STOCK PURCHASE AGREEMENT

                                  BY AND AMONG

MERRIMAC INDUSTRIES INC.                             FILTRAN MICROCIRCUITS INC.
  830212 ONTARIO INC.                                    K.N. RAMACHANDRAN
 B. JAYA RAMACHANDRAN                                   729024 ONTARIO LTD.
     PETER SMILEY                                          JOHN ANDREWS
      S.L. ROSS                                             RITA BHATIA
  TIGNER FAMILY TRUST                                     ROSS CHIARELLI
     HOWARD SOUCIE                                        ASHWINA BIJOOR
     CRAIG SUTTON                                           EAPEN KOSHY
RACHEL KOSHY IN TRUST                                       RACHEL KOSHY
       IAN BOLT                                             DORREN WHITE
     DEREK WHITE                                          GILLIAN PERSHAW
     PHILIP WHITE                                          CORANNE WHITE

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                          Dated as of December __, 1998
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<PAGE>
                                TABLE OF CONTENTS



ARTICLE I  PURCHASE PRICE AND CLOSING..........................................2
         1.01.  Purchase Price of the Stock....................................2
         1.02.  The Closing....................................................2
         1.03.  Adjustment to Purchase Price...................................2
         1.04.  Incorporation of Nominee.......................................3
         1.05.  Definitions....................................................4
ARTICLE IIA  REPRESENTATIONS AND WARRANTIES OF EACH SELLER.....................4
         2A.01.  Power and Capacity............................................4
         2A.02.  Title to Stock................................................4
         2A.03.  Incorporation; Organization; Books and Records................4
ARTICLE IIB  REPRESENTATIONS AND WARRANTIES OF SELLERS.........................5
         2B.01.  Binding Obligation............................................5
         2B.02.  Non-Contravention.............................................5
         2B.03.  Regulatory Approvals..........................................6
         2B.04.  Capitalization of the Company.................................6
         2B.05.  Subsidiaries and Equity Interests.............................6
         2B.06.  Qualifications, etc...........................................7
         2B.07.  Financial Statements..........................................7
         2B.08.  Absence of Certain Changes or Events..........................8
         2B.09.  Assets Other than Real Property Interests....................11
         2B.10.  Real Property Owned and Leased...............................12
         2B.11.  Patents, Trademarks, etc.....................................13
         2B.12.  Insurance....................................................14
         2B.13.  Commitments..................................................14
         2B.14.  Legal Proceedings............................................17
         2B.15.  Taxes........................................................18
         2B.16.  Compliance with Laws.........................................21
         2B.17.  Environment..................................................22
         2B.18.  Employee Benefit Plans; Termination and Severance 
                  Agreements..................................................24
         2B.19.  Employee and Labor Matters...................................25
         2B.20.  Capital Expenditures.........................................26
         2B.21.  Warranties...................................................26
         2B.22.  Powers of Attorney...........................................26
         2B.23.  Customer Accounts Receivable; Inventories....................26
         2B.24.  Customers and Suppliers......................................27
         2B.25.  No Material Misstatement or Omission.........................27
         2B.26.  Stand Alone..................................................27
         2B.27.  Year 2000 Compliant..........................................27
         2B.28.  Retiree Liability............................................28
ARTICLE III  REPRESENTATIONS AND WARRANTIES OF BUYER..........................28
         3.01.  Organization and Authority....................................28
         3.02.  Due Authorization; Binding Obligation.........................28
         3.03.  Non-Contravention.............................................28
         3.04.  Regulatory Approvals..........................................29
         3.05.  Investment Intent.............................................29
         3.06.  Nominee.......................................................29
ARTICLE IV  REPRESENTATIONS AND WARRANTIES OF 830212 SHAREHOLDERS.............29
         4.01.  Organization and Authority....................................29
         4.02.  Non-Contravention.............................................30
         4.03.  Regulatory Approvals..........................................30
         4.04.  Title to Stock................................................30
         4.05.  Capitalization................................................30
         4.06.  Subsidiaries and Equity Interests; Transactions with 
                 Affiliates...................................................31
         4.07.  Organization; Books and Records...............................31
         4.08.  Compliance with Laws..........................................31
         4.09.  No Material Misstatement or Omission..........................31
         4.10.  No Undisclosed Liabilities....................................31
ARTICLE V  REPRESENTATIONS AND WARRANTIES OF 729024 SHAREHOLDERS..............32
         5.01.  Organization and Authority....................................32
         5.02.  Non-Contravention.............................................32
         5.03.  Regulatory Approvals..........................................33
         5.04.  Title to Stock................................................33
         5.05.  Capitalization................................................33
         5.06.  Subsidiaries and Equity Interests; Transactions with 
                 Affiliates...................................................33
         5.07.  Organization; Books and Records...............................34
         5.08.  Compliance with Laws..........................................34
         5.09.  No Material Misstatement or Omission..........................34
         5.10.  No Undisclosed Liabilities....................................34
                                     
