time or both, result in such
default under any of the Company Leases; nor to the knowledge of the Company
is any other party to any of the Company Leases in default.

(c) The Company or one of its subsidiaries owns good and marketable title to
each of the tangible properties and tangible assets reflected on the most
recent audited financial statements included in the Company SEC Documents or
acquired since the date thereof, free and clear of all Liens and encumbrances,
except for (i) Liens for current Taxes not yet delinquent, (ii) Liens set
forth in Schedule 3.9, (iii) the properties subject to the Company Leases,
(iv) assets disposed of since the date of the most recent audited financial
statements included in the Company SEC Documents in the ordinary course of
business, (v) Liens imposed by law and incurred in the ordinary course of
business for obligations not yet due to carriers, warehousemen, laborers and
materialmen and (vi) Liens in respect of pledges or deposits under workers'
compensation laws, all of which Liens aggregate less than $25,000.

(d) All of the buildings, machinery, equipment, tools, jigs, fixtures,
vehicles and other tangible assets necessary for the conduct of the business
of the Company and its subsidiaries are in reasonable working condition and
repair, ordinary wear and tear excepted, and are usable in the ordinary course
of business. There are no defects in such assets or other conditions relating
thereto which adversely affect the operation or value of such assets. The
Company or one of its subsidiaries owns or leases under valid leases, all
buildings, machinery, equipment and other tangible assets necessary for the
conduct of its business as presently conducted, except for defects of title
that do not materially affect the use of such assets by the Company or its
subsidiaries and except for such assets that can be purchased or leased for
nominal expenditures.

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3.10 Accounts Receivable. The accounts receivable reflected on most recent
unaudited financial statements included in the Company SEC Documents and those
arising thereafter are valid receivables, are not subject to valid
counterclaims or set-offs, and are collectible in accordance with their terms,
except to the extent of the bad debt reserve reflected on such financial
statements.

3.11 Inventory. The inventory of raw materials, work in process and finished
goods of the Company and each of its subsidiaries consists of items of a cost,
quality and quantity usable and, with respect to finished goods only, salable
at the normal profit levels of the Company and such subsidiaries in the
ordinary course of the business of the Company and such subsidiaries. The
inventory of finished goods of the Company and each of its subsidiaries is not
slow-moving as determined in accordance with past practices, obsolete or
damaged and is merchantable and fit for its particular use. The Company and
each of its subsidiaries has on hand or has ordered and expects timely
delivery of such quantities of raw materials, and has on hand such quantities
of work in process and finished goods, in each case as are reasonably required
to timely fill current orders on hand which require delivery within 60 days
and to maintain the manufacture and shipment of products at its normal level
of operations. As of the date of the most recent unaudited financial
statements included in the Company SEC Documents, the values at which such
inventory is carried are in accordance with GAAP. Schedule 3.11 contains a
materially complete and accurate summary of the Company's and each of its
subsidiaries' inventory of raw materials, work in progress, finished goods and
reserve for obsolete and other inventory allowance or accrual calculation
schedules as of June 30, 1998.

3.12 Tax Matters. The Company, its subsidiaries and each affiliated,
consolidated, combined or unitary group of which the Company or any of its
subsidiaries is a member (a "COMPANY AFFILIATED GROUP"), has filed all Tax
Returns and reports required to be filed by it and has paid (or the Company
has paid on its behalf) all Taxes required to be paid by it (other than Taxes,
the failure to pay which would not, individually or in the aggregate, have a
Company Material Adverse Effect). All other Taxes of the Company which will be
due and payable, whether now or hereafter, for any period ending on,
including, or ending prior to the Closing Date, have been paid by or on behalf
of the Company or are reflected on the Company's books as an accrued Tax
liability, either current or deferred. The most recent financial statements
contained in the Company SEC Documents reflect an adequate reserve for all
material Taxes payable by the Company and any of its subsidiaries for all
Taxable periods and portions thereof through the date of such financial
statements. No deficiencies for any Taxes have been proposed, asserted, or
assessed against the Company or any Company Affiliated Group (other than
deficiencies, the liability for which would not, individually or in the
aggregate, have a Company Material Adverse Effect). No extensions nor requests
for waivers or extensions of the time to assess any Taxes have been granted or
are pending. None of the assets or properties of the Company or its
subsidiaries is subject to any Tax Lien (other than Liens for Taxes that are
not yet due) except for Liens which would not, individually or in the
aggregate, have a Company Material Adverse Effect. The Company is not under
audit with respect to any Taxable period for any federal, state, local, or
foreign Taxes (including income and franchise Taxes but not including real or
personal property Taxes) by the Internal Revenue Service ("IRS") or other
applicable Tax authority. Neither the Company nor any of its subsidiaries is a
party to any agreement, contract or arrangement that would result, separately
or in the aggregate, in the payment of any "excess parachute payments" within
the meaning of Section 280G of the Code. As used in this Agreement, "TAXES"
shall include all federal, state, local and foreign income, property, premium,
payroll, sales, excise, and other taxes, tariffs, or governmental charges of
any nature whatsoever, including any interest, penalties, or additions with
respect thereto, and "RETURNS" shall include all returns, reports, information
returns, and information statements with respect to Taxes required to be filed
by the IRS or any other Tax authority.

3.13 Contracts and Commitments.

(a) To the extent they are not listed elsewhere in the Company Disclosure
Schedules, Schedule 3.13 lists the following agreements, whether written or,
to the Company's knowledge, oral, to which the Company or any of its
subsidiaries is a party (or by which the Company or any of its subsidiaries or
their assets are bound): (i) collective bargaining agreement or contract with
any labor union; (ii) bonus, pension, profit sharing, retirement or other form
of deferred compensation plan, other than as described in Schedule 3.18; (iii)
hospitalization insurance or other welfare benefit plan or practice, whether
formal or informal, other than as described in

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Schedule 3.18; (iv) stock purchase or stock option plan; (v) contract for the
employment of any officer, individual employee or other person on a full-time
or consulting basis or relating to severance pay for any such person, other
than the Company's and its subsidiaries' normal employment practices generally
affecting all employees or classes of employees (such as hourly or salaried
classes of employees); (vi) agreement with employees and with consultants,
vendors, customers or other third parties requiring confidential treatment of
the Company's or any of its subsidiaries' confidential information or transfer
to the Company or any of its subsidiaries of intellectual property rights
created by employees and with consultants, vendors, customers or other third
parties; (vii) contract, agreement or understanding relating to the voting of
the Company's or any of its subsidiaries' capital stock or the election of
directors of the Company or any of its subsidiaries; (viii) agreement or
indenture relating to the borrowing of money, to letters of credit or to
mortgaging, pledging or otherwise placing a Lien on any of the assets of the
Company or any of its subsidiaries; (ix) guaranty of any obligation for
borrowed money or otherwise; (x) lease or agreement under which it is lessee
of, or holds or operates any property, real or personal, owned by any other
party; (xi) other than as described in Schedule 3.9, lease or agreement under
which it is lessor of, or permits any third party to hold or operate, any
property, real or personal, for which the annual rental exceeds $5,000; (xii)
contract or group of related contracts with the same party (other than any
contract or group of related contracts for the purchase or sale of products or
services) continuing over a period of more than six months from the date or
dates thereof, not terminable by it on 30 days' or less notice without penalty
and involving more than $5,000; (xiii) contract which prohibits the Company or
any of its subsidiaries from freely engaging in business anywhere in the
world; (xiv) contract for the distribution of the products of the Company or
any of its subsidiaries (including any distributor, sales and original
equipment manufacturer contract); (xv) franchise agreement; (xvi) license
agreement or agreement providing for the payment of royalties or other
compensation by the Company or any of its subsidiaries in connection with
intellectual property rights licensed from third parties; (xvii) license
agreement or agreement providing for the receipt of royalties or other
compensation by the Company or any of its subsidiaries in connection with
intellectual property rights owned, controlled or otherwise licensable by the
Company or any of its subsidiaries; (xviii) contract or commitment for capital
expenditures in excess of $5,000; (xix) agreement for the sale of any capital
asset in excess of $5,000; (xx) contract with any affiliate which in any way
relates to the Company or any of its subsidiaries (other than for employment
on customary terms); (xxi) agreement with vendors, customers or other third
parties requiring confidential treatment of confidential information of such
vendors, customers or other third parties; or (xxii) other agreement which is
either material to the business of the Company or any of its subsidiaries or
was not entered into in the ordinary course of business.

(b) Schedule 3.13 lists the following agreements, whether oral or written,
to which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or any of their assets are bound:
(i) contract or group of related contracts with the same party for the
purchase of products or services by the Company or any of its subsidiaries
under which the undelivered balance of such products or services is in excess
of $5,000; (ii) contract or group of related contracts with the same party for
the sale of products or services by the Company or any of its subsidiaries
under which the undelivered balance of such products or services (including,
without limitation, any free upgrades or ongoing services) has a sales price
in excess of $5,000; and (iii) sales agreement or other customer commitment
(other than the standard form of purchase order) which entitles any purchaser
to a rebate or right of set-off, to return any product of the Company or any
of its subsidiaries after acceptance thereof or to delay the acceptance
thereof, to receive future services, upgrades or enhancements, or which varies
in any material respect from the Company's or any of its subsidiaries'
standard form agreements for sales.

(c) The Company and each of its subsidiaries has performed all material
obligations required to be performed through the date hereof by it in
connection with the contracts or commitments required to be disclosed in
Schedule 3.13 and has not been notified of any claim of material default under
any contract or commitment required to be disclosed in Schedule 3.13; neither
the Company nor any Subsidiary has any present expectation or intention of not
fully performing any material obligation pursuant to any contract or
commitment required to be disclosed in Schedule 3.13; and neither the Company
nor any Subsidiary has knowledge of any material breach or anticipated
material breach by any other party to any contract or commitment required to
be disclosed in Schedule 3.13.

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(d) Prior to the date of this Agreement, Parent has been supplied with a
correct and complete copy of each written contract or commitment referred to
in Schedule 3.13, together with all known amendments, waivers or other changes
thereto.

3.14 Intellectual Property Rights.

(a) Schedule 3.14 describes: (i) all patents and all registrations for
trademarks, service marks, trade names, corporate names, copyrights and mask
works that have been issued to the Company or any of its subsidiaries; and
(ii) each pending patent application or application for registration for
trademarks, service marks, trade names, corporate names, copyrights and mask
works that the Company or any of its subsidiaries has made with respect to
intellectual property owned by, or otherwise controlled by, the Company or any
of its subsidiaries and used in, developed for use in or necessary to the
conduct of the business of the Company or any of its subsidiaries as now
conducted or as planned to be conducted as described herein (the "COMPANY
OWNED INTELLECTUAL PROPERTY RIGHTS"). Except as set forth in Schedule 3.14,
the Company and each of its subsidiaries owns and possesses all right, title
and interest, or holds such other interest as is identified in the Disclosure
Schedule, in and to the rights set forth under such caption free and clear of
all Liens, security interests or other encumbrances and has the full right to
exploit such Company Owned Intellectual Property Rights without payment of
compensation to any other party.

(b) Schedule 3.14 describes all agreements granting to the Company or any of
its subsidiaries rights in patents, patent applications, trademarks, service
marks, trade names, corporate names, copyrights, mask works, trade secrets or
other intellectual property rights used in or necessary to the conduct of the
business of the Company as now conducted or as planned to be conducted as
described herein (the "COMPANY LICENSED-IN INTELLECTUAL PROPERTY RIGHTS"). All
such agreements are in force and neither the Company nor any of its
subsidiaries is in breach of any such agreement.

(c) Schedule 3.14 describes all products marketed or that have been marketed
by the Company or any of its subsidiaries within the past two years and
identifies the method(s) of intellectual property protection utilized by the
Company or any of its subsidiaries with respect to such products.

(d) Schedule 3.14 describes all agreements granting to third parties any
rights in Company Owned Intellectual Property Rights and any agreements to
grant intellectual property rights that the Company or any of its subsidiaries
may acquire in the future.

(e) Except as disclosed in Schedule 3.14, all of the Company Owned
Intellectual Property Rights will be assumed by, and will become intellectual
property rights of, the Surviving Corporation in the Merger, without the
requirement that any consent to assignment be obtained or any payment (other
than government filing or registration fees) be made. Except as disclosed in
Schedule 3.14, all licenses of the Company Licensed-In Intellectual Property
Rights will be assumed by, and will become valid agreements of, the Surviving
Corporation in the Merger, without the requirement that any consent to
assignment be obtained or any payment be made (other than future royalties as
provided n such agreements).

(f) The Company and each of its subsidiaries have taken all commercially
reasonable steps to acquire, protect and maintain the Company Owned
Intellectual Property Rights. Without limiting the generality of the
foregoing, (i) all employees, contract workers, consultants and other agents
of the Company and each of its subsidiaries have executed agreements
sufficient to vest in the Company or such subsidiary ownership or the right to
use the Company Owned Intellectual Property Rights on which they have
performed services in the business of the Company or such subsidiary as
currently conducted without the payment of royalties or penalties; (ii) all
maintenance, annuity, renewal and other such fees and filings due on Company
Owned Intellectual Property Rights have been paid or made; and (ii) the
Company has no knowledge of any defects in the Company Owned Intellectual
Property Rights that would lead to any of them becoming invalid or
unenforceable.

(g) Except as disclosed in Schedule 3.14, neither the Company nor any of its
subsidiaries has received any notice of, nor are there any facts known to the
Company or any of its subsidiaries which indicate a likelihood of, any
infringement or misappropriation by, or conflict with, any third party with
respect to the Company Owned

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Intellectual Property Rights or any Company Licensed-In Intellectual Property
Rights that are exclusively licensed to the Company or any of its
subsidiaries; and no claim by any third party contesting the validity of any
Company Owned Intellectual Property Rights has been made, is currently
outstanding or, to the knowledge of the Company, is threatened;

(h) Except as disclosed in Schedule 3.14, neither the Company nor any of its
subsidiaries has received any notice of any infringement, misappropriation or
violation by the Company or any of its subsidiaries of any intellectual
property rights of any third parties and neither the Company nor any of its
subsidiaries, to its knowledge, has infringed, misappropriated or otherwise
violated any such intellectual property rights; and to the knowledge of the
Company, no infringement, misappropriation or violation of any intellectual
property rights of any third parties has occurred or will occur with respect
to products currently being sold by the Company or any of its subsidiaries or
with respect to the products currently under development (in their present
state of development) or with respect to the conduct of the business of the
Company or any of its subsidiaries as now conducted.

(i) Except as disclosed in Schedule 3.14, neither the Company nor any of its
subsidiaries has entered into any agreement restricting the Company or any of
its subsidiaries from selling, leasing or otherwise distributing any of its
current products or products under development to any class of customers, in
any geographic area, during any time period or in any segment of the market.

(j) To the Company's knowledge, the Company and each of its subsidiaries has
the right to make available to the Surviving Corporation all trade secrets and
other confidential information entrusted to the Company or any of its
subsidiaries by third parties.

(k) There are no known quality defects in the designs contained in the
Company Owned Intellectual Property Rights or Company Licensed-In Intellectual
Property Rights (including defects relating to the Year 2000 issue) and such
designs comply with all applicable laws.

3.15 Litigation. Except as disclosed in the Company SEC Documents, there is
no action, suit, investigation, or proceeding pending against or, to the
knowledge of the Company, overtly threatened against or affecting, the Company
or any of its properties (other than any such suit, action, or proceeding
challenging the acquisition by Parent or Sub of the shares of Company Common
Stock or any provision of this Agreement or seeking to restrain or prohibit
the consummation of the Merger) before any Governmental Entity or by any
Governmental Entity that, individually or in the aggregate, would reasonably
be expected to have a Company Material Adverse Effect.

3.16 Warranties; Products. Schedule 3.16 lists all claims outstanding,
pending or, to the knowledge of the Company, threatened for breach of any
warranty relating to any products sold by the Company or any of its
subsidiaries prior to the date hereof. The description of the product
warranties and other material terms of sale of the Company and each of its
subsidiaries set forth in Schedule 3.16 are correct and complete. The reserves
for warranty claims on the date of the most recent audited financial
statements included in the Company SEC Documents are consistent with the
Company's and each of its subsidiaries' prior practices and are fully adequate
to cover all warranty claims made or to be made against any products of the
Company or any of its subsidiaries sold prior to the date thereof.

3.17 Employees. (a) To the knowledge of the Company, no executive employee
of the Company or any of its subsidiaries and no group of the employees of the
Company or any of its subsidiaries has any plans to terminate his, her or
their employment; (b) the Company and each of its subsidiaries has complied
with all laws relating to the employment of labor, including provisions
thereof relating to wages, hours, equal opportunity, collective bargaining and
the payment of social security and other Taxes; (c) neither the Company nor
any of its subsidiaries has any labor relations problem pending and the
Company's labor relations are satisfactory; (d) there are no workers'
compensation claims pending against the Company or any of its subsidiaries nor
is the Company or any of its subsidiaries aware of any facts that would give
rise to such a claim; (e) no employee of the Company

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or any of its subsidiaries is subject to any secrecy or noncompetition
agreement or any other agreement or restriction of any kind that would impede
in any way the ability of such employee to carry out fully all activities of
such employee in furtherance of the business of the Company or any of its
subsidiaries; and (f) no employee or former employee of the Company or any of
its subsidiaries, or any predecessor has any claim with respect to any Company
Owned Intellectual Property Rights. Schedule 3.17 lists, as of the date set
forth in such Schedule, each employee of the Company or any of its
subsidiaries. Schedule 3.17 also states the position, title, remuneration
(including any scheduled salary or remuneration increases), date of employment
and accrued vacation pay of each such employee as of such date.

3.18 Employee Benefit Plans.

(a) Schedule 3.18 sets forth each employee benefit plan with respect to
which the Company or its ERISA Affiliates, as hereinafter defined, sponsors or
otherwise has any obligation (the "COMPANY EMPLOYEE BENEFIT PLANS"). For
purposes of this Agreement, "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended, and "ERISA AFFILIATES" means any trade or
business (whether or not incorporated) that is part of the same controlled
group, or under common control with, or part of an affiliated service group
that includes, the Company within the meaning of Section 414(b), (c), (m) or
(o) of the Code.

(b) Except as disclosed in Schedule 3.18:

(i) No Company Employee Benefit Plan is subject to Title IV of ERISA.

(ii) No Company Employee Benefit Plan promises or provides health or life
benefits to retirees or former employees except as required by federal
continuation of coverage laws or similar state laws.

(iii) Each Company Employee Benefit Plan has at all times been operated
in substantial compliance with ERISA, the Code, any other applicable law
(including all reporting and disclosure requirements thereunder) and the
terms of the plan. Each Company Employee Benefit Plan that is intended to
be Tax qualified under Section 401(a) of the Code has received a favorable
determination letter from the IRS stating that the Plan (and all
amendments) is Tax qualified and that any trust associated with the plan is
Tax exempt under Section 501(a) of the Code. To the knowledge of the
Company, there is no reason why such qualified status would be revoked.

(iv) To the knowledge of the Company, no state of facts or conditions
exist which reasonably could be expected to subject the Company to any
material liability (other than routine claims for benefits) with respect to
any Company Employee Benefit Plan under the terms of the Company Employee
Benefit Plan or applicable law.

(v) The Company has not committed to make any material increase in
contributions or benefits under any Company Employee Benefit Plan and has
not committed to establish any new plan.

(vi) There are no material unfunded liabilities as of the Closing Date
associated with any Company Employee Benefit Plan. All contributions to
each Company Employee Benefit Plan that are required to be made with
respect to periods ending on or before the Closing Date (including periods
from the first day of the then current plan or policy year to the Closing
Date) have been made or accrued before the Closing Date.

(vii) With respect to each Company Employee Benefit Plan (to the extent
applicable), the Company has delivered to Parent copies of the plan
documents, plan amendments, summary plan descriptions, the most recent Tax
qualified determination letters from the IRS, the three most recent Form
5500 Annual Reports, including related schedules and audited financials,
and a list of assets associated with each Company Employee Benefit Plan.

(viii) The benefits to be provided to participants under each Company
Employee Benefit Plan, other than a Tax qualified plan under Code Section
401(a), are to be provided exclusively through insurance or from the
general assets of the Company.

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3.19 Insurance. Schedule 3.19 lists and briefly describes each insurance
policy maintained by the Company or any of its subsidiaries with respect to
the properties, assets and operations of the Company or such subsidiary and
sets forth the date of expiration of each such insurance policy. All of such
insurance policies are in full force and effect. Neither the Company nor any
of its subsidiaries is in default with respect to its obligations under any of
such insurance policies.