                                       -1-
<PAGE>

ARTICLE VI  PRE-CLOSING COVENANTS.............................................34
         6.01.  Corporate Investigation by Buyer..............................34
         6.02.  Confidentiality...............................................35
         6.03.  Intentionally Deleted.........................................36
         6.04.  Maintenance of Insurance......................................36
         6.05.  Additional Disclosure.........................................36
         6.06.  Certain Licenses and Permits..................................36
         6.07.  Non-Interference..............................................36
         6.08.  Other Transactions............................................37
         6.09.  Effect of Termination and Abandonment.........................37
         6.10.  Amalgamation of 830212 and 729024 with Company................37
         6.11.  Schedules.....................................................37
         6.12.  Financial Statements..........................................38
         6.13.  Due Diligence.................................................38
         6.14.  Assistance....................................................38
         6.15.  Form 116......................................................38
         6.16.  Escrow........................................................38
         6.17.  Real Estate...................................................39
         6.18.  Closing for Seller............................................39
         6.19.  Closing for Buyer.............................................40
ARTICLE VIIA  CONDUCT OF BUSINESS.............................................41
         7A.01.  Conduct of Business..........................................41
ARTICLE VIIB  PRE-CLOSING COVENANTS OF THE HOLDING COMPANIES..................44
         7B.01.  Accuracy of Representations and Warranties...................44
ARTICLE VIII  CONDITIONS TO BUYER'S OBLIGATIONS...............................45
         8.01.  Accuracy of Representations and Warranties....................45
         8.02.  Performance of Covenants......................................45
         8.03.  Government Approvals..........................................45
         8.04.  Consents......................................................45
         8.05.  No Legal Proceedings..........................................45
         8.06.  Stock Certificates............................................46
         8.07.  No Material Changes...........................................46
         8.08.  Employment Contract...........................................46
         8.09.  Intercompany Accounts.........................................46
         8.10.  Amalgamation..................................................46
ARTICLE IX  CONDITIONS TO SELLER'S OBLIGATIONS................................46
         9.01.  Accuracy of Representations and Warranties....................47
         9.02.  Performance of Covenants......................................47
         9.03.  Governmental Approvals........................................47
         9.04.  No Legal Proceedings..........................................47
         9.05.  Payment of Purchase Price.....................................47
ARTICLE X  SURVIVAL...........................................................47
         10.01.  Survival.....................................................47
ARTICLE XI  INDEMNIFICATION...................................................48
         11.01.  Environmental Indemnification by Sellers.....................48
         11.02.  Other Indemnification by Sellers.............................49
         11.03.  Indemnification by Buyer.....................................49
         11.04.  Third-Party Claims...........................................49
         11.05.  Offset.......................................................51
         11.06.  Indemnification Limitations and Mitigation...................51
ARTICLE XII  TERMINATION......................................................52
         12.01.  Mutual Agreement.............................................52
         12.02.  Noncompliance or Nonperformance..............................53
         12.03.  Due Diligence Termination....................................53
ARTICLE XIII  MISCELLANEOUS...................................................53
         13.01.  Integration; Amendment.......................................53
         13.02.  Seller's Agent...............................................53
         13.03.  Assignment...................................................54
         13.04.  Counterparts.................................................54
         13.05.  Headings.....................................................54
         13.06.  Waiver; Requirement of Writing...............................55
         13.07.  Finder's Fees; Brokers.......................................55
         13.08.  Expenses.....................................................55
         13.09.  Notices......................................................55
         13.10.  Applicable Law; Consent to Jurisdiction......................56
         13.11.  Public Announcements.........................................57
         13.12.  No Third-Party Beneficiaries.................................57
APPENDIX A....................................................................63
         DEFINITIONS 63
                                      -2-
<PAGE>