3.20 Affiliate Transactions. Other than as described in the Company SEC
Documents or otherwise pursuant to this Agreement, no officer, director or
employee of the Company or any of its subsidiaries or any member of the
immediate family of any such officer, director or employee, or any entity in
which any of such persons owns any beneficial interest (other than any
publicly held corporation whose stock is traded on a national securities
exchange or in the over-the-counter market and less than one percent of the
stock of which is beneficially owned by any of such persons) (collectively
"INSIDERS"), has any agreement with the Company or any of its subsidiaries
(other than normal employment arrangements) or any interest in any property,
real, personal or mixed, tangible or intangible, used in or pertaining to the
business of the Company or any of its subsidiaries (other than ownership of
capital stock of the Company). None of the Insiders has any direct or indirect
interest (other than beneficial ownership of less than one percent of the
stock of a publicly held corporation whose stock is traded on a national
securities exchange or in the over-the-counter market) in any competitor,
supplier or customer of the Company or any of its subsidiaries or in any
person, firm or entity from whom or to whom the Company or any of its
subsidiaries leases any property. For purposes of this Section 3.20 the
members of the immediate family of an officer, director or employee shall
consist of the spouse, parents, children, siblings, mothers- and fathers-in-
law, sons- and daughters-in-law, and brothers- and sisters-in-law of such
officer, director or employee. All agreements and transactions between the
Company or any of its subsidiaries and any Insider identified in Schedule 3.20
were made for bona fide business purposes on terms comparable to what could be
obtained from an unaffiliated third party.

3.21 Customers and Suppliers. Schedule 3.21 lists the 15 largest
distributors and the 15 largest suppliers of the Company and each of its
subsidiaries for the 12-month period ended June 30, 1998, and sets forth
opposite the name of each such customer or supplier the approximate amount of
gross sales or purchases by such Subsidiary attributable to such customer or
supplier for such period. Except as set forth on Schedule 3.21, since June 30,
1998, no customer or supplier listed in Schedule 3.21 has informed the Company
or any of its subsidiaries that it will stop or materially decrease the rate
of business done with the Company or any of its subsidiaries.

3.22 Distributors. Schedule 3.22 lists (a) all former distributors of the
Company or any of its subsidiaries that have been terminated since January 1,
1995 and the circumstances surrounding such termination; (b) all litigation
and disputes between the Company or any of its subsidiaries and any of their
past or present distributors, including any claims initiated by any
distributor against the Company or any of its subsidiaries, whether such
litigation dispute resulted in a settlement, financial payment or not; (c) to
the Company's knowledge, all buying consortium arrangements by which any
distributor of the Company or any of its subsidiaries purchases goods
(including wholegoods, parts, supplies or other goods) or services from the
Company or any of its subsidiaries; and (d) all distributors of the Company or
any of its subsidiaries that, to the Company's knowledge, sell or distribute
goods or services other than those of the Company or any of its subsidiaries.
There are no enforceable agreements with any distributor except as set forth
in Schedule 3.22. Each distributor of the Company and each of its subsidiaries
may be terminated without penalty or other liability other than the repurchase
of inventory and potential liability for floor plan exposure upon at least 30
days' prior written notice, except as otherwise provided by distributor
protection laws in some states.

3.23 Officers and Directors; Bank Accounts. Schedule 3.23 lists all officers
and directors of the Company and each of its subsidiaries and all of the bank
accounts of the Company and each of its subsidiaries (designating each
authorized signer).

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3.24 Labor Matters. Neither the Company nor any of its subsidiaries is a
party to any collective bargaining agreement or other labor union contract
applicable to persons employed by the Company or any of its subsidiaries.

3.25 Compliance with Laws. Except as disclosed in the Company SEC Documents,
neither the Company nor any of its subsidiaries (a) is in violation of, nor
has it violated, any applicable provisions of any laws, statutes, ordinances
or regulations, or (b) has received any notice from any Governmental Entity or
any other person that the Company or any of its subsidiaries is in violation
of, or has violated, any applicable provisions of any laws, statutes,
ordinances or regulations, except in the case of clauses (a) and (b), for
violations, individually or in the aggregate, which have not had and would not
reasonably be expected to have a Company Material Adverse Effect. Each of the
Company and each of its subsidiaries has all permits, licenses, and franchises
from Governmental Entities required to conduct its business as now being
conducted, except for such permits, licenses, and franchises the absence of
which would not, individually or in the aggregate, have a Company Material
Adverse Effect.

3.26 Brokers. Other than Pacific Crest Securities, Inc., no broker,
investment banker, financial advisor, or other person is entitled to any
broker's, finder's, financial advisor's, or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.

3.27 Tax Matters. Neither the Company nor, to its knowledge, any of its
affiliates, has taken or agreed to take any action, or knows of any
circumstances, that (without regard to any action taken or agreed to be taken
by Parent or any of its affiliates) would prevent the Merger from qualifying
as a reorganization within the meaning of Section 368(a) of the Code.

3.28 Certain Business Matters. Neither the Company nor, to its knowledge,
any of its affiliates has (a) made or agreed to make any contribution, payment
or gift to any customer, supplier, governmental official, employee or agent
where either the contribution, payment or gift or the purpose thereof was
illegal under any applicable law, (b) established or maintained any unrecorded
fund or asset of the Company or any of its subsidiaries for any improper
purpose or made any false entries on its books and records for any reason,
(c) made or agreed to make any contribution, or reimbursed any political gift
or contribution made by any other person, to any candidate for federal, state
or local public office in violation of any applicable law, or (d) engaged in
any activity constituting fraud or abuse under applicable laws relating to
health care, insurance or the regulation of professional corporations.

3.29 Certain Contract Matters.

(a) Schedule 3.29 sets forth, as of the Agreement Date, a list of each
contract to which the Company, its subsidiaries, or any of its affiliates
(other than individuals) is a party limiting the right of the Company prior to
the Closing Date, or Parent or any of its subsidiaries, or affiliates (other
than individuals), at or after the Closing Date, to engage in, or to compete
with any person in, any business, including each contract containing
exclusivity provisions restricting the geographical area in which, or the
method by which, any business may be conducted by the Company, its
subsidiaries, or any of its affiliates (other than individuals) prior to the
Closing Date, or by Parent, its subsidiaries, or affiliates (other than
individuals) after the Closing Date. Each such contract is in full force and
effect, each is a legal, valid and binding contract, and there is no material
default (or any event which, with the giving of notice or lapse of time or
both, would be a material default) by the Company or any of its subsidiaries,
in the timely performance of any material obligation to be performed or paid
under any such contract.

3.30 Environmental Matters.

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

(i) "HAZARDOUS MATERIALS" means any dangerous, toxic or hazardous
pollutant, contaminant, chemical, waste, material or substance as defined
in or governed by any federal, state or local law, statute,

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code, ordinance, regulation, rule or other requirement relating to such
substance or otherwise relating to the environment or human health or
safety, including without limitation any waste, material, substance,
pollutant or contaminant that might cause any injury to human health or
safety or to the environment or might subject a party to any imposition of
costs or liability under any Environmental Law.

(ii) "ENVIRONMENTAL LAWS" means all applicable federal, state, local and
foreign laws, rules, regulations, codes, ordinances, orders, decrees,
directives, permits, licenses and judgments relating to pollution,
contamination or protection of the environment (including, without
limitation, all applicable federal, state, local and foreign laws, rules,
regulations, codes, ordinances, orders, decrees, directives, permits,
licenses and judgments relating to Hazardous Materials in effect as of the
Agreement Date).

(iii) "RELEASE" shall mean the spilling, leaking, disposing, discharging,
emitting, depositing, ejecting, leaching, escaping or any other release or
threatened release, however defined, whether intentional or unintentional,
of any Hazardous Material.

(b) The Company, each of its subsidiaries and the Company Real Property are
in material compliance with all applicable Environmental Laws.

(c) The Company has obtained, and maintained in full force and effect, all
environmental permits, licenses, certificates of compliance, approvals and
other authorizations (collectively, the "ENVIRONMENTAL PERMITS") necessary to
conduct its business and operate the Company Real Property. A true and correct
copy of each of such Environmental Permit has been provided by the Company to
Parent. The Company has conducted its business in compliance with all terms
and conditions of the Environmental Permits. The Company has filed all reports
and notifications required to be filed under and pursuant to all applicable
Environmental Laws.

(d) Except as set forth in Schedule 3.30: (i) no Hazardous Materials have
been generated, treated, contained, handled, located, used, manufactured,
processed, buried, incinerated, deposited, stored, or released on, under or
about any part of the Company's Property during the period the Company was in
possession thereof, (ii) the Company's Property and any improvements thereon,
contain no asbestos, urea, formaldehyde, radon at levels above natural
background, polychlorinated biphenyls (PCBs) or pesticides, and (iii) no
aboveground or underground storage tanks are located on, under or about the
Company's Property.

(e) Except as set forth in Schedule 3.30, the Company has not received
notice alleging in any manner that any of them is, or might be potentially
responsible for any Release of Hazardous Materials, or any costs arising under
or violation of Environmental Laws.

(f) To the knowledge of the Company, no expenditure outside the ordinary
course of business will be required in order for Parent, Merger Sub or the
Surviving Corporation to comply with any Environmental Laws in effect at the
Effective Time in connection with the operation or continued operation of the
business of the Company or the Company's Property in a manner consistent with
the current operation thereof by the Company.

(g) The Company and the Company Real Property are not and have not been
listed on the United States Environmental Protection Agency National
Priorities List of Hazardous Waste Sites, or any other list, schedule, law,
inventory or record of hazardous or solid waste sites maintained by any
federal, state or local agency.

(h) The Company has disclosed and delivered to Parent all environmental
reports and investigations which the Company has obtained or ordered with
respect to the business of the Company and the Company Real Property.

(i) To the knowledge of the Company, no part of the business of the Company
and none of the Company Real Property has been used as a landfill, dump or
other disposal, storage, transfer, handling or treatment area for Hazardous
Materials, or as a gasoline service station or a facility for selling,
dispensing, storing, transferring, disposing or handling petroleum or
petroleum products.

(j) No Lien has been attached or filed against the Company or the Company
Real Property in favor of any governmental or private entity for (i) any
liability or imposition of costs under or violation of any applicable
Environmental Law; or (ii) any Release of Hazardous Materials.

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3.31 Disclosure. No representation or warranty contained in this Agreement,
in the Company Disclosure Schedules, or in any document delivered by the
Company to Parent pursuant to Article VII of this Agreement, contains, or will
at the Effective Time contain, any untrue statement of a material fact or
omits or will at, the Effective Time, omit to state a material fact necessary
to make the statements therein, in light of the circumstances under which they
were or will be made, not misleading.

ARTICLE IV

Representations and Warranties
of Parent and Sub

Parent and Merger Sub represent and warrant to the Company that, except as
set forth in, and qualified by, the Parent disclosure schedules attached to
this Agreement (the "PARENT DISCLOSURE SCHEDULES"), which schedules identify
exceptions by specific section reference):

4.1 Corporate Existence and Power. Each of Parent and Merger Sub is a
corporation duly organized and validly existing under the laws of the
jurisdiction of its incorporation. Each of Parent and Merger Sub has all
corporate powers required to carry on its business as now conducted. Each of
Parent and Merger Sub is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the
character of the property that they own or lease or the nature of their
respective activities makes such qualification necessary, except for those
jurisdictions in which the failure to be so qualified would not have a
material adverse effect on Parent or any of its subsidiaries (a "PARENT
MATERIAL ADVERSE EFFECT"). For purposes of this Agreement, a "Parent Material
Adverse Effect" means (i) a material adverse effect on the business, assets
(including intangible assets), liabilities, financial condition or results of
operations of Parent and any of its subsidiaries, taken as a whole, or (ii) a
material impairment of the ability of Parent and any of its subsidiaries to
perform any of their respective obligations under this Agreement or to
consummate the Merger. Parent and Merger Sub have heretofore made available to
the Company correct and complete copies of the articles of incorporation and
bylaws of Parent and Merger Sub as currently in effect.

4.2 Subsidiaries. Schedule 4.2 lists each subsidiary of the Parent, together
with its jurisdiction of incorporation or organization. All outstanding shares
of capital stock of each such subsidiary have been duly authorized and validly
issued and are fully paid and nonassessable. The Parent owns all of such
shares, free and clear of any Lien. No options, warrants, or other rights to
acquire any securities of any type of any of such subsidiaries are outstanding
as of the Agreement Date. Except for the capital stock of its subsidiaries and
except for ownership interests set forth in Schedule 4.2, the Parent does not
own, directly or indirectly, any capital stock or other ownership interest in
any corporation, partnership, joint venture, or other entity.

4.3 Corporate Authorization. Except for the requirement to authorize
additional shares in accordance with the Charter Amendment (as defined in
Section 6.1 hereof), Parent's and Merger Sub's execution, delivery and
performance of this Agreement and their consummation of the transactions
contemplated hereby are within their respective corporate powers. Except for
approval by the affirmative vote of the holders of a majority of the shares of
Parent Common Stock required for the Merger and the Charter Amendment, Parent
and Merger Sub each has duly authorized the Merger. Parent and Merger Sub each
has duly and validly executed and delivered this Agreement. This Agreement
constitutes a valid and binding agreement of each of Parent and Merger Sub and
is enforceable in accordance with its terms. Parent has taken all actions as
may be necessary, in its capacity as sole shareholder of Merger Sub, to
authorize the Merger.

4.4 Governmental Authorization. Parent's and Merger Sub's execution,
delivery, and performance of this Agreement and their consummation of the
transactions contemplated hereby require no action by, or in respect of, or
filing with, any federal, state, local, or foreign Governmental Entity other
than the following: (a) the filing of the Articles of Merger in accordance
with Oregon Law; (b) the filing of the Charter Amendment under Minnesota Law;
(c) compliance with applicable requirements of the Securities Act; (d)
compliance with the

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Exchange Act and the rules and regulations promulgated thereunder; (e)
compliance with the rules or regulations of the Nasdaq National Market; and
(f) compliance with the securities laws of various states.

4.5 Non-Contravention. Except to the extent the Charter Amendment is
required to be approved and filed, Parent's and Merger Sub's execution,
delivery and performance of this Agreement does not, and Parent's and Merger
Sub's consummation of the transactions contemplated hereby will not: (a)
contravene or conflict with the articles or articles of incorporation or
bylaws of Parent and Merger Sub; (b) assuming compliance with the matters
referred to in Section 4.4, contravene or conflict with or constitute a
violation of any provision of any law, regulation, judgment, injunction,
order, or decree binding upon or applicable to Parent and Merger Sub, other
than such as would not, individually or in the aggregate, have a Parent
Material Adverse Effect; (c) constitute a breach or violation of, or a default
under or give rise to a right of termination, cancellation, or acceleration of
any right or obligation of Parent or Merger Sub or to a loss of any benefit to
which Parent or Merger Sub is entitled under any provision of, any agreement,
contract, or other instrument binding upon Parent or Merger Sub or any
license, franchise, permit, or other similar authorization held by Parent or
Merger Sub, other than such as would not, individually or in the aggregate,
have a Parent Material Adverse Effect; or (d) result in the creation or
imposition of any Lien on any asset of Parent or Merger Sub, other than such
as would not, individually or in the aggregate, have a Parent Material Adverse
Effect. Schedule 4.5 sets forth a correct and complete list of all consents,
approvals, and authorizations required to be obtained by Parent and Merger Sub
from any non-Governmental Entity in connection with this Agreement, the Merger
and the transactions contemplated hereby, other than those with respect to
which the failure of Parent and Merger Sub to obtain such consent, approval or
authorization, individually or in the aggregate, would not have a Parent
Material Adverse Effect.

4.6 Capitalization.

(a) The authorized capital stock of Parent consists of 25,000,000 shares of
Parent Common Stock, $.01 par value, and 5,000,000 shares of preferred stock,
$.01 par value ("PARENT PREFERRED STOCK" and together with Parent Common
Stock, "PARENT CAPITAL STOCK"). As of the Agreement Date, 16,705,261 shares of
Parent Common Stock are outstanding and no shares of Parent Preferred Stock
are outstanding. As of the Agreement Date, options to purchase an aggregate of
963,747 shares of Parent Common Stock (each a "PARENT OPTION") are outstanding
and warrants to purchase an aggregate of 6,000 shares of Parent Common Stock
(the "PARENT WARRANTS") are outstanding. Parent has duly reserved for issuance
pursuant to the exercise of options under existing plans or Warrants a total
of 1,551,851 shares of Parent Common Stock, including 969,747 shares of Parent
Common Stock for issuance of the Parent Options and Parent Warrants. All
outstanding shares of Parent Capital Stock have been duly authorized and
validly issued and are fully paid and nonassessable. Parent issued all such
shares in compliance with all applicable federal and state securities laws.
The Parent Common Stock is registered pursuant to Section 12(g) of the
Exchange Act and has been approved for listing on the NASDAQ National Market.
Parent owns, beneficially and of record, all issued and outstanding shares of
common stock of Merger Sub, which shares are validly issued, fully paid, and
non-assessable, and free and clear of all Liens. Except as set forth in this
Section and except for changes since the Agreement Date resulting from the
exercise of employee and director options outstanding on the Agreement Date,
(i) no shares of Parent Capital Stock or other voting securities of Parent are
outstanding, (ii) no securities of Parent convertible into or exchangeable for
shares of capital stock or voting securities of Parent are outstanding, and
(iii) no options or other rights to acquire from Parent, and no obligation of
Parent to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of
Parent are outstanding (the items in clauses (i), (ii), and (iii) being
referred to collectively as the "PARENT SECURITIES"). No obligations of Parent
to repurchase, redeem, or otherwise acquire any Parent Securities are
outstanding.

4.7 SEC Documents. Parent has filed all required reports, schedules, forms,
statements, and other documents with the SEC since July 1, 1994 (together with
later filed documents that revise or supersede earlier filed documents, the
"PARENT SEC DOCUMENTS"). As of their respective dates, the Parent SEC
Documents complied as to form in all material respects with the requirements
of the Securities Act, or the Exchange Act, as the case may be, and the rules
and regulations of the SEC promulgated thereunder applicable to such Parent

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SEC Documents. None of the Parent SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of Parent included in the Parent SEC Documents complied as of their
respective dates of filing with the SEC as to form in all material respects
with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles (except, in the case of
unaudited statements, as permitted by Form 10-QSB of the Exchange Act) applied
on a consistent basis during the periods involved (except as may be indicated
in the notes thereto), and fairly present the consolidated financial position
of Parent and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as set forth in the Parent SEC Documents, and except for
liabilities and obligations incurred in the ordinary course of business
consistent with past practice, neither Parent nor any of its subsidiaries has
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by generally accepted accounting principles
to be set forth on a consolidated balance sheet of Parent and its consolidated
subsidiaries or in the notes thereto which, individually or in the aggregate,
would have a Parent Material Adverse Effect.

4.8 Absence of Certain Changes or Events. Except as disclosed in Parent SEC
Documents, and except as expressly contemplated by this Agreement or set forth
in Schedule 4.8, since the date of the most recent audited financial
statements included in Parent SEC Documents, Parent and each of its
subsidiaries have conducted their respective businesses only in the ordinary
course, and neither Parent nor any of its subsidiaries has experienced, agreed
to, or effected, as the case may be:

(a) with the exception of seasonal business changes in the ordinary course,
suffered any material adverse change in the assets, financial condition,
operating results, distributor, customer, employee or supplier relations,
business condition or prospects of Parent or any of its subsidiaries, nor any
other event or occurrence or development of a state of circumstances or facts
which has had a Company Material Adverse Effect;

(g) disclosed, to any person other than Company or Merger Sub and authorized
representatives of Company or Merger Sub, any proprietary confidential
information, other than pursuant to a confidentiality agreement prohibiting
the use or further disclosure of such information, which agreement is
identified in the Schedule 4.8 and is in full force and effect on the date
hereof;

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(i) declared or paid any dividends or other distributions with respect to
any shares of its capital stock other than to Parent or a Subsidiary or
redeemed or purchased, directly or indirectly, any shares of its capital stock
or any options, warrants or other rights to purchase the same;

(k) taken any other action or entered into any other transaction other than
in the ordinary course of business and in accordance with past custom and
practice, or entered into any transaction with any Insider (as defined in
Section 4.20 other than employment arrangements otherwise disclosed in this
Agreement and Parent Disclosure Schedules, or the transactions expressly
contemplated by this Agreement;

(l) suffered any material theft, damage, destruction or loss of or to any
property or properties owned or used by it, whether or not covered by
insurance;

(n) made any single capital expenditure or commitment therefor in excess of
$5,000;

(o) made any loans or advances to, or guarantees for the benefit of, any
persons in excess of $5,000;

(p) made any charitable contributions or pledges in excess of $5,000;

(q) made any change in accounting principles or practices from those
utilized in the preparation of Parent SEC Documents;

(s) experienced any labor dispute;

(t) experienced any change in any assumption underlying or method of
calculating any bad debt, inventory, contingency or other reserve;

(u) written off as uncollectible any note or account receivable, or canceled
any debts, other than in the ordinary course of business and consistent with
past practice;

(w) experienced any writedown or writeup of (or failed to writedown or
writeup in accordance with GAAP) the value of any inventories, receivables or
other assets, or revalued any of its assets;

(x) failed to maintain all material assets in accordance with good business
practice and in good operating condition and repair, ordinary wear and tear
excepted;

(y) experienced any lapse or termination of any material permit that was
issued or relates to its business, including any failure to renew any such
permit; or

(z) discontinued or altered, in any material respect, its advertising or
promotional activities or its pricing and purchasing policies.

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4.9 Title to Properties.

(a) The real property listed as owned ("PARENT OWNED PROPERTY") or leased
("PARENT LEASED PROPERTY") in Schedule 4.9 constitutes all of the real
property now used or occupied by Parent or any Subsidiary, and ever owned used
or occupied in the past by Parent or any Subsidiary (including any and all
structures, fixtures or other improvements thereon, the "PARENT REAL
PROPERTY"). Schedule 4.9 includes the record title holder, location, uses
thereof and Parent or any subsidiary indebtedness thereon, if any, for all
Company Real Property. Parent or one of its subsidiaries has good and
marketable fee simple title to all Company Owned Property, except for recorded
easements, covenants and other restrictions; utility easements; building
restrictions; zoning restrictions; and other easements, covenants and
restrictions existing generally with respect to properties of a similar
character, all of which are shown on Schedule 4.9 and there are no outstanding
options to purchase Parent Owned Property. Parent Real Property has access,
sufficient for the conduct of the business of Parent as now conducted or as
presently proposed to be conducted, to public roads and to all utilities,
including electricity, sanitary and storm sewer, potable water, natural gas
and other utilities, used in the operation of the business of Parent at that
location. All structures, fixtures and other improvements on all Company Owned
Property are within the lot lines and do not encroach on the properties of any
other Person, and the use and operation of all Company Owned Property are not
in violation of any applicable building, zoning, safety, environmental,
subdivision and other laws, ordinances, regulations, codes, permits, licenses
and certificates and all restrictions and conditions affecting title. Except
as described in Schedule 4.9, no portion of any Company Owned Property is
located in a flood plain, flood hazard area or designated wetlands area. Since
January 1, 1992, neither Parent nor any Subsidiary has received any written or
oral notice of assessments for public improvements against any Company Owned
Property or any written or oral notice or order by any governmental body, any
insurance company that has issued a policy with respect to any of such
properties or any board of fire underwriters or other body exercising similar
functions (other than as disclosed in the insurance reports disclosed
hereunder) that (i) relates to material violations of building, safety or fire
ordinances or regulations, (ii) claims any material defect or deficiency with
respect to any of such properties or (iii) requests that performance of any
material repairs, alterations or other work to or in any of such properties or
in the streets bounding the same. Complete and correct copies of all material
written reports on such matters from any insurance company that has issued a
policy with respect to any of such properties since January 1, 1992 have been
delivered to Company. To the knowledge of Parent, there is no pending
condemnation, expropriation, eminent domain or similar proceeding affecting
all or any portion of Parent Real Property.

(b) The leases for Parent Leased Property (the "PARENT LEASES") are in full
force and effect, and Parent or one of its subsidiaries holds a valid and
existing leasehold interest under each of Parent Leases for the term set forth
in Schedule 4.9. Parent has delivered to Company complete and accurate copies
of each of Parent Leases, and none of Parent Leases has been modified in any
respect, except to the extent that such modifications are disclosed by the
copies delivered to Company. Neither Parent nor any of its subsidiaries is in
material default, and to the knowledge of Parent no circumstances exist which,
if unremedied, would, either with or without notice or the passage of time or
both, result in such default under any of Parent Leases; nor to the knowledge
of Parent is any other party to any of Parent Leases in default.

(c) Parent or one of its subsidiaries owns good and marketable title to each
of the tangible properties and tangible assets reflected on the most recent
audited financial statements included in Parent SEC Documents or acquired
since the date thereof, free and clear of all Liens and encumbrances, except
for (i) Liens for current Taxes not yet delinquent, (ii) Liens set forth in
Schedule 4.9, (iii) the properties subject to Parent Leases, (iv) assets
disposed of since the date of the most recent audited financial statements
included in Parent SEC Documents in the ordinary course of business, (v) Liens
imposed by law and incurred in the ordinary course of business for obligations
not yet due to carriers, warehousemen, laborers and materialmen and (vi) Liens
in respect of pledges or deposits under workers' compensation laws, all of
which Liens aggregate less than $25,000.

(d) All of the buildings, machinery, equipment, tools, jigs, fixtures,
vehicles and other tangible assets necessary for the conduct of the business
of Parent and its subsidiaries are in reasonable working condition and repair,
ordinary wear and tear excepted, and are usable in the ordinary course of
business. There are no defects in such assets or other conditions relating
thereto which adversely affect the operation or value of such assets.

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Parent or one of its subsidiaries owns or leases under valid leases, all
buildings, machinery, equipment and other tangible assets necessary for the
conduct of its business as presently conducted, except for defects of title
that do not materially affect the use of such assets by Parent or its
subsidiaries and except for such assets that can be purchased or leased for
nominal expenditures.

4.10 Accounts Receivable. The accounts receivable reflected on most recent
unaudited financial statements included in Parent SEC Documents and those
arising thereafter are valid receivables, are not subject to valid
counterclaims or set-offs, and are collectible in accordance with their terms,
except to the extent of the bad debt reserve reflected on such financial
statements.

4.11 Inventory. The inventory of raw materials, work in process and finished
goods of Parent and each of its subsidiaries consists of items of a cost,
quality and quantity usable and, with respect to finished goods only, salable
at the normal profit levels of Parent and such subsidiaries in the ordinary
course of the business of Parent and such subsidiaries. The inventory of
finished goods of Parent and each of its subsidiaries is not slow-moving as
determined in accordance with past practices, obsolete or damaged and is
merchantable and fit for its particular use. Parent and each of its
subsidiaries has on hand or has ordered and expects timely delivery of such
quantities of raw materials, and has on hand such quantities of work in
process and finished goods, in each case as are reasonably required to timely
fill current orders on hand which require delivery within 60 days and to
maintain the manufacture and shipment of products at its normal level of
operations. As of the date of the most recent unaudited financial statements
included in Parent SEC Documents, the values at which such inventory is
carried are in accordance with GAAP. Schedule 4.11 contains a materially
complete and accurate summary of Parent's and each of its subsidiaries'
inventory of raw materials, work in progress, finished goods and reserve for
obsolete and other inventory allowance or accrual calculation schedules as of
June 30, 1998.

4.12 Tax Matters. Parent, its subsidiaries and each affiliated,
consolidated, combined or unitary group of which Parent or any of its
subsidiaries is a member (a "PARENT AFFILIATED GROUP"), has filed all Tax
Returns and reports required to be filed by it and has paid (or Parent has
paid on its behalf) all Taxes required to be paid by it (other than Taxes, the
failure to pay which would not, individually or in the aggregate, have a
Company Material Adverse Effect). All other Taxes of Parent which will be due
and payable, whether now or hereafter, for any period ending on, including, or
ending prior to the Closing Date, have been paid by or on behalf of Parent or
are reflected on Parent's books as an accrued Tax liability, either current or
deferred. The most recent financial statements contained in Parent SEC
Documents reflect an adequate reserve for all material Taxes payable by Parent
and any of its subsidiaries for all Taxable periods and portions thereof
through the date of such financial statements. No deficiencies for any Taxes
have been proposed, asserted, or assessed against Parent or any Company
Affiliated Group (other than deficiencies, the liability for which would not,
individually or in the aggregate, have a Company Material Adverse Effect). No
extensions nor requests for waivers or extensions of the time to assess any
Taxes have been granted or are pending. None of the assets or properties of
Parent or its subsidiaries is subject to any Tax Lien (other than Liens for
Taxes that are not yet due) except for Liens which would not, individually or
in the aggregate, have a Company Material Adverse Effect. Parent is not under
audit with respect to any Taxable period for any federal, state, local, or
foreign Taxes (including income and franchise Taxes but not including real or
personal property Taxes) by the IRS or other applicable Tax authority. Neither
Parent nor any of its subsidiaries is a party to any agreement, contract or
arrangement that would result, separately or in the aggregate, in the payment
of any "excess parachute payments" within the meaning of Section 280G of the
Code.

4.13 Contracts and Commitments.

(a) To the extent they are not listed elsewhere in the Parent Disclosure
Schedules, Schedule 4.13 lists the following agreements, whether written or,
to Parent's knowledge, oral, to which Parent or any of its subsidiaries is a
party (or by which Parent or any of its subsidiaries or their assets are
bound): (i) collective bargaining agreement or contract with any labor union;
(ii) bonus, pension, profit sharing, retirement or other form of deferred
compensation plan, other than as described in Schedule 4.18; (iii)
hospitalization insurance or other welfare benefit plan or practice, whether
formal or informal, other than as described in Schedule 4.18; (iv) stock
purchase or stock option plan; (v) contract for the employment of any officer,
individual employee or other

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person on a full-time or consulting basis or relating to severance pay for any
such person, other than Parent's and its subsidiaries' normal employment
practices generally affecting all employees or classes of employees (such as
hourly or salaried classes of employees); (vi) agreement with employees and
with consultants, vendors, customers or other third parties requiring
confidential treatment of Parent's or any of its subsidiaries' confidential
information or transfer to Parent or any of its subsidiaries of intellectual
property rights created by employees and with consultants, vendors, customers
or other third parties; (vii) contract, agreement or understanding relating to
the voting of Parent's or any of its subsidiaries' capital stock or the
election of directors of Parent or any of its subsidiaries; (viii) agreement
or indenture relating to the borrowing of money, to letters of credit or to
mortgaging, pledging or otherwise placing a Lien on any of the assets of
Parent or any of its subsidiaries; (ix) guaranty of any obligation for
borrowed money or otherwise; (x) lease or agreement under which it is lessee
of, or holds or operates any property, real or personal, owned by any other
party; (xi) other than as described in Schedule 4.9, lease or agreement under
which it is lessor of, or permits any third party to hold or operate, any
property, real or personal, for which the annual rental exceeds $5,000; (xii)
contract or group of related contracts with the same party (other than any
contract or group of related contracts for the purchase or sale of products or
services) continuing over a period of more than six months from the date or
dates thereof, not terminable by it on 30 days' or less notice without penalty
and involving more than $5,000; (xiii) contract which prohibits Parent or any
of its subsidiaries from freely engaging in business anywhere in the world;
(xiv) contract for the distribution of the products of Parent or any of its
subsidiaries (including any distributor, sales and original equipment
manufacturer contract); (xv) franchise agreement; (xvi) license agreement or
agreement providing for the payment of royalties or other compensation by
Parent or any of its subsidiaries in connection with intellectual property
rights licensed from third parties; (xvii) license agreement or agreement
providing for the receipt of royalties or other compensation by Parent or any
of its subsidiaries in connection with intellectual property rights owned,
controlled or otherwise licensable by Parent or any of its subsidiaries;
(xviii) contract or commitment for capital expenditures in excess of $5,000;
(xix) agreement for the sale of any capital asset in excess of $5,000; (xx)
contract with any affiliate which in any way relates to Parent or any of its
subsidiaries (other than for employment on customary terms); (xxi) agreement
with vendors, customers or other third parties requiring confidential
treatment of confidential information of such vendors, customers or other
third parties; or (xxii) other agreement which is either material to the
business of Parent or any of its subsidiaries or was not entered into in the
ordinary course of business.

(b) Schedule 4.13 lists the following agreements, whether oral or written,
to which Parent or any of its subsidiaries is a party or by which Parent or
any of its subsidiaries or any of their assets are bound: (i) contract or
group of related contracts with the same party for the purchase of products or
services by Parent or any of its subsidiaries under which the undelivered
balance of such products or services is in excess of $5,000; (ii) contract or
group of related contracts with the same party for the sale of products or
services by Parent or any of its subsidiaries under which the undelivered
balance of such products or services (including, without limitation, any free
upgrades or ongoing services) has a sales price in excess of $5,000; and (iii)
sales agreement or other customer commitment (other than the standard form of
purchase order) which entitles any purchaser to a rebate or right of set-off,
to return any product of Parent or any of its subsidiaries after acceptance
thereof or to delay the acceptance thereof, to receive future services,
upgrades or enhancements, or which varies in any material respect from
Parent's or any of its subsidiaries' standard form agreements for sales.

(c) Parent and each of its subsidiaries has performed all material
obligations required to be performed through the date hereof by it in
connection with the contracts or commitments required to be disclosed in
Schedule 4.13 and has not been notified of any claim of material default under
any contract or commitment required to be disclosed in Schedule 4.13; neither
Parent nor any Subsidiary has any present expectation or intention of not
fully performing any material obligation pursuant to any contract or
commitment required to be disclosed in Schedule 4.13; and neither Parent nor
any Subsidiary has knowledge of any material breach or anticipated material
breach by any other party to any contract or commitment required to be
disclosed in Schedule 4.14.

(d) Prior to the date of this Agreement, Company has been supplied with a
correct and complete copy of each written contract or commitment referred to
in Schedule 4.13, together with all known amendments, waivers or other changes
thereto.

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4.14 Intellectual Property Rights.

(a) Schedule 4.14 describes: (i) all patents and all registrations for
trademarks, service marks, trade names, corporate names, copyrights and mask
works that have been issued to Parent or any of its subsidiaries; and (ii)
each pending patent application or application for registration for
trademarks, service marks, trade names, corporate names, copyrights and mask
works that Parent or any of its subsidiaries has made with respect to
intellectual property owned by, or otherwise controlled by, Parent or any of
its subsidiaries and used in, developed for use in or necessary to the conduct
of the business of Parent or any of its subsidiaries as now conducted or as
planned to be conducted as described herein (the "PARENT OWNED INTELLECTUAL
PROPERTY RIGHTS"). Except as set forth in Schedule 4.14, Parent and each of
its subsidiaries owns and possesses all right, title and interest, or holds
such other interest as is identified in such Schedule, in and to the rights
set forth under such caption free and clear of all Liens, security interests
or other encumbrances and has the full right to exploit such Parent Owned
Intellectual Property Rights without payment of compensation to any other
party.

(b) Schedule 4.14 describes all agreements granting to Parent or any of its
subsidiaries rights in patents, patent applications, trademarks, service
marks, trade names, corporate names, copyrights, mask works, trade secrets or
other intellectual property rights used in or necessary to the conduct of the
business of Parent as now conducted or as planned to be conducted as described
herein (the "PARENT LICENSED-IN INTELLECTUAL PROPERTY RIGHTS"). All such
agreements are in force and neither Parent nor any of its subsidiaries is in
breach of any such agreement.

(c) Schedule 4.14 describes all products marketed or that have been marketed
by Parent or any of its subsidiaries within the past two years and identifies
the method(s) of intellectual property protection utilized by Parent or any of
its subsidiaries with respect to such products.

(d) Schedule 4.14 describes all agreements granting to third parties any
rights in Parent Owned Intellectual Property Rights and any agreements to
grant intellectual property rights that Parent or any of its subsidiaries may
acquire in the future.

(e) Except as disclosed in Schedule 4.14, all of Parent Owned Intellectual
Property Rights will be assumed by, and will become intellectual property
rights of, the Surviving Corporation in the Merger, without the requirement
that any consent to assignment be obtained or any payment (other than
government filing or registration fees) be made. Except as disclosed in
Schedule 4.14, all licenses of Parent Licensed-In Intellectual Property Rights
will be assumed by, and will become valid agreements of, the Surviving
Corporation in the Merger, without the requirement that any consent to
assignment be obtained or any payment be made (other than future royalties as
provided n such agreements).

(f) Parent and each of its subsidiaries have taken all commercially
reasonable steps to acquire, protect and maintain Parent Owned Intellectual
Property Rights. Without limiting the generality of the foregoing, (i) all
employees, contract workers, consultants and other agents of Parent and each
of its subsidiaries have executed agreements sufficient to vest in Parent or
such subsidiary ownership or the right to use Parent Owned Intellectual
Property Rights on which they have performed services in the business of
Parent or such subsidiary as currently conducted without the payment of
royalties or penalties; (ii) all maintenance, annuity, renewal and other such
fees and filings due on Company Owned Intellectual Property Rights have been
paid or made; and (iii) Parent has no knowledge of any defects in Parent Owned
Intellectual Property Rights that would lead to any of them becoming invalid
or unenforceable.

(g) Except as disclosed in Schedule 4.14, neither Parent nor any of its
subsidiaries has received any notice of, nor are there any facts known to
Parent or any of its subsidiaries which indicate a likelihood of, any
infringement or misappropriation by, or conflict with, any third party with
respect to Parent Owned Intellectual Property Rights or any Parent Licensed-In
Intellectual Property Rights that are exclusively licensed to Parent or any of
its subsidiaries; and no claim by any third party contesting the validity of
any Parent Owned Intellectual Property Rights has been made, is currently
outstanding or, to the knowledge of Parent, is threatened;

(h) Except as disclosed in Schedule 4.14, neither Parent nor any of its
subsidiaries has received any notice of any infringement, misappropriation or
violation by Parent or any of its subsidiaries of any intellectual property

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rights of any third parties and neither Parent nor any of its subsidiaries, to
its knowledge, has infringed, misappropriated or otherwise violated any such
intellectual property rights; and to the knowledge of Parent, no infringement,
misappropriation or violation of any intellectual property rights of any third
parties has occurred or will occur with respect to products currently being
sold by Parent or any of its subsidiaries or with respect to the products
currently under development (in their present state of development) or with
respect to the conduct of the business of Parent or any of its subsidiaries as
now conducted.

(i) Except as disclosed in Schedule 4.14, neither Parent nor any of its
subsidiaries has entered into any agreement restricting Parent or any of its
subsidiaries from selling, leasing or otherwise distributing any of its
current products or products under development to any class of customers, in
any geographic area, during any time period or in any segment of the market.

(j) To Parent's knowledge, Parent and each of its subsidiaries has the right
to make available to the Surviving Corporation all trade secrets and other
confidential information entrusted to Parent or any of its subsidiaries by
third parties.

(k) There are no known quality defects in the designs contained in Parent
Owned Intellectual Property Rights or Parent Licensed-In Intellectual Property
rights (including defects relating to the Year 2000 issue) and such designs
comply with all applicable laws.

4.15 Litigation. Except as disclosed in the Parent SEC Documents, there is
no action, suit, investigation, or proceeding pending against or, to the
knowledge of Parent, overtly threatened against or affecting, Parent or any of
its properties (other than any such suit, action, or proceeding challenging
the acquisition by Parent or Sub of the shares of Company Common Stock or any
provision of this Agreement or seeking to restrain or prohibit the
consummation of the Merger) before any Governmental Entity or by any
Governmental Entity that, individually or in the aggregate, would reasonably
be expected to have a Parent Material Adverse Effect.

4.16 Warranties; Products. Schedule 4.16 lists all claims outstanding,
pending or, to the knowledge of Parent, threatened for breach of any warranty
relating to any products sold by Parent or any of its subsidiaries prior to
the date hereof. The description of the product warranties and other material
terms of sale of Parent and each of its subsidiaries set forth in Schedule
4.16 are correct and complete. The reserves for warranty claims on the date of
the most recent audited financial statements included in Parent SEC Documents
are consistent with parent and each of its subsidiaries' prior practices and
are fully adequate to cover all warranty claims made or to be made against any
products of Parent or any of its subsidiaries sold prior to the date thereof.

4.17 Employees. (a) To the knowledge of Parent, no executive employee of
Parent or any of its subsidiaries and no group of the employees of Parent or
any of its subsidiaries has any plans to terminate his, her or their
employment; (b) Parent and each of its subsidiaries has complied with all laws
relating to the employment of labor, including provisions thereof relating to
wages, hours, equal opportunity, collective bargaining and the payment of
social security and other Taxes; (c) neither Parent nor any of its
subsidiaries has any labor relations problem pending and Parent's labor
relations are satisfactory; (d) there are no workers' compensation claims
pending against Parent or any of its subsidiaries nor is Parent or any of its
subsidiaries aware of any facts that would give rise to such a claim; (e) no
employee of Parent or any of its subsidiaries is subject to any secrecy or
noncompetition agreement or any other agreement or restriction of any kind
that would impede in any way the ability of such employee to carry out fully
all activities of such employee in furtherance of the business of Parent or
any of its subsidiaries; and (f) no employee or former employee of Parent or
any of its subsidiaries, or any predecessor has any claim with respect to any
Company Owned Intellectual Property Rights. Schedule 4.17 lists, as of the
date set forth in such Schedule, each employee of Parent or any of its
subsidiaries. Schedule 4.17 also states the position, title, remuneration
(including any scheduled salary or remuneration increases), date of employment
and accrued vacation pay of each such employee as of such date.

4.18 Employee Benefit Plans.

(a) Schedule 4.18 sets forth each employee benefit plan with respect to
which Parent or its ERISA Affiliates, as hereinafter defined, sponsors or
otherwise has any obligation (the "PARENT EMPLOYEE BENEFIT PLANS").

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(b) Except as disclosed in Schedule 4.18:

(i) No Parent Employee Benefit Plan is subject to Title IV of ERISA.

(ii) No Parent Employee Benefit Plan promises or provides health or life
benefits to retirees or former employees except as required by federal
continuation of coverage laws or similar state laws.

(iii) Each Parent Employee Benefit Plan has at all times been operated in
substantial compliance with ERISA, the Code, any other applicable law
(including all reporting and disclosure requirements thereunder) and the
terms of the plan. Each Parent Employee Benefit Plan that is intended to be
Tax qualified under Section 401(a) of the Code has received a favorable
determination letter from the IRS stating that the Plan (and all
amendments) is Tax qualified and that any trust associated with the plan is
Tax exempt under Section 501(a) of the Code. To the knowledge of Parent,
there is no reason why such qualified status would be revoked.

(iv) To the knowledge of Parent, no state of facts or conditions exist
which reasonably could be expected to subject Parent to any material
liability (other than routine claims for benefits) with respect to any
Company Employee Benefit Plan under the terms of Parent Employee Benefit
Plan or applicable law.

(v) Parent has not committed to make any material increase in
contributions or benefits under any Parent Employee Benefit Plan and has
not committed to establish any new plan.

(vi) There are no material unfunded liabilities as of the Closing Date
associated with any Parent Employee Benefit Plan. All contributions to each
Parent Employee Benefit Plan that are required to be made with respect to
periods ending on or before the Closing Date (including periods from the
first day of the then current plan or policy year to the Closing Date) have
been made or accrued before the Closing Date.

(vii) With respect to each Parent Employee Benefit Plan (to the extent
applicable), Parent has delivered to the Company copies of the plan
documents, plan amendments, summary plan descriptions, the most recent Tax
qualified determination letters from the IRS, the three most recent Form
5500 Annual Reports, including related schedules and audited financials,
and a list of assets associated with each Parent Employee Benefit Plan.

(viii) The benefits to be provided to participants under each Parent
Employee Benefit Plan, other than a Tax qualified plan under Code Section
401(a), are to be provided exclusively through insurance or from the
general assets of Parent.

4.19 Insurance. Schedule 4.19 lists and briefly describes each insurance
policy maintained by Parent or any of its subsidiaries with respect to the
properties, assets and operations of Parent or such subsidiary and sets forth
the date of expiration of each such insurance policy. All of such insurance
policies are in full force and effect. Neither Parent nor any of its
subsidiaries is in default with respect to its obligations under any of such
insurance policies.

4.20 Affiliate Transactions. Other than as described in the Parent SEC
Documents or otherwise pursuant to this Agreement, no Insider has any
agreement with Parent or any of its subsidiaries (other than normal employment
arrangements) or any interest in any property, real, personal or mixed,
tangible or intangible, used in or pertaining to the business of Parent or any
of its subsidiaries (other than ownership of capital stock of Parent). None of
the Insiders has any direct or indirect interest (other than beneficial
ownership of less than one percent of the stock of a publicly held corporation
whose stock is traded on a national securities exchange or in the over-the-
counter market) in any competitor, supplier or customer of Parent or any of
its subsidiaries or in any person, firm or entity from whom or to whom Parent
or any of its subsidiaries leases any property. For purposes of this Section
4.230 the members of the immediate family of an officer, director or employee
shall consist of the spouse, parents, children, siblings, mothers- and
fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law
of such officer, director or employee. All agreements and transactions between
Parent

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or any of its subsidiaries and any Insider identified in Schedule 4.20 were
made for bona fide business purposes on terms comparable to what could be
obtained from an unaffiliated third party.

4.21 Customers and Suppliers. Schedule 4.21 lists the 15 largest
distributors and the 15 largest suppliers of Parent and each of its
subsidiaries for the 12-month period ended June 30, 1998, and sets forth
opposite the name of each such customer or supplier the approximate amount of
gross sales or purchases by such Subsidiary attributable to such customer or
supplier for such period. Except as set forth on Schedule 4.21, since June 30,
1998, no customer or supplier listed in Schedule 4.21 has informed Parent or
any of its subsidiaries that it will stop or materially decrease the rate of
business done with Parent or any of its subsidiaries.

4.22 Distributors. Schedule 4.22 lists (a) all former distributors of Parent
or any of its subsidiaries that have been terminated since January 1, 1995 and
the circumstances surrounding such termination; (b) all litigation and
disputes between Parent or any of its subsidiaries and any of their past or
present distributors, including any claims initiated by any distributor
against Parent or any of its subsidiaries, whether such litigation dispute
resulted in a settlement, financial payment or not; (c) to Parent's knowledge,
all buying consortium arrangements by which any distributor of Parent or any
of its subsidiaries purchases goods (including wholegoods, parts, supplies or
other goods) or services from Parent or any of its subsidiaries; and (d) all
distributors of Parent or any of its subsidiaries that, to Parent's knowledge,
sell or distribute goods or services other than those of Parent or any of its
subsidiaries. There are no enforceable agreements with any distributor except
as set forth in Schedule 4.22. Each distributor of Parent and each of its
subsidiaries may be terminated without penalty or other liability other than
the repurchase of inventory and potential liability for floor plan exposure
upon at least 30 days' prior written notice, except as otherwise provided by
distributor protection laws in some states.

4.23 Officers and Directors; Bank Accounts. Schedule 4.23 lists all officers
and directors of Parent and each of its subsidiaries and all of the bank
accounts of Parent and each of its subsidiaries (designating each authorized
signer).

4.24 Labor Matters. Neither Parent nor any of its subsidiaries is a party to
any collective bargaining agreement or other labor union contract applicable
to persons employed by Parent or any of its subsidiaries.

4.25 Compliance with Laws. Except as disclosed in Parent SEC Documents,
neither Parent nor any of its subsidiaries (a) is in violation of, nor has it
violated, any applicable provisions of any laws, statutes, ordinances or
regulations, or (b) has received any notice from any Governmental Entity or
any other person that Parent or any of its subsidiaries is in violation of, or
has violated, any applicable provisions of any laws, statutes, ordinances or
regulations, except in the case of clauses (a) and (b), for violations,
individually or in the aggregate, which have not had and would not reasonably
be expected to have a Company Material Adverse Effect. Each of Parent and each
of its subsidiaries has all permits, licenses, and franchises from
Governmental Entities required to conduct its business as now being conducted,
except for such permits, licenses, and franchises the absence of which would
not, individually or in the aggregate, have a Company Material Adverse Effect.

4.26 Brokers. No broker, investment banker, financial advisor, or other
person is entitled to any broker's, finder's, financial advisor's, or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Parent.

4.27 Tax Matters. Neither Parent nor, to its knowledge, any of its
affiliates, has taken or agreed to take any action, or knows of any
circumstances, that (without regard to any action taken or agreed to be taken
by Company or any of its affiliates) would prevent the Merger from qualifying
as a reorganization within the meaning of Section 368(a) of the Code.

4.28 Certain Business Matters. Neither Parent nor, to its knowledge, any of
its affiliates has (a) made or agreed to make any contribution, payment or
gift to any customer, supplier, governmental official, employee or agent where
either the contribution, payment or gift or the purpose thereof was illegal
under any applicable law, (b) established or maintained any unrecorded fund or
asset of Parent or any of its subsidiaries for any improper

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purpose or made any false entries on its books and records for any reason, (c)
made or agreed to make any contribution, or reimbursed any political gift or
contribution made by any other person, to any candidate for federal, state or
local public office in violation of any applicable law, or (d) engaged in any
activity constituting fraud or abuse under applicable laws relating to health
care, insurance or the regulation of professional corporations.

4.29 Certain Contract Matters.

(a) Schedule 4.29 sets forth, as of the Agreement Date, a list of each
contract to which Parent, its subsidiaries, or any of its affiliates (other
than individuals) is a party limiting the right of Parent prior to the Closing
Date, or Parent or any of its subsidiaries or affiliates (other than
individuals), at or after the Closing Date, to engage in, or to compete with
any person in, any business, including each contract containing exclusivity
provisions restricting the geographical area in which, or the method by which,
any business may be conducted by Parent, its subsidiaries, or any of its
affiliates (other than individuals) prior to the Closing Date, or by Parent,
its subsidiaries or affiliates (other than individuals) after the Closing
Date. Each such contract is in full force and effect, each is a legal, valid
and binding contract, and there is no material default (or any event which,
with the giving of notice or lapse of time or both, would be a material
default) by Parent or any of its subsidiaries, in the timely performance of
any material obligation to be performed or paid under any such contract.

4.30 Environmental Matters.

(a) Parent, each of its subsidiaries and the Parent Real Property are in
material compliance with all applicable Environmental Laws.

(b) Parent has obtained, and maintained in full force and effect, all
Environmental Permits necessary to conduct its business and operate Parent
Real Property. A true and correct copy of each of such Environmental Permit
has been provided by Parent to Company. Parent has conducted its business in
compliance with all terms and conditions of the Environmental Permits. Parent
has filed all reports and notifications required to be filed under and
pursuant to all applicable Environmental Laws.

(c) Except as set forth in Schedule 4.30: (i) no Hazardous Materials have
been generated, treated, contained, handled, located, used, manufactured,
processed, buried, incinerated, deposited, stored, or released on, under or
about any part of the Parent Real Property during the period Parent was in
possession thereof, (ii) Parent's Real Property and any improvements thereon,
contain no asbestos, urea, formaldehyde, radon at levels above natural
background, polychlorinated biphenyls (PCBs) or pesticides, and (iii) no
aboveground or underground storage tanks are located on, under or about the
Parent Real Property.

(d) Except as set forth in the Schedule 4.30, Parent has not received notice
alleging in any manner that any of them is, or might be potentially
responsible for any Release of Hazardous Materials, or any costs arising under
or violation of Environmental Laws.

(e) To the knowledge of Parent, no expenditure outside the ordinary course
of business will be required in order for Parent, Merger Sub or the Surviving
Corporation to comply with any Environmental Laws in effect at the Effective
Time in connection with the operation or continued operation of the business
of Parent or the Parent Real Property in a manner consistent with the current
operation thereof by Parent.

(f) Except as set forth in Schedule 4.30, Parent and the Parent Real
Property are not and have not been listed on the United States Environmental
Protection Agency National Priorities List of Hazardous Waste Sites, or any
other list, schedule, law, inventory or record of hazardous or solid waste
sites maintained by any federal, state or local agency.

(g) Parent has disclosed and delivered to Company all environmental reports
and investigations which Parent has obtained or ordered with respect to the
business of Parent and the Parent Real Property.

(h) To the knowledge of Parent, no part of the business of Parent and none
of the Parent Real Property has been used as a landfill, dump or other
disposal, storage, transfer, handling or treatment area for Hazardous
Materials, or as a gasoline service station or a facility for selling,
dispensing, storing, transferring, disposing or handling petroleum or
petroleum products.

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(i) No Lien has been attached or filed against Parent or the Parent Real
Property in favor of any governmental or private entity for (i) any liability
or imposition of costs under or violation of any applicable Environmental Law;
or (ii) any Release of Hazardous Materials.

4.31 Disclosure. No representation or warranty contained in this Agreement,
in the Parent Disclosure Schedules, or in any document delivered by Parent to
the Company pursuant to Article VII of this Agreement, contains, or will at
the Effective Time contain, any untrue statement of a material fact or omits
or will at, the Effective Time, omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they
were or will be made, not misleading.

ARTICLE V

Covenants Relating to Conduct of Business

5.1 Conduct of Business by the Company. Except as contemplated by this
Agreement, from the Agreement Date until the Effective Time, each of the
Company and each of its subsidiaries shall conduct its business in the
ordinary course consistent with past practice and shall use reasonable efforts
to preserve intact its business organization and relationships with third
parties and to keep available the services of its present officers and
employees. Without limiting the generality of the foregoing, except as
provided in this Agreement from the Agreement Date until the Effective Time,
neither the Company nor any of its subsidiaries, without the prior written
approval of Parent, will:

(a) amend its articles of incorporation, bylaws, or other comparable charter
or organizational documents;

(b) (i) declare or pay any dividends on, or make any other distributions
(whether in cash, stock or property) in respect of, any of their capital
stock, (ii) split, combine, or reclassify any of their capital stock, or issue
or authorize the issuance of any other securities in respect of shares of
their capital stock, or (iii) purchase, redeem, or otherwise acquire any
shares of capital stock or any other securities or any rights, warrants, or
options to acquire any such shares or other securities;

(c) issue, grant, award, sell, pledge, or otherwise encumber any shares of
their capital stock, any other voting securities, or any securities
convertible into or any rights, warrants, or options to acquire, any such
shares, voting securities, or convertible securities, other than the issuance
of shares of Company Common Stock upon the exercise of Company Options or
Company Warrants in accordance with their present terms;

(d) acquire or agree to acquire by merger, consolidation, asset purchase, or
any other manner, (i) any corporation, partnership, joint venture, association
or other business organization, or any division thereof or (ii) any assets
that are material, individually or in the aggregate, to the Company, except
purchases of inventory in the ordinary course of business consistent with past
practice;

(e) sell, lease, license, mortgage, subject to any Lien, or otherwise
dispose of any of its assets that are material, individually or in the
aggregate, except sales of inventory in the ordinary course of business
consistent with past practice;

(f) (i) incur any indebtedness, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or a
subsidiary, guarantee any debt or debt security of another person, enter into
any "keep well" or other agreement to maintain any financial statement
condition of another person or enter into any arrangement having the economic
effect of any of the foregoing, except for short-term borrowings incurred in
the ordinary course of business consistent with past practice, or (ii) make
any loans, advances, or capital contributions to, or investments in, any other
person, other than (A) to the Company or its subsidiaries or (B) advances to
employees consistent with past practice;

(g) make or agree to make any new capital expenditure or expenditures which,
individually, is in excess of $5,000 or, in the aggregate, are in excess of
$25,000;

(h) make any Tax election or settle or compromise any Tax liability, or make
any change in any method of accounting for Taxes or accounting policy or
practice with respect to Taxes;

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(i) pay, discharge, settle, or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement, or satisfaction, in
the ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the
notes thereto) of the Company included in the Company SEC Documents or
incurred in the ordinary course of business consistent with past practice, or
waive any material benefits of, or agree to modify in any material respect,
any confidentiality, standstill or similar agreements to which the Company or
a subsidiary is a party;

(j) except in the ordinary course of business, modify, amend, or terminate
any material contract or agreement to which the Company is a party or waive,
release, or assign any material rights or claims;

(k) enter into any contract or agreement with any sales representative or
distributor;

(l) except as required by applicable law or in the ordinary course of
business, (i) adopt, enter into, terminate, or amend any bonus, profit
sharing, thrift, compensation, stock option, stock purchase, restricted stock,
pension, retirement, or deferred compensation or other plan, trust arrangement
or fund for the benefit or welfare of any director, officer or current or
former employee (each, a "BENEFIT PLAN"), (ii) increase in any manner the
compensation or fringe benefits of, or pay any bonus to, any director or
employee (except for normal increases or bonuses in the ordinary course of
business consistent with past practice), (iii) pay any benefit not provided
for under any Benefit Plan, (iv) except as permitted in clause (ii), grant any
awards, or remove any existing restrictions, under any bonus, incentive,
performance or other compensation plan or arrangement or Benefit Plan, or (v)
take any action to fund or in any other way secure the payment of compensation
or benefits under any employee plan, agreement, or arrangement or Benefit
Plan;

(m) make any change in any method of accounting or accounting practice or
policy other than those required by generally accepted accounting principles;

(n) take any action that (without regard to any action taken or agreed to be
taken by the Company or any of its affiliates) would prevent the Merger from
qualifying as a reorganization within the meaning of Sections 368(a) of the
Code;

(o) pay any fees of any legal or Tax adviser retained in connection with the
Merger calculated on a basis other than an hourly basis at the maximum agreed
rates per hour;

(p) enter into any written employment agreement with any employee or any
verbal agreement providing for benefits not equivalent to employees of similar
position in the Company;

(q) accelerate the vesting of any Company Options; or

(r) authorize any of, or commit or agree to take any of, the foregoing
actions.

5.2 Conduct of Business by Parent. Except as provided in this Agreement,
from the Agreement Date until the Effective Time, each of Parent and Merger
Sub shall conduct its business in the ordinary course consistent with past
practice and shall use reasonable efforts to preserve intact its business
organization and relationships with third parties and to keep available the
services of its present officers and employees. Without limiting the
generality of the foregoing neither Parent nor any of its subsidiaries,
without the prior written approval of the Company, will:

(a) except for the Charter Amendment, amend its articles of incorporation,
bylaws, or other comparable charter or organizational documents;

(c) issue more than 2,500,000 shares of Parent Capital Stock, any other
voting securities, or any securities convertible into or any rights, warrants
or options to acquire any such shares, voting securities or convertible

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securities, at a price equivalent that is less than 75% of the market price of
the Parent Common Stock on the date of issuance;

(d) make any acquisition or take any other action which would materially
adversely affect its ability to consummate the transactions contemplated by
this Agreement;

(e) take any action that (without regard to any action taken or agreed to be
taken by the Company or any of its affiliates) would prevent the Merger from
qualifying as a reorganization within the meaning of Sections 368(a) of the
Code;

(f) authorize either of, or commit or agree to take either of, the foregoing
actions.

5.3 No Solicitation of Transactions. Except as expressly contemplated by
this Agreement or otherwise consented to in writing by Parent, from the
Agreement Date until the Effective Time, the Company shall not participate in
any discussions with, provide any information to, enter into any agreement or
understanding with, or otherwise cooperate in any other way with any person
(other than Parent and its directors, officers, employees, representatives,
and agents) concerning any "COMPANY COMPETING TRANSACTION," or permit or
authorize any of the directors, officers, employees, shareholders or
representatives (including, without limitation, any financial advisor,
attorney, or accountant) of the Company or any of its subsidiaries to take any
such action. The Company shall promptly notify Parent when it receives, or
becomes aware that any subsidiary or any director, officer, employee, or
representative of the Company or any subsidiary has received any inquiries,
proposals, or requests for information concerning a Company Competing
Transaction. For purposes of this Agreement, "Company Competing Transaction"
shall mean any of the following involving the Company (other than the
transactions contemplated by this Agreement): (a) any tender or exchange
offer, proposal for a merger, consolidation or other business combination
involving the Company or any proposal or offer to acquire in any manner 20% or
more of the voting equity securities of the Company in a single transaction or
series of related transactions; (b) any sale, lease, exchange, mortgage,
pledge, transfer, or other disposition of 25% or more of the assets of the
Company on a consolidated basis, in a single transaction or a series of
related transactions; or (c) any agreement to, or public announcement by the
Company of a proposal, plan, or intention to, do any of the foregoing, in each
case other than in accordance with this Agreement. Notwithstanding the
foregoing, nothing contained in this Agreement shall prevent the Company or
its board of directors from furnishing non-public information to, or entering
into discussions or negotiations with, any person or entity in connection with
an unsolicited bona fide written proposal or inquiry concerning a Company
Competing Transaction by such person or entity or recommending an unsolicited
bona fide written proposal concerning a Company Competing Transaction to the
shareholders of the Company, if and only to the extent that (i) the board of
directors of the Company believes in good faith that such Company Competing
Transaction would, if consummated, result in a transactoin more favorable to
the Company's shareholders from a financial point of view than the transaction
contemplated by this Agreement (any such more favorable Company Competing
Transaction being referred to in this Agreement as a "Superior Proposal") and
the board of directors of the Company determines in good faith after
consultation with outside legal counsel that such action is necessary for the
Company to comply with its fiduciary duties to shareholders under applicable
law, and (ii) prior to furnishing such non-public information to, or entering
into discussions or negotiations with, such person or entity, the board of
directors of the Company receives from such person or entity an executed
confidentiality agreement with terms no more favorable to such party than
those contained in the Confidentiality Agreement dated June 30, 1998, between
Parent and the Company.

ARTICLE VI

Additional Agreements

6.1 Shareholder Approvals. Each of the Company and Parent shall take, in
accordance with applicable law, applicable NASDAQ rules and its respective
certificate or articles of incorporation and by-laws, all action necessary to
convene, respectively, (i) an appropriate meeting of shareholders of Parent to
consider and vote upon (A) the approval and adoption of this Agreement and the
Merger (including the issuance of the shares of

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Parent Common Stock to be issued in the Merger pursuant to this Agreement),
(B) an amendment to the articles of incorporation of Parent to increase the
number of authorized shares of Parent Common Stock to 50,000,000 shares (the
"CHARTER AMENDMENT"), and (C) any other matters required to be approved by
Parent shareholders for consummation of the Merger, and (ii) an appropriate
meeting of shareholders of the Company to consider and vote upon the approval
and adoption of this Agreement and the Merger and any other matters required
to be approved by the Company's shareholders for consummation of the Merger as
promptly as practicable after the Form S-4 is declared effective. The board of
directors of Parent and the board of directors of the Company shall recommend
such approval, and each of Parent and the Company shall take all reasonable
lawful action to solicit such approval by its respective shareholders. The
Company and Parent shall coordinate and cooperate with respect to the timing
of the shareholder meetings and shall use their respective best efforts to
hold such meetings on the same day as soon as practicable after the Agreement
Date.

6.2 Preparation of Form S-4 and the Proxy Statement; Shareholders'
Meetings. As soon as practicable following the Agreement Date, (i) the Company
and Parent shall cooperate in the preparation of a registration statement on
Form S-4 (the "FORM S-4") to be filed by Parent in connection with the
issuance of Parent Common Stock in the Merger (including the joint proxy
statement and prospectus and other proxy solicitation materials of the Company
and Parent constituting a part thereof (the "JOINT PROXY STATEMENT")). Each of
the Company and Parent shall use reasonable efforts to have the Form S-4
declared effective under the Securities Act as promptly as practicable after
such filing and to maintain such effectiveness until the shares covered
thereby have been issued. Parent shall provide the Company with copies of all
filings made pursuant to this Section 6.2 and shall consult with the Company
on any responses to comments made by the staff of the SEC with respect
thereto. The Company and Parent will use reasonable efforts to cause the Joint
Proxy Statement to be mailed to their respective shareholders as promptly as
practicable after the Form S-4 is declared effective under the Securities Act.
Parent shall, at its expense, also take any action required to be taken under
any applicable state securities laws in connection with the issuance of Parent
Common Stock in the Merger.

6.3 Information Supplied by the Company. None of the information supplied or
to be supplied by the Company specifically for inclusion or incorporation by
reference in (a) the Form S-4 will, at the time the Form S-4 is filed with the
SEC, at any time it is amended or supplemented and, at the time it becomes
effective under the Securities Act and at the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading, and (b)
the Joint Proxy Statement will, at the date it is first mailed to the
Company's shareholders and at the time of the shareholders' Meetings, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event or
circumstance relating to the Company, or its officers or directors, should be
discovered by the Company which should be set forth in an amendment to the
Form S-4 or a supplement to the Joint Proxy Statement, the Company shall
promptly inform Parent. All documents, if any, that the Company is responsible
for filing with the SEC in connection with the transactions contemplated
herein will comply as to form and substance in all material respects with the
applicable requirements of the Exchange Act and the rules and regulations
thereunder.

6.4 Information Supplied by Parent. None of the information supplied or to
be supplied by Parent specifically for inclusion or incorporation by reference
in (i) the Form S-4 will, at the time the Form S-4 is filed with the SEC, at
any time it is amended or supplemented, at the time it becomes effective under
the Securities Act and at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading, and (ii) the Joint
Proxy Statement will, at the date it is first mailed to the Company's
shareholders and at the time of the shareholders' Meetings, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading. If at any time
prior to the Effective Time any event or circumstance relating to Parent or
its officers and directors, should be discovered by

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Parent which should be set forth in an amendment to the Form S-4 or a
supplement to the Joint Proxy Statement, Parent shall promptly inform the
Company and shall promptly prepare such supplement or amendment and file such
amendment to the Form S-4. All documents that Parent is responsible for filing
with the SEC in connection with the transactions contemplated herein will
comply as to form and substance in all material respects with the applicable
requirements of the Securities Act and the rules and regulations thereunder.
Prior to the Closing Date, Parent shall use reasonable efforts to cause the
shares of Parent Common Stock to be issued pursuant to the Merger to be
registered or qualified under all applicable securities or blue sky laws of
each of the states and territories of the United States, and to take any other
actions which may be necessary to enable the Parent Common Stock to be issued
pursuant to the Merger to be distributed in each such jurisdiction.

6.5 Access to Information. Subject to Section 6.8, from the Agreement Date
to the Effective Time, Parent and the Company shall each, upon reasonable
notice and during normal business hours, provide to the other access to all
information and documents which the other may reasonably request regarding the
business, assets, liabilities, employees and other aspects of the other party,
other than the information and documents that in the opinion of such other
party's legal counsel may not be disclosed under applicable law.

6.6 Confidentiality. The parties will, and will cause their respective
directors, officers, employees, accountants, consultants, legal counsel, and
other representatives to, comply with all of their respective obligations
under the confidentiality agreement between Parent and the Company, dated June
30, 1998 (the "CONFIDENTIALITY AGREEMENT"). Without limiting the generality of
the obligations set forth in the Confidentiality Agreement, both parties to
this Agreement agree that, without the consent of the other party, neither
party will solicit or cause to be solicited for employment any employee, sales
agent or sales representative of the other party, or hire any employee, sales
agent or sales representative with whom such party had contact in the course
of evaluating the Merger, prior to the Effective Time and for a period of 18
months after any termination of this Agreement. Any such consent granted by a
party is revocable at any time. For purposes of this paragraph, solicitation
shall not include solicitation of employees, sales agents or sales
representatives (i) who first solicit employment or relationship from the
party in question, or (ii) who are solicited (A) by advertising in periodicals
of general circulation, or (B) by an employee search firm on a party's behalf,
so long as such party does not direct or encourage such firm to solicit such
employee or any other employees of the other party.

6.7 Public Announcements. Each of Parent and the Company will consult with
the other party before issuing any press release or making any public
statement with respect to this Agreement and the transactions contemplated
hereby and, except as may be required by applicable law or any listing
agreement with any national securities exchange, will not issue any such press
release or make any such public statement prior to such consultation. The
parties have agreed on the text of a joint press release by which Parent and
the Company will announce the execution of this Agreement.

6.8 Appropriate Action; Consents; Filings.

(a) The Company and Parent shall use reasonable efforts to (i) take, or
cause to be taken, all appropriate action necessary under applicable law or
required to be taken by any Governmental Entity to consummate the Merger and
the transactions contemplated by this Agreement as promptly as practicable,
(ii) obtain from any Governmental Entities any licenses, waivers, or approvals
required to be obtained by the Company or Parent or any of their respective
subsidiaries in connection with the authorization, execution, and delivery of
this Agreement and the consummation of the transactions contemplated hereby,
(iii) give any notices to non-Governmental Entities and obtain any third party
consents, (A) necessary to consummate the Merger and the transactions
contemplated by this Agreement, (B) disclosed or required to be disclosed in
the schedules to this Agreement, or (C) required to prevent a Company Material
Adverse Effect or a Parent Material Adverse Effect, and (iv) as promptly as
practicable, make all necessary filings, and thereafter make any other
required submissions, with respect to this Agreement and the Merger required
under (A) the Securities Act, the Exchange Act, and any other applicable
federal or state securities laws, and (B) any other applicable law; provided
that Parent and the Company shall cooperate with each other in connection with
the making of all such filings,

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including providing copies of all such documents to the non-filing party and
its advisors prior to filing and, if requested, to accept all reasonable
additions, deletions or changes suggested in connection therewith. In the
event that either Parent or the Company shall fail to perform any action
listed in (i), (ii), (iii), or (iv) above, it shall use reasonable efforts,
and shall take any such actions reasonably requested by the other party, to
minimize any adverse effect upon the Company and Parent, their respective
subsidiaries and their respective businesses resulting, or which could
reasonably be expected to result after the Effective Time, from the failure to
perform such action. The Company and Parent shall use reasonable efforts to
furnish to each other all information required for any application or other
filing to be made pursuant to the rules and regulations of any applicable law
(including all information required to be included in the Form S-4 and the
Joint Proxy Statement) in connection with the transactions contemplated by
this Agreement.

(b) Except as otherwise permitted by this Agreement, none of the Company,
Parent or Merger Sub will knowingly take any action, or omit to take any
action, if such action or omission would, or would reasonably be expected to,
result in any of its representations or warranties set forth herein being or
becoming untrue, or in any of the conditions to the Merger set forth in this
Agreement not being satisfied.

(c) From the Agreement Date until the Effective Time, each of Parent, and
the Company shall promptly notify the other of any pending or threatened
action, proceeding or investigation by any Governmental Entity or any other
person (i) challenging or seeking material damages in connection with the
Merger or the conversion of the Company Common Stock into Parent Common Stock
pursuant to the Merger or (ii) seeking to restrain or prohibit the
consummation of the Merger or otherwise limit the right of Parent or any of
its subsidiaries to own or operate all or any portion of the businesses or
assets of the Company.

6.9 Directors' and Officers' Indemnification and Insurance.

(a) Right to Indemnification. From and after the Effective Time, Parent
shall, and shall cause the Company to, jointly and severally, indemnify,
defend and hold harmless the present and former officers and directors of the
Company and persons who become officers or directors prior to the Effective
Time (collectively, the "INDEMNITEES") against all losses, expenses,
(including reasonable attorney's fees) claims, damages, liabilities, costs or
judgments or amounts that are paid in settlement with the approval of Parent
(which approval shall not be unreasonably withheld) arising out of actions or
omissions occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by this Agreement) to the full
extent permitted or required as of the Agreement Date by the Company's
articles of incorporation and bylaws (and shall also advance expenses as
incurred to the fullest extent permitted or required as of the Agreement Date
under the Company's articles of incorporation and bylaws, provided that the
person to whom expenses are advanced provides the undertaking to repay such
advances if and as contemplated by applicable law or such articles of
incorporation and bylaws). The Company shall use reasonable efforts to obtain
extended reporting endorsements (tail coverage) on the fiduciary liability,
professional liability, and directors and officers liability policies
currently covering the Company or any of the Indemnitees required to be
indemnified by Parent at a commercially reasonable cost, effective as of and
following the Effective Time; provided that such coverage and the cost thereof
shall be subject to Parent's approval, which approval shall not be
unreasonably withheld. In connection with such efforts, the Company will
complete accurately in all material respects any insurance applications and
forms of the applicable insurer and take any reasonable steps to preserve any
claims, including submitting a full and complete list of any potential claims
of which the Company has knowledge, under the policy issued by such insurer.
In the event the Company is unable to obtain such extended reporting coverage
under the Company's existing directors and officers liability insurance
policies at a commercially reasonable cost, Parent shall use reasonable
efforts to provide similar coverage for those Indemnitees that it is required
to indemnify under policies then maintained by Parent; provided that such
similar coverage is available to Parent at a commercially reasonable cost.
Notwithstanding any provisions of this Section 6.11(a), failure by the Company
or Parent, despite use of their respective reasonable efforts, to obtain such
extended reporting endorsements or to provide such similar coverage under
Parent's policies shall not in any way affect, lessen or excuse Parent from
its obligation to indemnify, defend and hold harmless the Indemnitees to the
extent required by this Section 6.9.

(b) Claims. In the event any claim, action, suit, proceeding or
investigation (a "D&O CLAIM") for which indemnification is provided under this
Section 6.9 is brought against an Indemnitee (whether arising before

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or after the Effective Time) after the Effective Time (i) such Indemnitee may
retain counsel satisfactory to it (subject to approval by the indemnifying
party, which approval shall not be unreasonably withheld, and subject to the
terms and conditions of the applicable directors and officers liability
insurance or fiduciary liability insurance policies), (ii) the indemnifying
party shall pay all reasonable fees and expenses of such counsel for such
Indemnitee promptly as statements therefor are received (subject to the
ability of the indemnifying party to receive such information relative to the
legal services provided as is customarily provided and reasonably requested by
the indemnifying party and provided that nothing in this Section 6.9 shall
prevent the indemnifying party from disputing any fees it reasonably believes
are not reasonable), and (iii) the indemnifying party will use all reasonable
efforts to assist in the vigorous defense of any such matter, provided that
the indemnifying party shall not be liable for any settlement of any D&O Claim
effected without its written consent, which consent shall not be unreasonably
withheld. Any Indemnitee wishing to claim indemnification under this Section
6.9, upon learning of any such D&O Claim, shall notify the appropriate
indemnifying party (but the failure so to notify such indemnifying party shall
not relieve the indemnifying party from any liability which it may have under
this Section 6.9 except to the extent such failure materially prejudices such
indemnifying party), and shall deliver to such indemnifying party the
undertaking contemplated by applicable law. The Indemnitees as a group may
retain only one law firm to represent them with respect to each such matter
unless there is, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of any two or more
Indemnitees.

(c) This Section 6.9 is intended to benefit the Indemnitees, shall be
enforceable by each Indemnitee and his or her heirs and representatives, and
shall be binding on all successors and assigns of the Company and Parent.

(d) In the event that Parent or the Surviving Corporation or any of their
respective successors and assigns consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or transfers and conveys all or substantially all
of its property and assets to any person, then, and in each case, proper
provisions shall be made so that the successor and assigns of Parent and the
Surviving Corporation assume the obligations set forth in this Section 6.9.

6.10 Obligations of Merger Sub. Parent shall take all action necessary to
cause Merger Sub to perform its obligations under this Agreement and to
consummate the Merger on the terms and subject to conditions set forth in this
Agreement.

6.11 Company Affiliates.

(a) Identification; Restrictions. Promptly following the Agreement Date, the
Company shall deliver to Parent a list of names and addresses of those persons
who are affiliates of the Company within the meaning of Rule 145 of the rules
and regulations promulgated under the Securities Act (each such person, a
"COMPANY AFFILIATE"). The Company shall provide Parent such information and
documents as Parent shall reasonably request for purposes of reviewing such
list. The Company shall use its best efforts to deliver or cause to be
delivered to Parent, on or prior to the Effective Time, an affiliate letter in
the form attached hereto as Exhibit A, executed by each of the Company
Affiliates identified in the foregoing list. Parent shall be entitled to place
legends as specified in such affiliate letters on the certificates evidencing
any of the Parent Common Stock to be received by such Company Affiliates
pursuant to the terms of this Agreement, and to issue appropriate stop
transfer instructions to the transfer agent for the Parent Common Stock,
consistent with the terms of such letters.

(b) Parent Obligations. For so long as resales of shares of Parent Common
Stock issued pursuant to the Merger are subject to the resale restrictions set
forth in Rule 145 under the Securities Act, Parent will use its best efforts
to comply with Rule 144(c)(1) under the Securities Act.

6.12 NASDAQ Listing. Parent shall promptly prepare and submit a listing
application in accordance with the rules of the NASDAQ National Market
covering the shares of Parent Common Stock to be issued in connection with the
Merger and to be issued in connection with the exercise of Company Options and
Company Warrants to be assumed by Parent hereunder. Parent shall use
reasonable efforts to have such application approved by the NASDAQ National
Market prior to the Effective Time.

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6.13 Employee Benefits.

(a) Parent reserves the right to request in writing at least 15 days prior
to the Closing Date, that the Company cease contributing to one or more of the
Company Employee Benefit Plans effective as of the Closing Date.

(b) If Parent requests that the Company cease contributions to or terminate
a qualified plan under Section 401(k) of the Code (the "COMPANY'S 401(K)
PLAN"), the Company shall (i) adopt written resolutions, the form and
substance of which shall be satisfactory to Parent, to terminate the Company's
401(k) Plan and to fully (100%) vest all participants under the Company's
401(k) Plan no later than the third business day preceding the Closing Date;
provided, however, that such plan termination may be made contingent upon the
consummation of the Merger and distribution of benefits may be made contingent
upon the receipt of a favorable determination letter from the IRS with respect
to the termination of the Company's 401(k) Plan, (ii) deliver, prior to the
Closing Date, notice of the Company's 401(k) Plan termination to any trustees
and custodians of the Company's 401(k) Plan and/or its assets, (iii) appoint
(if not already appointed) an institutional trustee of the Company's 401(k)
Plan, and (iv) prepare IRS Form 5310, with full disclosure of the Merger and
the existence of Parent's 401(k) Savings Plan ("PARENT'S 401(K) PLAN") and the
fact that Company employees participating in the Company's 401(k) Plan as of
the Closing Date shall become participants in Parent's 401(k) Plan immediately
following the Closing Date. The Company shall take all actions necessary to
cause such IRS Form 5310, in a form satisfactory to Parent, to be filed with
the IRS on, or as soon as practicable following the Effective Time. If a
favorable determination letter is received from the IRS with respect to the
termination of the Company's 401(k) Plan and distributions of benefits
thereunder, Parent shall take all actions necessary to cause distributions on
account of termination of the Plan to be made as soon as administratively
feasible thereafter. If the IRS fails to issue a favorable determination
letter, the Company's 401(k) Plan shall, at Parent's option, be (i) merged
into Parent's 401(k) Plan, or (ii) maintained as a separate frozen qualified
plan. In the event that Parent elects, in accordance with the preceding
sentence, to continue the Company's 401(k) Plan, then the Company's 401(k)
Plan shall be operated in a manner generally consistent with Parent's 401(k)
Plan, in terms of available investment options, payment of expenses and other
plan features.

(c) The Company shall suspend the Company's 1995 Employee Stock Purchase
Plan effective as of August 1, 1998 and no further contributions or purchases
shall be made under such plan.

(d) Parent acknowledges and agrees that the Merger constitutes a "Change of
Control" as defined in the Change of Control Agreements dated as of December
31, 1997, between the Company and the individuals listed on Schedule 6.15.

6.16 Preparation of Tax Returns.

(a) The Company shall file (or cause to be filed) at its own expense, on or
prior to the due date, all Tax Returns, including all Company Employee Benefit
Plan Returns and reports, for all Tax periods ending on or before the Closing
Date where the due date for such Returns or reports (taking into account valid
extensions of the respective due dates) falls on or before the Closing Date;
provided, however, that the Company shall provide Parent with a copy of
appropriate workpapers, schedules drafts and final copies of each federal and
state income Tax return or election of the Company (including Returns of all
Company Employee Benefit Plans) at least ten days before filing such return or
election and shall reasonably cooperate with any request by Parent in
connection therewith.

(b) Parent, in its sole and absolute discretion, will file (or cause to be
filed) all Tax Returns of the Company due after the Closing Date. After the
Closing Date, Parent, in its sole and absolute discretion and to the extent
permitted by law, shall have the right to amend, modify or otherwise change
all Tax Returns of the Company for all Tax periods.

6.17 Directors of Parent. Parent agrees that, to the extent permitted by
applicable law, commencing at the first meeting of the Board of Directors of
Parent following the Effective Time, Parent will cause Volker G. Oakey and
Walter C. Babcock to be appointed to the Board of Directors of Parent, and
thereafter at the next

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annual meeting of Parent's shareholders,will cause Messrs. Oakey and Babcock
to be nominated, and will use its best efforts to cause them to be elected, to
serve on such Board of Directors.

ARTICLE VII

Conditions to the Merger

7.1 Conditions of Each Party's Obligation to Effect the Merger. The
respective obligations of the Company, Parent and Merger Sub to consummate the
Merger are subject to the satisfaction upon or prior to the Closing of the
following conditions:

(a) Shareholder Approval. The holders of a majority of shares of outstanding
Company Common Stock shall have approved this Agreement and the Merger in
accordance with Oregon Law and the articles of incorporation and bylaws of the
Company and the holders of a majority of shares of Parent Common Stock shall
have approved this Agreement and the Charter Amendment in accordance with
Minnesota Law and the articles of incorporation and bylaws of Parent.

(b) Governmental Entity Approvals. All authorizations, consents, orders or
approvals of, or declarations or filings with, or expiration of waiting
periods imposed by, any Governmental Entity necessary for the consummation of
the transactions contemplated by this Agreement shall have been filed, expired
or been obtained.

(c) Form S-4; Proxy Statement. The Form S-4 shall have become effective
under the Securities Act, shall not be the subject of any stop order or
proceedings seeking a stop order, and the Joint Proxy Statement shall not at
the Effective Time of the Merger be subject to any proceedings commenced or
threatened by the SEC.

(d) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any Governmental
Entity of competent jurisdiction nor other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect.

(e) Charter Amendment. The Charter Amendment shall have been filed with the
Secretary of State for the State of Minnesota.

7.2 Conditions of Obligations of Parent and Merger Sub. The obligations of
Parent and Merger Sub to effect the Merger are subject to the satisfaction
prior to or upon the Closing of the following conditions, unless waived by
Parent and Merger Sub:

(a) Representations and Warranties. The representations and warranties of
the Company set forth in this Agreement shall be true and correct in all
material respects as of the Closing Date, as though made on and as of such
date (provided that those representations or warranties made as of a
particular date need only be true and correct as of such date). Parent shall
have received a certificate signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company to such
effect.

(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations and covenants required to
be performed by it under this Agreement prior to or as of the Closing Date,
and Parent shall have received a certificate signed on behalf of the Company
by the chief executive officer and the chief financial officer of the Company
to such effect.

(c) Consents. The consents, approvals and authorizations described in
Schedule 3.5 shall have been obtained in form and in substance reasonably
satisfactory to each of Parent and Merger Sub, except for such consents,
approvals and authorizations with respect to which the failure to obtain would
not have a Company Material Adverse Effect.

(d) Letters from Company Affiliates. Parent shall have received from each
Company Affiliate an executed copy of an agreement substantially in the form
of Exhibit A.

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7.3 Conditions of Obligation of the Company. The obligation of the Company
to effect the Merger is subject to the satisfaction prior to or upon the
Closing of the following conditions, unless waived by the Company:

(a) Representations and Warranties. The representations and warranties of
Parent and Merger Sub set forth in this Agreement shall be true and correct in
all material respects as of the Closing Date, as though made on and as of such
date (provided that those representations or warranties made as of a
particular date need only be true and correct as of such date). The Company
shall have received a certificate signed on behalf of Parent by the chief
executive officer and the chief financial officer of Parent to such effect.

(b) Performance of Obligations of Parent and Merger Sub. Parent and Merger
Sub shall have performed in all material respects all obligations and
covenants required to be performed by them under this Agreement prior to or as
of the Closing Date, and the Company shall have received a certificate signed
on behalf of Parent by the chief executive officer and the chief financial
officer of Parent to such effect.

(c) Consents. The consents, approvals and authorizations described in
Schedule 4.4 shall have been obtained in form and substance reasonably
satisfactory to the Company, except for such consents, approvals and
authorizations with respect to which the failure to obtain would not have a
Parent Material Adverse Effect.

(d) NASDAQ Listing. The shares of Parent Common Stock constituting the
Merger Consideration shall have been approved for listing on the NASDAQ
National Market System.

(e) Tax Opinion. The Company shall have received an opinion dated as of the
Effective Time in form and substance satisfactory to the Company of Ater Wynne
LLP, to the effect that (i) the Merger will be treated for federal income Tax
purposes as a reorganization within the meaning of Section 368(a) of the Code,
(ii) Parent, Merger Sub and the Company will each be a party to that
reorganization within the meaning of Section 368(b) of the Code, (iii) no
income, gain or loss will be recognized for federal income Tax purposes by the
Company as a result of the consummation of the Merger, and (iv) no income,
gain or loss will be recognized for federal income Tax purposes by
shareholders of the Company upon the exchange in the Merger of shares of
Company Common Stock solely for shares of Parent Common Stock (except to the
extent of any cash received in lieu of fractional shares). In connection with
such opinion, counsel shall be entitled to rely upon certain representations
and covenants of the Company, Parent, Merger Sub, and such other persons as
such counsel deems appropriate.

ARTICLE VIII

Termination, Amendment and Waiver

8.1 Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, notwithstanding any
requisite approval of this Agreement and the Merger by the shareholders of the
Company:

(a) by mutual written consent of each of Parent, Merger Sub and the Company;

(b) by either Parent, Merger Sub or the Company if either (i) the Effective
Time shall not have occurred on or before December 31, 1998, provided,
however, that the right to terminate this Agreement under this
Section 8.1(b)(i) shall not be available to any party whose failure to fulfill
any obligation under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date, or (ii) there
shall be any law that makes consummation of the Merger illegal or otherwise
prohibited or if any court of competent jurisdiction or Governmental Entity
shall have issued an order, decree, ruling, or taken any other action
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and unappealable;

(c) by either Parent or Merger Sub if the board of directors of the Company
withdraws, modifies, or changes its recommendation of this Agreement or the
Merger in a manner adverse to Parent or Merger Sub or shall have resolved to
do any of the foregoing, for any reason other than the occurrence of an event
or discovery of the falsity of a representation or warranty relating to Parent
which has a Parent Material Adverse Effect, or the board

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of directors of the Company shall have recommended to the shareholders of the
Company any Company Competing Transaction or resolved to do so;

(d) by the Company if the board of directors of Parent withdraws, modifies,
or changes its recommendation of this Agreement or the Merger in a manner
adverse to the Company or shall have resolved to do any of the foregoing, for
any reason other than the occurrence of an event or discovery of the falsity
of a representation or warranty relating to the Company which has a Company
Material Adverse Effect;

(e) by either Parent, Merger Sub or the Company if the Company's
shareholders' Meeting shall have been held and the shareholders of the Company
shall have failed to approve this Agreement and the Merger at such meeting
(including any adjournment or postponement thereof);

(f) by either Parent, Merger Sub, or the Company, if Parent's shareholders'
Meeting shall have been held and the shareholders of Parent shall have failed
to approve this Agreement, the Merger and the Charter Amendment at such
meeting (including any adjournment or postponement thereof);

(g) by the Company, in the event of a material breach by Parent or Merger
Sub of any representation, warranty, covenant or agreement contained herein
(other than a breach of Parent or Merger Sub due to the occurrence of a Parent
Material Adverse Effect arising solely due to the public announcement of the
Merger) which has not been cured or is not curable by December 31, 1998; or

(h) by Parent, in the event of a material breach by the Company of any
representation, warranty, covenant or agreement contained herein (other than a
breach of Company due to the occurrence of a Company Material Adverse Effect
arising solely due to the public announcement of the Merger) which has not
been cured or is not curable by December 31, 1998.

8.2 Effect of Termination. Except as provided in Section 8.3, in the event
of the termination of this Agreement pursuant to Section 8.1, this Agreement
shall forthwith become void, there shall be no liability under this Agreement
on the part of Parent, Merger Sub, or the Company or any of their respective
officers or directors and all rights and obligations of any party shall cease,
subject to the remedies of the parties set forth in Section 8.3.

8.3 Remedies.

(a) Company Termination Fee. If this Agreement is terminated (i) pursuant to
Section 8.1(c), (ii) pursuant to Section 8.1(e) and a Company Competing
Transaction exists on the date of the Company's shareholders' Meeting, or
(iii) pursuant to Section 8.1(h) and the breach giving rise to such
termination is a result of a Company Competing Transaction, the Company shall
pay Parent a fee of $1,000,000 and shall reimburse Parent and Merger Sub for
all of its out-of-pocket costs and expenses incurred in connection with the
transactions contemplated by this Agreement (such fee and expenses being
referred to herein as the "COMPANY TERMINATION FEE"). Such Company Termination
Fee shall be due and payable within thirty (30) days of termination of this
Agreement; provided that, in no event shall the Company be required to pay the
Company Termination Fee to Parent if, immediately prior to the termination of
this Agreement, Parent was in breach of any of its material obligations under
this Agreement. In the event that the Company shall fail to pay the Company
Termination Fee when due, there shall also be paid the costs and expenses
actually incurred or accrued by Parent or Merger Sub (including, without
limitation, reasonable fees and expenses of counsel) in connection with the
collection under and enforcement of this Section 8.3(a), together with
interest on such unpaid Company Termination Fee, commencing on the date that
such Company Termination Fee becomes due, at a rate equal to the prime rate of
interest published in the Wall Street Journal plus 2%.

(b) Transaction Costs. Except as set forth in this Section 8.3, all costs
and expenses incurred in connection with this Agreement and the Merger shall
be paid by the party incurring such costs or expenses, whether or not the
Merger is consummated.

(d) Other Remedies. Nothing in this Section 8.3 precludes a party from
seeking such other remedies at law or equity as it deems appropriate.

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ARTICLE IX

General Provisions

9.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time;
provided, however, that this Section 9.1 shall not limit any agreement or
covenant of the parties which by its terms contemplates performance after the
Effective Time.

9.2 Notices. All notices, requests, claims, demands and other communications
to any party hereunder shall be in writing (including telecopy or similar
writing) and shall be deemed given if delivered personally, by facsimile,
certified mail (postage prepaid, return receipt requested) or sent by
overnight courier (in each case, providing proof of delivery) to the parties
at the following addresses (or such other address for a party as shall be
specified in like notice):

if to Parent or Merger Sub, to:

Verdant Brands, Inc.
9555 James Avenue South
Suite 200
Bloomington, MN 55431-2543
Attention: Mark Eisenschenk
Facsimile: (612) 887-1300

with a copy to:

Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, MN 55402
Attention: Michael Trucano
Facsimile: (612) 340-8827

if to the Company, to:

Consep, Inc.
213 Southwest Columbia Street
Bend, Oregon 97702
Attention: Volker G. Oakey
Facsimile: (541) 388-3705

with a copy to:

Ater Wynne LLP
Suite 1800
222 SW Columbia Street
Portland, OR 97201-6618
Attention: Michael W. Shackelford
Facsimile: (503) 226-0079

9.3 Amendment. This Agreement may be changed or modified by the parties only
by action taken by or on behalf of their respective boards of directors,
reflected in a written amendment signed by the parties, at any time prior to
the Effective Time; provided, however, that, after the approval of this
Agreement and the Merger by the shareholders of the Company, no amendment may
be made which would reduce the amount or change the type of consideration into
which each Share shall be converted upon consummation of the Merger.

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9.4 Waiver. At any time prior to the Effective Time, any party may (a)
extend the time for the performance of any obligation or other act of any
other party, (b) waive any inaccuracy in the representations and warranties
contained herein or in any document delivered pursuant to this Agreement and
(c) waive compliance with any agreement or condition contained herein. Any
such extension or waiver shall be valid only if set forth in any instrument in
writing signed by the party or parties to be bound thereby.

9.5 Entire Agreement. This Agreement (including the Exhibits and Schedules)
and the other documents referenced herein (including the Confidentiality
Agreement) contain the entire agreement between the parties with respect to
the subject matter hereof and supersede all prior arrangements and
understandings, both written and oral, with respect thereto including, without
limitation, the Letter of Intent dated July 10, 1998.

9.6 Severability. It is the desire and intent of the parties that the
provisions of this Agreement be enforced to the fullest extent permissible
under the law and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, in the event that any provision of this
Agreement would be held in any jurisdiction to be invalid, prohibited or
unenforceable for any reason, such provision, as to such jurisdiction, shall
be ineffective, without invalidating the remaining provisions of this
Agreement or affecting the validity or enforceability of such provision in any
other jurisdiction. Notwithstanding the foregoing, if such provision could be
more narrowly drawn so as not to be invalid, prohibited or unenforceable in
such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn,
without invalidating the remaining provisions of this Agreement or affecting
the validity or enforceability of such provision in any other jurisdiction.

9.7 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns, provided that no party may assign, delegate or
otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties.

9.8 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, other than Section 6.9 (which is intended to be for the benefit of
the persons covered by the indemnification provisions contained therein and
may be enforced by such persons).

9.9 Governing Law. This Agreement shall be construed in accordance with and
governed by the law of the State of Minnesota, without giving effect to the
principles of conflict of laws thereof.

9.10 Counterparts; Effectiveness. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.

This Agreement shall become effective when each party hereto shall have
received counterparts hereof signed by all of the other parties hereto.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.

Verdant Brands, Inc.

By: /s/ Stanley Goldberg
----------------------------------
Name: Stanley Goldberg
Title: President and CEO

Consep Acquisition, Inc.

By: /s/ Mark G. Eisenschenk
---------------------------------
Name: Mark G. Eisenschenk
Title: President

Consep, Inc.

By: /s/ Volker G. Oakey
---------------------------------
Name: Volker G. Oakey
Title: President and CEO

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APPENDIX B

OPINION OF PIPER JAFFRAY INC.

September 30, 1998

The Board of Directors
Verdant Brands, Inc.
9555 James Avenue South, Suite 200
Bloomington, MN 55431-2543

Attention:Stanley Goldberg
Chairman, President and Chief Executive Officer

Members of the Board:

You have requested our opinion as of September 8, 1998 as to the fairness,
from a financial point of view, to Verdant Brands, Inc. ("Verdant" or the
"Company), of the consideration to be paid by the Company for the acquisition
of the common stock (the "Transaction") of Consep, Inc. ("Consep") pursuant to
an Agreement and Plan of Merger dated September 8, 1998 (the "Agreement"), by
and among Verdant, Consep and Consep Acquisition, Inc., a wholly owned merger
subsidiary of Verdant. Pursuant to the Agreement, each share of Consep common
stock will be converted into the right to receive 0.95 shares of registered
Verdant common stock (the "Exchange Ratio"). The Agreement also states that
the Transaction is contingent upon (i) approval of the Transaction by
Verdant's shareholders, (ii) approval of the Transaction by Consep's
shareholders and (iii) Verdant shareholders' authorization of additional
common shares. The other terms and conditions of the Transaction are more
fully set forth in the Agreement.

Piper Jaffray Inc., as a customary part of its investment banking business,
is regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, underwritings and secondary
distributions of securities, private placements and valuations for estate,
corporate and other purposes. We will receive a fee for our services in
rendering this opinion that is not contingent upon the consummation of the
Transaction. Verdant has also agreed to indemnify us against certain
liabilities in connection with our services. We make a market in Verdant's
common stock and provide research coverage on Verdant. We also acted as the
Company's exclusive financial advisor for an acquisition in September 1996. In
the ordinary course of our business, we and our affiliates may actively trade
the securities of Verdant for our own account or the account of our customers
and, accordingly, may at any time hold a long or short position in such
securities.

In arriving at our opinion, we have undertaken such review, analyses and
inquiries as we deemed necessary and appropriate under the circumstances.
Among other things, we have (i) reviewed the Agreement, (ii) reviewed certain
publicly available and internal financial and other information related to
Consep provided to us by Consep management, (iii) reviewed certain financial
information for Consep on both a stand-alone basis and in combination with
Verdant furnished to us by the management of Verdant, (iv) reviewed, to the
extent publicly available, the financial terms of certain acquisition
transactions involving companies deemed comparable with Consep, (v) performed
certain valuation analyses using the financial information of selected public
companies deemed comparable to Consep, (vii) performed certain discounted cash
flow valuation analyses based on the stand-alone financial performance of
Consep and (viii) reviewed certain internal and publicly available financial
and securities data for Verdant. In addition, we had discussions with members
of the management of Consep concerning the financial condition, operating
results and business outlook for Consep on (a) a stand-alone basis and (b) a
pro forma basis in combination with Verdant. We also met with the management
of Verdant to discuss the estimated pro forma operating results and business
outlook for Consep in combination with Verdant.

We have relied upon and assumed the accuracy, completeness and fairness of
the financial statements and other information provided to us by Consep,
Verdant, or otherwise made available to us, and have not assumed

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<PAGE>

responsibility independently to verify such information. We have relied upon
the assurances of the management of Consep and Verdant that the information
provided to us by each, either directly or through their respective
representatives, has been prepared on a reasonable basis, and, with respect to
financial planning data and other business outlook information, reflects the
best currently available estimates and judgments, and that they are not aware
of any information or facts that would make the information provided to us
incomplete or misleading. We have assumed no material adverse change in
Consep's assets, financial condition, results of operations, business or
prospects since the date of the information furnished to us.

In arriving at our opinion, we have not performed any appraisals or
valuations of any specific assets or liabilities of Consep, have not been
furnished with any such appraisals or valuations and have made no physical
inspection of the properties or assets of Consep. We express no opinion
regarding the liquidation value of any entity.

This opinion is necessarily based upon the information available to us and
facts and circumstances as they exist and are subject to evaluation on the
date hereof; events occurring after the date hereof could materially affect
the assumptions used in preparing this opinion. We are not expressing any
opinion herein as to the prices at which shares of Verdant common stock have
traded or may trade at any future time. We have not undertaken to reaffirm or
revise this opinion or otherwise comment upon any events occurring after the
date hereof and do not have any obligation to update, revise or reaffirm this
opinion.

This opinion is directed to the Board of Directors of Verdant in connection
with the Transaction and is not intended to be and does not constitiute a
recommendation to any shareholder of Verdant. We were not requested to opine
as to, and this opinion does not address, the basic business decision to
proceed with or effect the Transaction. Except as provided in our engagement
letter, this opinion shall not be published or otherwise used, nor shall any
public references to us be made, without our prior written approval.

Based upon and subject to the foregoing and based upon such other factors as
we consider relevant, it is our opinion that, as of September 8, 1998, the
consideration proposed to be paid by Verdant for the common stock of Consep
pursuant to the Agreement is fair, from a financial point of view, to Verdant.

Sincerely,

PIPER JAFFRAY INC.

/s/ Piper Jaffray Inc.
By___________________________________

B-2
<PAGE>

APPENDIX C

OPINION OF PACIFIC CREST SECURITIES INC.

September 8, 1998

The Board of Directors
Consep, Inc.
213 SW Columbia Street
Bend, Oregon 97702

Members of the Board:

You have asked us to advise you with respect to the fairness to the common
shareholders of Consep, Inc. ("Consep" or the "Company"), from a financial
point of view, of the exchange ratio (the "Exchange Ratio") of one share of
Common Stock of the Company for .95 shares of Common Stock of Verdant Brands,
Inc. ("Verdant"), pursuant to the Merger (the "Merger") of the Company with
and into Verdant as provided in the Agreement and Plan of Merger, dated
September 8, 1998.

Pacific Crest Securities Inc. is an investment banking firm that performs
financial advisory services. We have acted as financial advisor to the Board
of Directors in connection with the Merger and will receive a fee for our
services. We have in the past provided investment banking services to the
Company and have received customary fees for the rendering of such services.
In addition, in the ordinary course of our business, we have actively traded
the common stock of the Company for our own account and for the accounts of
customers and, accordingly, may at any time hold a long or a short position in
such securities.

In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to the Company and Verdant. We
have reviewed certain other information, including financial forecasts,
provided to us by the Company and Verdant, and have met with the Company's
management to discuss the business and prospects of the Company. We have also
discussed with Verdant's management the business and prospects of Verdant.

We have considered certain financial data of the Company and Verdant, and
compared the data with similar data for publicly held companies with similar
operations. Additionally, we have considered the financial terms of certain
other business combinations in the agricultural and specialty chemical
industry that have recently been effected. We have considered certain pro
forma combined financial information of the Company and Verdant. We also
considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria that we deemed
relevant.

In connection with our review, we have not independently verified any of the
foregoing information and have relied on its being complete and accurate in
all material respects. With respect to the financial forecasts, we have
assumed that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the Company's and Verdant's
management as to the future financial performance of the Company and Verdant.
In addition, we have not made an independent evaluation or appraisal of any of
the assets of the Company or Verdant.

We were retained by the Board of Directors of the Company and our opinion as
expressed herein is limited to the fairness, from a financial point of view to
the common stockholders of the Company, of the Merger and does not address the
Company's underlying business decision to proceed with the Merger. Our opinion
is necessarily based on conditions as they exist and can be evaluated on the
date hereof and the information made available to us through the date hereof.
This letter does not constitute a recommendation to the Board of Directors or
to any common stockholder of the Company with respect to any approval of
Merger.

C-1
<PAGE>

We agree to the inclusion of this opinion letter in the Proxy
Statement/Prospectus relating to the Merger. The opinion may not, however, be
summarized, excerpted from or otherwise publicly referred to without our prior
written consent.

Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair to the common stockholders of the
Company from a financial point of view.

Very truly yours,

PACIFIC CREST SECURITIES, INC.

/s/ David S. Kalez
By: _________________________________
DAVID S. KALEZ
Senior Vice President

C-2
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS.

Section 302A.521, subd. 2, of the Minnesota Statutes requires Verdant to
indemnify a person made or threatened to be made a party to a proceeding by
reason of the former or present official capacity of the person with respect
to Verdant, against judgments, penalties, fines, including, without
limitation, excise taxes assessed against the person with respect to an
employee benefit plan, settlements, and reasonable expenses, including
attorneys' fees and disbursements, incurred by the person in connection with
the proceeding with respect to the same acts or omissions if such person (1)
has not been indemnified by another organization or employee benefit plan for
the same judgments, penalties or fines; (2) acted in good faith; (3) received
no improper personal benefit, and statutory procedure has been followed in the
case of any conflict of interest by a director; (4) in the case of a criminal
proceeding, had no reasonable cause to believe the conduct was unlawful; and
(5) in the case of acts or omissions occurring in the person's performance in
the official capacity of director or, for a person not a director, in the
official capacity of officer, board committee member or employee, reasonably
believed that the conduct was in the best interests of Verdant, or, in the
case of performance by a director, officer or employee of Verdant involving
service as a director, officer, partner, trustee, employee or agent of another
organization or employee benefit plan, reasonably believed that the conduct
was not opposed to the best interests of Verdant. In addition, Section
302A.521, subd. 3, requires payment by Verdant, upon written request, of
reasonable expenses in advance of final disposition of the proceeding in
certain instances. A decision as to required indemnification is made by a
disinterested majority of the Board of Directors present at a meeting at which
a disinterested quorum is present, or by a designated committee of the Board,
by special legal counsel, by the shareholders, or by a court.

The Restated Bylaws of Verdant provide that the officers and directors of
Verdant and certain others shall be indemnified to substantially the same
extent permitted by Minnesota law.

Section 302A.521 of the Minnesota Business Corporation Act provides that a
corporation shall indemnify any person who was or is made or is threatened to
be made a party to any proceeding, by reason of the former or present official
capacity (as defined) of such person, against judgments, penalties, fines,
settlements and reasonable expenses, including attorneys' fees and
disbursements, incurred by such person in connection with the proceeding if
certain statutory standards are met. "Proceeding" means a threatened, pending
or complete civil, criminal, administrative, arbitration or investigative
proceeding, including one by or in the right of the corporation. Section
302A.521 contains detailed terms regarding such right of indemnification and
reference is made thereto for a complete statement of such indemnification
rights.

Verdant maintains a standard policy of officers' and directors' liability
insurance.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(A) EXHIBITS.

<TABLE>
<C> <S>
2.1 Agreement and Plan of Merger, dated as of September 8, 1998 by and among
Verdant Brands, Inc., Consep Acquisition, Inc. and Consep, Inc. (included
as Exhibit A to the Proxy Statement-Prospectus that forms a part of this
Registration Statement on Form S-4).
3.1 Restated Articles of Incorporation of Verdant, as amended to date
(incorporated by reference to Exhibit 3.2 of Verdant's Registration
Statement on Form S-18, SEC File No. 33-36205-C).
3.2 Proposed form of Articles of Amendment reflecting Charter Amendment.*
3.3 Bylaws of Verdant, as amended to date (incorporated by reference to
Exhibit 3.3 of Verdant's Registration Statement on Form S-18, SEC File No.
33-36205-C).
</TABLE>

II-1
<PAGE>

<TABLE>
<C> <S>
4.1 Specimen certificate of Common Stock, $.01 par value (incorporated by
reference to Exhibit 4.1 of Verdant's Registration Statement on Form S-
18, SEC File No. 33-36205-C).
5.1 Opinion of Dorsey & Whitney LLP regarding validity of securities.*
8.1 Opinion of Ater Wynne LLP regarding tax treatment.
10.1 1986 Employee Incentive Stock Option Plan (incorporated by reference to
Exhibit 4.4 of Verdant's Registration Statement on Form S-8, SEC File
No. 33-37806).
10.2 Amendment No. 1 dated January 1, 1988, Amendment No. 2 dated September
9, 1992 and Amendment No. 3 dated January 4, 1995 to Verdant's 1986
Employee Incentive Stock Option Plan (incorporated by reference to
Exhibit 10.2 of Verdant's Quarterly Report on Form 10-QSB dated March
31, 1998, SEC File No. 0-18921).
10.3 Stock Option Plan for Non-Employee Directors (incorporated by reference
to Exhibit 10.2 of Verdant's Annual Report on Form 10-KSB for the fiscal
year ended September 30, 1993, SEC File No. 0-18921).
10.4 Amendment No. 1 to Verdant's Stock Option Plan for Non-Employee
Directors dated December 8, 1997 (incorporated by reference to Exhibit
10.4 of Verdant's Quarterly Report on Form 10-QSB dated March 31, 1998,
SEC File No. 0-18921).
10.5 Lease Agreement between Verdant and 94th Street Associates, a Minnesota
Partnership, dated August 15, 1996 (incorporated by reference to Exhibit
10.3 of Verdant's Annual Report on Form 10-KSB for the fiscal year ended
September 30, 1996, SEC File No. 0-18921).
10.6 Lease Agreement between Verdant and MEPC American Properties, Inc., a
Delaware corporation, dated August 16, 1996 (incorporated by reference
to Exhibit 10.4 of Verdant's Annual Report on Form 10-KSB for the fiscal
year ended September 30, 1996).
10.7 Employment Agreement between Verdant and Stanley Goldberg dated
September 13, 1992 (incorporated by reference to Exhibit 10.6 of
Verdant's Annual Report on Form 10-K for the fiscal year ended September
30, 1992, SEC File No. 0-18921).
10.8 Amendment of Employment Agreement between Verdant and Stanley Goldberg,
dated December 5, 1997 (incorporated by reference to Exhibit 10.6 of
Verdant's Amended Annual Report on Form 10-KSB/A for the fiscal year
ended September 30, 1997, SEC File No. 0-18921).
10.9 Employment Agreement between Verdant and Mark G. Eisenschenk, dated
December 5, 1997 (incorporated by reference to Exhibit 10.7 of Verdant's
Amended Annual Report on Form 10-KSB/A for the fiscal year ended
September 30, 1997, SEC File No. 0-18921).
10.10 Stock Purchase Agreement, and related documents, between Verdant and
Stanley Goldberg, dated April 29, 1997 (incorporated by reference to
Exhibit 10.8 of Verdant's Amended Annual Report on Form 10-KSB/A for the
fiscal year ended September 30, 1997, SEC File No. 0-18921).
10.11 Stock Purchase Agreement, and related documents, between Verdant and
Mark G. Eisenschenk, dated April 29, 1997 (incorporated by reference to
Exhibit 10.9 of Verdant's Amended Annual Report on Form 10-KSB/A for the
fiscal year ended September 30, 1997, SEC File No. 0-18921).
10.12 Credit Agreement between Verdant and General Electric Capital
Corporation dated May 2, 1997 (incorporated by reference to Exhibit 10.6
of Verdant's Quarterly Report on Form 10-QSB for the third fiscal
quarter ended June 30, 1997, SEC File No. 0-18921).
10.13 Consent and First Amendment to Credit Agreement, dated December 9, 1997,
between Verdant and General Electric Capital Corporation dated May 2,
1997 (incorporated by reference to Exhibit 10.13 of Verdant's Quarterly
Report on Form 10-QSB for the second fiscal quarter ended June 30, 1998,
SEC File No. 0-18921).
10.14 Consent to Credit Agreement, dated December 11, 1997, between Verdant
and General Electric Capital Corporation dated May 2, 1997 (incorporated
by reference to Exhibit 10.14 of Verdant's Quarterly Report on Form 10-
QSB for the second fiscal quarter ended June 30, 1998, SEC File No. 0-
18921).
</TABLE>

II-2
<PAGE>

<TABLE>
<C> <S>
10.15 Second Amendment, dated April 22, 1997, to Credit Agreement between
Verdant and General Electric Capital Corporation dated May 2, 1997
(incorporated by reference to Exhibit 10.15 of Verdant's Quarterly
Report on Form 10-QSB for the second fiscal quarter ended June 30, 1998,
SEC File No. 0-18921).
10.16 Stock Subscription Warrant between Verdant and Robert W. Fischer Co.,
Inc. dated July 18, 1990 (incorporated by reference to Exhibit 10.16 of
Verdant's Registration Statement on Form S-18, SEC File No. 33-36205-C).
10.17 Cross-Licensing and Joint Licensing/Sale Agreement between Verdant and
Mycogen Corporation, dated May 31, 1994 (incorporated by reference to
Exhibit 10.1 of Verdant's Quarterly Report on Form 10-QSB for the fiscal
quarter ended June 30, 1994, SEC File No. 0-18921).
10.18 Patent License Agreement between Verdant, Mycogen Corporation and
Monsanto Company, dated June 29, 1994 (incorporated by reference to
Exhibit 10.2 of Verdant's Quarterly Report on Form 10-QSB for the fiscal
quarter ended June 30, 1994, SEC File No. 0-18921).
10.19 Verdant 1996 Employee Stock Option Plan (incorporated by reference to
Exhibit 10.15 of Verdant's Annual Report on Form 10-KSB for the fiscal
year ended September 30, 1996).
10.20 Form of Affiliate Agreement by and among Verdant and certain
shareholders of Consep.*
10.21 Form of Exchange Agent Agreement.
21.1 Subsidiaries of Verdant.*
23.1 Consent of Deloitte & Touche LLP with respect to financial statements of
Verdant.
23.2 Consent of KPMG Peat Marwick LLP with respect to financial statements of
Consep.
23.3 Consent of Smith & Howard, P.C. with respect to financial statements of
Southern Resources, Inc.*
23.4 Consent of Dorsey & Whitney LLP (included in Exhibit 5.1).
23.5 Consent of Ater Wynne LLP (included in Exhibit 8.1).
23.6 Consent of Singer Lewak Greenbaum & Goldstein LLP.
24.1 Power of Attorney.*
99.1 Consent of Piper Jaffray, Inc. with respect to the fairness of the
Merger.*
99.2 Consent of Pacific Crest Securities, Inc. with respect to the fairness
of the Merger.*
99.4 Form of Proxy Card for the Special Meeting of Verdant.*
99.5 Form of Proxy Card for Special Meeting of Consep.*
</TABLE>

- --------

* Previously filed.

(B) FINANCIAL STATEMENT SCHEDULES.

Not Applicable.

ITEM 22. UNDERTAKINGS.

The undersigned Registrant hereby undertakes:

(a)(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective Registration Statement.

II-3
<PAGE>

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;

(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.

(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.

(c) To respond to requests for information that is incorporated by reference
into the Prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
the Registration Statement through the date of responding to the request.

(d) To supply by means of a post-effective amendment all information
concerning a transaction, and Consep being acquired involved therein, that was
not the subject of and included in the Registration Statement when it became
effective.

II-4
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-4 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF BLOOMINGTON, STATE OF MINNESOTA, ON OCTOBER 21,
1998.

Verdant Brands, Inc.

/s/ Stanley Goldberg
By: _________________________________
STANLEY GOLDBERG
PRESIDENT AND CEO

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON OCTOBER 21, 1998.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----

<S> <C>
/s/ Stanley Goldberg Chairman, President and CEO (principal executive
______________________________________ officer)
STANLEY GOLDBERG

/s/ Mark G. Eisenschenk Executive Vice President and Chief Financial
______________________________________ Officer (principal financial officer)
MARK G. EISENSCHENK

/s/ Joseph R. Price Vice President Finance (principal accounting
______________________________________ officer)
JOSEPH R. PRICE

Chairman of the Board and Director
______________________________________
GORDON F. STOFER*

Director
______________________________________
ROBERT W. FISCHER*

Director
______________________________________
DONALD E. LOVNESS*

Director
______________________________________
RICHARD MAYO*

Director
______________________________________
DR. FRANKLIN PASS*

Director
______________________________________
JOHN F. HETTERICK*

Director
______________________________________
FREDERICK F. YANNI, JR.*

/s/ Stanley Goldberg Attorney-in-fact
*By: _________________________________
STANLEY GOLDBERG
</TABLE>

II-5

<PAGE>

Exhibit 8.1

October 21, 1998
----------------

Consep, Inc.
213 S.W. Columbia
Bend, OR 97702

Gentlemen and Ladies:

We are acting as tax counsel to Consep, Inc. ("Consep") in connection
with a proposed transaction (the "Merger") involving Consep, a corporation
organized under the laws of the State of Oregon, Consep Acquisition, Inc.
("Merger Sub"), a corporation organized under the laws of the State of Oregon,
and Verdant Brands, Inc. ("Verdant"), a corporation organized under the laws of
the State of Minnesota.

The Merger is structured as a statutory merger of Merger Sub with and
into Consep, in which Consep will be the surviving entity (Consep, following the
Merger will be referred to as the "Surviving Corporation"), in accordance with
that certain Agreement and Plan of Merger by and among Verdant, Merger Sub and
Consep, dated as of September 8, 1998, and the exhibits thereto (the
"Agreement"). Except as otherwise indicated herein, capitalized terms used in
this opinion are defined in the Agreement. Our opinion is delivered pursuant to
Section 7.3(e) of the Agreement.

For purposes of rendering this opinion, we have examined and are
relying upon (without any independent investigation or review thereof) the truth
and accuracy, at all relevant times, of the statements, representations and
warranties contained in the following documents:

1. The Agreement (including exhibits thereto);

2. A Certificate of Consep, dated October 21, 1998,
signed by an authorized officer of Consep and
delivered to us by Consep and incorporated herein by
reference;

3. A Certificate of Verdant, dated October 21, 1998,
signed by an authorized officer of Verdant and
delivered to us by Verdant and incorporated herein by
reference;

4. A Certificate of Merger Sub, dated October 21, 1998,
signed by an authorized officer of Merger Sub, and
delivered to us by Merger Sub and incorporated herein
by reference;

5. Such other instruments and documents related to the
formation, organization and operation of Consep,
Merger Sub and Verdant or the consummation of the
Merger and the transactions contemplated thereby as
we have deemed necessary or appropriate.
<PAGE>

Consep, Inc.
October 21, 1998
- --------
Page 2

In rendering this opinion, we have assumed or obtained representations
and are relying thereon (without any independent investigation or review
thereof) that:

1. Original documents (including signatures) are
authentic, documents submitted to us as copies
conform to the original documents, and there has been
(or will be by the Effective Time) due execution and
delivery of all documents where due execution and
delivery are prerequisites to effectiveness thereof;

2. Any representation or statement referred to above
made "to the best of knowledge" or otherwise
similarly qualified is correct without such
qualification;

3. The Merger will be effective under the applicable
states' laws;

4. In the Merger, Consep Common Stock representing
control of Consep will be exchanged solely for voting
stock of Verdant. For this purpose, "control" means
the direct ownership of stock possessing at least 80
percent of the total combined voting power for the
election of directors of all classes of Consep stock
entitled to vote and at least 80 percent of the total
number of shares of each nonvoting class of stock of
Consep. For this purpose, Consep Common Stock
exchanged for cash or other property originating with
Verdant will be treated as outstanding Consep Common
Stock on the date of the Effective Time.

5. At the Effective Time, Consep will not have
outstanding any warrants, options, convertible
securities, or any other type of right pursuant to
which any person could acquire Consep Common Stock
that, if exercised or converted, would affect
Verdant's acquisition or retention of control of the
Surviving Corporation. For this purpose, "control"
means the direct ownership of stock possessing at
least 80 percent of the total combined voting power
for the election of directors of all classes of the
Surviving Corporation stock entitled to vote and at
least 80 percent of the total number of shares of
each nonvoting class of stock of the Surviving
Corporation.
<PAGE>

Consep, Inc.
October 21, 1998
- --------
Page 3

6. The fair market value of Verdant Common Stock and
other consideration received by each Consep
shareholder in the Merger will be approximately equal
to the fair market value of the Consep Common Stock
surrendered in exchange therefor.

7. There is no intercorporate indebtedness existing
between Verdant and Consep or Merger Sub and Consep
that was issued, acquired, or will be settled at a
discount.

8. On the date of the Effective Time, the fair market
value of the assets of Consep will exceed the sum of
its liabilities, plus the amount of liabilities, if
any, to which the assets of Consep are subject.

9. Any liabilities of Consep in existence at the
Effective Time and any liabilities to which the
assets of Consep are subject as of the Effective Time
were incurred by Consep in the ordinary course of
business.

10. Verdant, Merger Sub, Consep and the Consep
shareholders will pay their respective expenses, if
any, with respect to the Merger.

11. Neither Verdant nor Consep is an investment company
as defined in Section 368(a)(2)(F)(iii) and (iv) of
the Internal Revenue Code.

12. Consep is not under the jurisdiction of a court in a
case under Title 11 of the United States Code, or a
receivership, foreclosure, or similar proceeding in a
federal or state court.

13. Neither Consep, a related party to Consep, a
partnership of which Consep is a partner, nor a
predecessor of Consep has redeemed or purchased any
of Consep's outstanding common stock or preferred
stock during the past five years. For this purpose,
"related party" means any corporation related to
Consep within the meaning of Treasury Regulations
Section 1.368-1(e)(3) (determined without regard to
Treasury Regulations Section 1.368-1(e)(3)(i)(A)),
including any corporation in which Consep owns,
directly or indirectly, at least 50 percent of the
total combined voting power of all classes of stock
entitled to vote, or at least
<PAGE>

Consep, Inc.
October 21, 1998
- --------
Page 4

50 percent of the total value of shares of all
classes of stock, either before or after the Merger.

14. In the Merger, the Consep shareholders will receive
Verdant Common Stock with an aggregate value, as of
the date of the Merger, of not less than 50 percent
of the value of all the formerly outstanding Consep
Common Stock as of the same date. For this purpose,
(i) shares of Consep Common Stock exchanged for cash
or other property will be treated as outstanding
Consep Common Stock on the date of the Merger, and
(ii) shares of Verdant Common Stock received by a
Consep shareholder and subsequently sold, exchanged,
or otherwise transferred to a related party of
Verdant or a partnership of which Verdant is a
partner will not be treated as received in the Merger
by such Consep shareholder. For purposes of this
representation, "related party" means any corporation
related to Verdant within the meaning of Treasury
Regulations Section 1.368-1(e)(3), including (i) any
corporation that is a member of the same affiliated
group as Verdant as defined in Section 1504 of the
Internal Revenue Code (determined without regard to
Section 1504(b)), either before or after the Merger,
or (ii) any corporation in which Verdant owns,
directly or indirectly, at least 50 percent of the
total combined voting power of all classes of stock
entitled to vote, or at least 50 percent of the total
value of shares of all classes of stock, either
before or after the Merger.

15. Consep has not made any extraordinary distributions
to its shareholders subsequent to the commencement of
negotiations with Verdant regarding the Merger or in
anticipation of the Merger.

16. No outstanding indebtedness of Consep has or will
represent equity for tax purposes; no outstanding
equity of Consep has represented indebtedness for tax
purposes; no outstanding security, instrument,
agreement or arrangement that provides for, contains,
or represents a right to acquire Consep Common Stock
(or to share in the appreciation thereof) constitutes
"stock" for purposes of Section 368(c) of the Code.

17. Verdant, Merger Sub and Consep are participating in
the Merger for valid business purposes and not for
the purpose of tax avoidance, and the terms of the
Merger are the product of arm's length negotiations.
<PAGE>

Consep, Inc.
October 21, 1998
- --------
Page 5

18. None of the compensation received by any
shareholder-employees of Consep will be separate
consideration for, or allocable to, any of their
shares of Consep Common Stock; none of the shares of
Verdant Common Stock or received by any
shareholder-employees will be separate consideration
for, or allocable to, any employment agreements or
covenants not to compete; and the compensation paid
to any shareholder- employees will be for services
actually rendered and will be commensurate with
amounts paid to third parties bargaining at arm's
length for similar services.

19. Prior to and up to the Effective Time of the Merger,
Consep has conducted and intends to continue to
conduct its historic business.

20. The Agreement (together with its exhibits and
schedules) represents the entire agreement and
understanding of Consep and Verdant with respect to
the Merger, and the Merger will be consummated in
accordance with the terms of the Agreement.

21. Each of the representations made by Consep or Verdant
in the Agreement, the Joint Proxy Statement-
Prospectus and any other documents associated
therewith is true and accurate.

22. Following the Merger, the Surviving Corporation will
hold at least (a) 90 percent of the fair market value
of the net assets held by Consep and Merger Sub
immediately prior to the Merger, and (b) 70 percent
of the fair market value of the gross assets held by
Consep and Merger Sub immediately prior to the
Merger. For purposes of this representation, the
assets of Consep and Merger Sub shall include assets
disposed of by Consep or Merger Sub, respectively,
prior to or subsequent to the Merger and in
contemplation thereof (including without limitation
any asset disposed of by Consep or Merger Sub, other
than in the ordinary course of business, pursuant to
a plan or intent existing during the period ending on
the Effective Time and beginning with the
commencement of negotiations (whether formal or
informal) with Verdant regarding the Merger). For
purposes of this representation, any amounts paid by
Consep or Merger Sub to Consep shareholders who
receive cash or other property, any
<PAGE>

Consep, Inc.
October 21, 1998
- --------
Page 6

amounts used by Consep or Merger Sub to pay expenses
related to the Merger, and all redemptions or
distributions (except for regular, normal dividends)
made by Consep or Merger Sub will be included as
assets of Consep or Merger Sub, respectively,
immediately prior to the Merger.

23. Following the Merger, the Surviving Corporation will
continue the historic business of Consep or use a
significant portion of Consep's historic business
assets in a business. For purposes of this
representation, the Surviving Corporation will be
deemed to satisfy this requirement if (a) the members
of Verdant's qualified group (as defined in Treasury
Regulations Section 1.368-1(d)(4)(ii)), in the
aggregate, continue the historic business of Consep
or use a significant portion of Consep's historic
business assets in a business, or (b) the foregoing
activities are undertaken by a partnership as
contemplated by Treasury Regulations Section 1.368-
1(d)(4)(iii).

24. Verdant has no present plan or intention to liquidate
the Surviving Corporation; to merge the Surviving
Corporation with or into another corporation; to sell
or otherwise dispose of the stock of the Surviving
Corporation (other than as permitted under Treasury
Regulations Section 1.368-2(k)(2)); or to sell or
otherwise dispose of any of the assets of the
Surviving Corporation or of any of the assets
acquired from Merger Sub except for dispositions made
in the ordinary course of business or transfers of
assets to a corporation controlled by the Surviving
Corporation. For this purpose, a "corporation
controlled by the Surviving Corporation" is a
corporation in which the Surviving Corporation
directly owns stock possessing 80 percent of the
total combined voting power for the election of
directors of the corporation and at least 80 percent
of the total number of shares of each nonvoting class
of stock of the corporation.

25. Prior to the Merger, Verdant will be in control of
Merger Sub. For this purpose, "control" means the
direct ownership of stock possessing at least 80
percent of the total combined voting power for the
election of directors of all classes of Merger Sub
stock entitled to vote and at least 80 percent of the
total number of shares of each nonvoting class of
stock of Merger Sub.
<PAGE>

Consep, Inc.
October 21, 1998
- --------
Page 7

26. Merger Sub has been formed solely in order to
consummate the transactions contemplated by the
Agreement, and Merger Sub has not conducted and will
not conduct any business activities or other
operations of any kind other than the issuance of its
stock to Verdant, prior to the Effective Time.

27. Neither Verdant, nor a related party to Verdant, nor
a partnership of which Verdant is a partner owns, nor
has it owned during the past five years, any Consep
Common Stock. For purposes of this representation,
"related party" means any corporation related to
Verdant within the meaning of Treasury Regulations
Section 1.368-1(e)(3), including (i) any corporation
that is a member of the same affiliated group as
Verdant as defined Section 1504 of the Internal
Revenue Code (determined without regard to Section
1504(b)), either before or after the Merger, or (ii)
any corporation in which Verdant owns, directly or
indirectly, at least 50 percent of the total combined
voting power of all classes of stock entitled to
vote, or at least 50 percent of the total value of
shares of all classes of stock, either before or
after the Merger.

28. Other than amounts paid in lieu of fractional shares,
the only consideration to be received, directly or
indirectly, by Consep shareholders in the Merger for
their Consep Common Stock is Verdant Common Stock.
Verdant has not agreed to assume, nor will it
directly or indirectly assume, any expense or
liability, whether contingent or fixed, of any holder
of Consep Common Stock. Verdant has no present plan
or intention to contribute any additional capital to
Consep or the Surviving Corporation or to make any
loans to Consep or the Surviving Corporation for the
purpose of directly or indirectly paying any
additional consideration to any holders of Consep
Common Stock. None of the Consep Common Stock
exchanged in the Merger for Verdant Common Stock will
be subject to any liabilities. No part of the
consideration to be exchanged for Consep Common Stock
will be received by a Consep shareholder as a
creditor, employee, or in any capacity other than
that of a Consep shareholder.

29. No Consep shareholder is acting as an agent for
Verdant in connection with the Merger or approval
thereof, and Verdant will not reimburse any Consep
shareholder for Consep Common Stock such shareholder
may
<PAGE>

Consep, Inc.
October 21, 1998
- --------
Page 8

have purchased or for other obligations such
shareholder may have incurred.

30. Any purchase of Consep Common Stock by Verdant
stockholders prior to the Merger was made by such
Verdant stockholders on their own behalf and with
their own funds and not as a representative, or for
the benefit of, Verdant.

31. Verdant has no present plan or intention to cause the
Surviving Corporation to issue additional shares of
Surviving Corporation stock that would result in
Verdant losing control of the Surviving Corporation.
For this purpose, "control" means the direct
ownership of stock possessing at least 80 percent of
the total combined voting power for the election of
directors of all classes of Surviving Corporation
stock entitled to vote and at least 80 percent of the
total number of shares of each nonvoting class of
stock of Surviving Corporation.

32. Neither Verdant, nor a related party to Verdant, nor
a partnership of which Verdant is a partner has a
present plan or intention to reacquire any of the
Verdant Common Stock issued in the Merger to Consep
shareholders. For this purpose, "related party" means
any corporation related to Verdant within the meaning
of Treasury Regulations Section 1.368-1(e)(3),
including (i) any corporation that is a member of the
same affiliated group as Verdant as defined in
Section 1504 of the Internal Revenue Code (determined
without regard to Section 1504(b)), either before or
after the Merger, or (ii) any corporation in which
Verdant owns, directly or indirectly, at least 50
percent of the total combined voting power of all
classes of stock entitled to vote, or at least 50
percent of the total value of shares of all classes
of stock, either before or after the Merger.

33. The payment of cash in lieu of fractional shares of
Verdant Common Stock is solely for the purpose of
avoiding the expense and inconvenience to Verdant of
issuing fractional shares and does not represent
separately bargained-for consideration. The total
cash consideration that will be paid in the
transaction to the Consep shareholders instead of
issuing fractional shares of Verdant Common Stock
will not exceed one percent of the total
consideration that will be issued in the transaction
to the Consep shareholders in exchange for their
shares of Consep Common Stock. The fractional share
interests of each Consep shareholder will be
aggregated, and no Consep shareholder will receive
cash in an amount equal to or greater than the value
of one full share of Verdant Common Stock.
<PAGE>

Consep, Inc.
October 21, 1998
- --------
Page 9

34. No liabilities of Merger Sub will be assumed by
Consep or the Surviving Corporation, and Merger Sub
will not transfer to Consep or the Surviving
Corporation any assets subject to liabilities.

Based on the foregoing documents, materials, assumptions and
information, and subject to the qualifications and assumptions set forth herein,
it is our opinion that, if the Merger is consummated in accordance with the
provisions of the Agreement and the exhibits thereto:

(1) the Merger of Merger Sub with and into Consep, with Consep
surviving the Merger, will qualify as a reorganization within the meaning of
Section 368(a) of the Code;

(2) each of Verdant, Merger Sub, and Consep will be a party to
a reorganization within the meaning of Section 368(b) of the Code;

(3) no income, gain or loss will be recognized for federal
income tax purposes by Consep as a result of the consummation of the Merger; and

(4) no income gain or loss will be recognized for federal
income tax purposes by the shareholders of Consep upon the exchange in the
Merger of shares of Consep Common Stock solely for shares of Verdant Common
Stock (except to the extent of any cash received in lieu of fractional shares).

Our opinions set forth above are based on the existing provisions of
the Code, Treasury Regulations (including Temporary and Proposed Treasury
Regulations) promulgated under the Code, published Revenue Rulings, Revenue
Procedures and other announcements of the Internal Revenue Service (the "IRS")
and existing court decisions, any of which could be changed at any time. Any
such changes might be retroactive with respect to transactions entered into
prior to the date of such changes and could significantly modify the tax results
described in the opinions set forth above. We undertake no responsibility to
advise you of any subsequent developments in the application, operation or
interpretation of the federal income tax laws.

Our opinion concerning certain of the federal income tax consequences
of the Merger is limited to the specific federal income tax consequences
presented above. No opinion is expressed as to any transaction other than the
Merger, including any transaction undertaken in connection with the Merger. In
addition, this opinion does not address any estate, gift, state, local or
foreign tax consequences that may result from the Merger. In particular, we
express no opinion
<PAGE>

Consep, Inc.
October 21, 1998
- --------
Page 10

regarding (1) the amount, existence, or availability after the Merger, of any of
the federal income tax attributes of Consep, Merger Sub or Verdant (including,
without limitation, foreign tax credits or net operating loss carryforwards, if
any, of Consep, Merger Sub, or Verdant); (2) any transaction in which Consep
Common Stock is acquired or Verdant Common Stock is disposed of, (3) the
potential application of the "disqualifying disposition" rules of Section 421 of
the Code to dispositions of Consep Common Stock; (4) the effects of any Consep
Common Stock acquired by the holder thereof in exchange for stock acquired
subject to the provisions of Section 83(a) of the Code; (5) the effects of the
Merger on any payment that is or may be subject to Section 280G of the Code; (6)
the effects of the Merger on a holder of options to acquire Consep Common Stock,
whether vested or nonvested, compensatory or noncompensatory, statutory stock
options or nonstatutory stock options; or (7) the effects of the Merger on a
holder of a warrant to purchase shares of Consep Common Stock.

In addition to your request for our opinion on these specific matters
of federal income tax law, you have asked us to review the discussion of federal
income tax issues contained in the Joint Proxy Statement-Prospectus which forms
a part of the Registration Statement filed with the Securities and Exchange
Commission on September 30, 1998, on Form S-4 (as amended any time up to and
including the date hereof, the "Registration Statement"). We have reviewed the
discussion entitled "Certain Federal Income Tax Consequences" contained in the
Joint Proxy Statement-Prospectus and believe that such information fairly
presents the current federal income tax law applicable to the Merger, and the
material federal income tax consequences to Consep, Merger Sub, Verdant, and
Consep shareholders as a consequence of the Merger.

No ruling has or will be requested from the IRS concerning the federal
income tax consequences of the Merger. In reviewing this opinion, you should be
aware that the opinions set forth above represent our conclusions regarding the
application of existing federal income tax law to the Merger. If the facts vary
from those relied upon (including if any representations, covenants, warranties
or assumptions upon which we have relied are inaccurate, incomplete, breached or
ineffective), our opinions contained herein could be inapplicable. You should be
aware that an opinion of counsel represents only the best legal judgment of
counsel, and has no binding official status of any kind, and that no assurance
can be given that contrary positions may not be taken by the IRS or that a court
considering the issues would not hold otherwise.

This opinion is being delivered solely for the purposes of (1) being
included as an exhibit to the Registration Statement, and (2) satisfying the
conditions set forth in Section 7.3(e) of the Agreement; it may not be relied
upon or utilized for any other purpose or by any other person or
<PAGE>

Consep, Inc.
October 21, 1998
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Page 11

entity, and may not be made available to any other person or entity, without our
prior written consent. We do however, consent to (a) the use of this opinion to
satisfy the conditions set forth in Section 7.3(e) of the Agreement, (b) the use
of this opinion as an exhibit to the Registration Statement (c) the reliance
upon this opinion by holders of Consep Common Stock and holders of options or
warrants to acquire Consep Common Stock, and (d) to the use of our name in the
Joint Proxy Statement-Prospectus wherever it appears. In giving such consent, we
do not hereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended.

Very truly yours,

/s/ ATER WYNNE LLP
ATER WYNNE LLP

SES:LDC:tld

<PAGE>

EXHIBIT 10.21

EXCHANGE AGREEMENT

Agreement dated as of __________, 1998, by and between Verdant Brands, Inc.
a Minnesota corporation ("Verdant") and Norwest Bank Minnesota, National
Association (the "Exchange Agent").

WHEREAS, pursuant to an Agreement and Plan of Merger dated as of September
8, 1998 (the "Merger Agreement"), Consep Acquisition, Inc., an Oregon
corporation and a wholly-owned subsidiary of Verdant merged with and into
Consep, Inc. an Oregon corporation ("Consep") (the "Merger"), effective as of
__________ (the "Time of Merger").

WHEREAS, the Exchange Agent is the transfer agent for the common stock,
$.01 par value per share, of Verdant ("Verdant Common Stock"); and

WHEREAS, Verdant desires that the Exchange Agent act as its special agent
for the purpose of effecting the distribution of Verdant Common Stock to the
holders of certificates formerly representing shares of common stock, $.01 par
value per share, of Consep ("Consep Common Stock") pursuant to the terms of the
Merger Agreement.

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

ARTICLE I

1. Verdant hereby instructs the Exchange Agent, in its capacity as transfer
agent for Verdant Common Stock, to issue as of ________________, (i) 10,127,069
shares from authorized but heretofore unissued stock , and, in its capacity as
Exchange Agent, to hold the certificate or certificates for 10,127,069 shares of
Verdant Common Stock, representing the aggregate number of shares of Verdant
Common Stock into which outstanding shares of Consep Common Stock were
converted, and (ii) 25,000 shares from authorized but heretofore unissued stock,
and, in its capacity as Exchange Agent, to hold the certificate or certificates
for 25,000 shares of Verdant Common Stock, representing the number of shares
issued to Piper Jaffray Inc.("Piper"), financial advisor to Verdant in the
Merger, representing a portion of the fee paid to Piper in consideration for its
role as financial advisor.

2. A complete and correct list of the shareholders of Consep as of the
close of business on October 15, 1998, identifying each shareholder by name,
address, and the number of shares owned, has been previously transmitted to the
Exchange Agent.
<PAGE>

ARTICLE II

The Exchange Agent covenant and agrees that:

1. As soon as practicable after the Time of the Merger, the Exchange Agent
shall send a Letter of Transmittal, in substantially the form attached hereto as
Exhibit A, together with a return envelope addressed to the Exchange Agent, to
each record holder (a "Record Holder") of an outstanding certificate or
certificates which immediately prior to the time of the Merger evidenced shares
of Consep Common Stock which shall have been converted into Verdant Common Stock
pursuant to the provisions of the Merger Agreement, advising such Record Holder
of the terms of such conversion and the procedure for surrendering to the
Exchange Agent such certificate or certificates in exchange for a certificate or
certificates evidencing Verdant Common Stock.

2. Upon receipt by the Exchange Agent from a Record Holder of a certificate
or certificates representing Consep Common Stock, accompanied by the appropriate
Letter of Transmittal duly completed and executed in accordance with the
instructions appearing therein, the Exchange Agent shall deliver to such Record
Holder (or to a transferee specified in such Letter of Transmittal) a
certificate or certificates representing full shares of Verdant Common Stock on
the basis of 0.95 of one share of Verdant Common Stock for each share of Consep
Common Stock.

3. Certificates representing shares of Verdant Common Stock issued to the
following Record Holders or their transferees:

----------------

shall bear the following legend on the back of each certificate:

The shares represented by this certificate were issued in a
transaction to which Rule 145 under the Securities Act of 1933, as
amended (the "Act"), applies, have been delivered in reliance upon the
representation of the registered holder hereof that they have been
acquired for such holder's account, and may be sold, transferred, or
otherwise disposed of, in whole or in part, except in compliance with
applicable requirements of Rule 145 or pursuant to a registration
statement under the Act or an exemption from such registration.

-2-
<PAGE>

4. No certificate or scrip for such fractional shares of Verdant Common
Stock shall be issued. In lieu of such fractional shares, any Record Holder or
transferee who would otherwise be entitled to fractional shares of Verdant
Common Stock shall, upon surrender of his or her certificate or certificates
representing Consep Common Stock, be paid the cash value of each such fraction,
which shall be equal to the fraction multiplied by the closing price of Verdant
Common Stock on the closing date of the Merger.

5. If any Record Holder shall report that his or her failure to surrender
any certificate or certificates representing shares of Consep Common Stock
registered in his or her name is due to the loss, misplacement or destruction of
such certificate or certificates, the Exchange Agent shall require such Record
Holder to furnish a Bond of Indemnity Agreement in form satisfactory to the
Exchange Agent and Verdant before delivering to such Record Holder or his or her
transferee the certificate or certificates for the shares of Verdant Common
Stock to which he or she is entitled.

6. The Exchange Agent shall cancel and return to Verdant the certificates
for shares of Consep Common Stock delivered for exchange after a period of one
year.

7. The Exchange Agent shall receive and hold, for distribution without
interest to the first record holder of the certificate or certificates
representing shares of Consep Common Stock, all dividends and other
distributions paid on shares of Verdant Common Stock held in the Exchange
Agent's name as agent.

ARTICLE III

1. The Exchange Agent:

(a) shall not be obligated to take any legal action hereunder which
might in its judgment involve any expense or liability unless it shall have
been furnished with reasonable indemnity from Verdant;

(b) may rely on and shall be protected in acting upon any certificate,
instrument, opinion, notice, letter, telegram, or other document or
security delivered to it and believed by it to be genuine and to have been
signed by the proper party or parties;

(c) may rely on and shall be protected in acting upon the written
instructions of the Secretary, Assistant Secretary or any Vice President of
Verdant; and

(d) may consult counsel satisfactory to it, who may be counsel to
Verdant, and the opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in accordance with the opinion of
such counsel.

-3-
<PAGE>

2. Verdant agrees to indemnify and hold the Exchange Agent harmless against
any loss, claim, liability or expense (including, without limitation, the costs
and expenses of defending against such loss, claim or liability) incurred
without gross negligence on its part arising out of or in connection with:

(a) the performance of its duties hereunder; or

(b) reliance by the Exchange Agent upon the information relating to
the Consep Common Stock furnished to the Exchange Agent by Verdant provided
that, in any case in which there is a discrepancy between such information
and the information contained in the certificate or certificates
surrendered to the Exchange Agent by a former shareholder of Consep for
exchange under the terms hereof, the Exchange Agent shall have a duty to
inquire as to the reason for such discrepancy.

3. Verdant agrees to pay the reasonable and customary fees of the Exchange
Agent for the services of the Exchange Agent hereunder or in connection herewith
and to reimburse the Exchange Agent for all reasonable out-of-pocket expenses
incurred by it pursuant to or in connection with its services hereunder.

4. This Agreement shall be construed and enforced in accordance with the
laws of the State of Minnesota and shall inure to the benefit of, and the
obligations crated hereby shall be binding upon, the successors and assigns of
the parties hereto.

5. Verdant and the Exchange Agent agree that, unless terminated or extended
in writing by Verdant this agreement shall terminate one year from the date of
this agreement.

-4-
<PAGE>

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

VERDANT BRANDS, INC.

By:
--------------------------------
Its:
---------------------------

NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION

By:
--------------------------------
Its:
---------------------------

-5-

<PAGE>

Exhibit 23.1

CONSENT OF INDEPENDENT AUDITORS
-------------------------------

We hereby consent to the use in this Amendment No. 1 to Registration
Statement No. 333-65113 on Form S-4 of Verdant Brands, Inc. of our report dated
December 5, 1997 (September 29, 1998 as to Note 12), appearing in the
Prospectus, which is part of this Registration Statement. We also consent to the
reference to us under the heading "EXPERTS" in such Prospectus.

/S/ Deloitte & Touche LLP

Minneapolis, MN
October 20, 1998

<PAGE>

Exhibit 23.2

Consent of Independent Accountants

The Board of Directors
Consep, Inc.

We consent to the use of our report dated February 13, 1998 included in
Amendment No. 1 to the Registration Statement and to the reference to our firm
under the heading "Experts" in the prospectus.

/s/ KPMG PEAT MARWICK LLP

KPMG PEAT MARWICK LLP

Portland, Oregon
October 21, 1998

<PAGE>

EXHIBIT 23.6

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We have issued our report dated June 9, 1997, accompanying the financial
statements and schedules of Dexol Industries, Inc. contained in the Amendment
No. 1 to Form S-4 Registration Statement and Prospectus (File No. 333-65113). We
consent to the use of the aforementioned reports in the Registration Statement
and Prospectus, and to the use of our name as it appears under the caption
"Experts."

SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
--------------------------------------
Singer Lewak Greenbaum & Goldstein LLP

Los Angeles, California
October 21, 1998