                            STOCK PURCHASE AGREEMENT

     THIS STOCK PURCHASE  AGREEMENT  dated as of December [ ], 1998 by and among
Merrimac Industries,  Inc., a New Jersey corporation ("Buyer"), the Shareholders
of  830212  Ontario  Inc.   listed  on  the  signature   pages  hereto  ("830212
Shareholders"),  K.N.  Ramachandran,  B. Jaya Ramachandran,  the Shareholders of
729024   Ontario  Ltd.   listed  on  the   signature   pages   hereto   ("729024
Shareholders"),  Peter Smiley,  John Andrews,  S.L.  Ross,  Rita Bhatia,  Tigner
Family Trust,  Ross  Chiarelli,  Howard Soucie,  Ashwina Bijoor and Craig Sutton
(individually a "Seller" and collectively,  "Sellers"),  Filtran  Microcircuits,
Inc., a  corporation  incorporated  under the laws of Ontario  (the  "Company"),
830212 Ontario Inc. ("830212") and 729024 Ontario Ltd. ("729024")  (collectively
"Holding Companies").


                              W I T N E S S E T H :

     WHEREAS,  Sellers,  830212 and 729024 own all of the issued and outstanding
shares  consisting of in the aggregate  1,052 common shares (the "Stock") of the
Company;

     WHEREAS, the 830212 Shareholders own all the shares of 830212;

     WHEREAS, the 729024 Shareholders own all the shares of 729024;

     WHEREAS,  the Buyer has the option to create an acquisition  vehicle as its
Nominee (the "Nominee") to acquire the Stock;

     WHEREAS,  the Sellers shall cause the Amalgamation of the Holding Companies
and the Company (the "Amalgamation") on or prior to the Closing Date (references
to the Company herein shall include references to the corporation resulting from
the Amalgamation); and

     WHEREAS,  Buyer desires to purchase  from Sellers,  and each of the Sellers
desires to sell to Buyer,  the Stock upon the terms and  conditions  hereinafter
set forth;

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


                                    ARTICLE I


                           PURCHASE PRICE AND CLOSING


     1.01. Purchase Price of the Stock.

     Subject to all of the terms and conditions of this Agreement, Sellers shall
sell the Stock to Buyer or its  Nominee at the  Closing  (as  defined in Section
1.02  below)  and  Buyer  or  its  Nominee,   in  reliance  on  the   covenants,
representations  and warranties of Sellers contained  herein,  shall purchase or
cause to purchase  the Stock from  Sellers at the  Closing for a purchase  price
(the "Purchase Price") equal to CDN $6,000,000. The Purchase Price shall be paid
by Buyer or its  Nominee  to Seller at the  Closing,  in  immediately  available
funds,  or by certified or official bank checks  payable to the order of Sellers
in  accordance  with the  amounts  set forth on Schedule I. Buyer or its Nominee
may,  in its sole  discretion,  offer to  satisfy  up to  CDN $2,000,000  of the
Purchase  Price through the issuance of common shares of the Buyer.  Each Seller
shall have the right in his, her or its  discretion to accept or reject any such
offer. In any such case,  Buyer and any Sellers who agree to take Buyer's shares
in payment of some or all of their share of the Purchase  Price shall  negotiate
the number of Buyer's  common  shares to be issued and the value to be  ascribed
thereto. In connection  therewith,  the parties shall make such  representations
customary  for a  purchase  of shares  and  acceptable  to such  Sellers  acting
reasonably,  and shall assume such undertakings as to allow Buyer's shares to be
issued  without  registration  or  qualification  under  the laws of the  United
States,  Canada and any political subdivision thereof. Each of the Sellers shall
deliver to Buyer at the Closing certificates for the Stock duly endorsed or with
duly executed stock powers  attached.  Notwithstanding  that Buyer may appoint a
Nominee hereunder to acquire the Stock, the Buyer shall be liable for all of its
obligations  and those of its  Nominee,  as principal  and not as surety,  which
arise under this Agreement.

                                      -3-

<PAGE>
     1.02. The Closing.

     The  closing of the sale and  purchase of the Stock (the  "Closing")  shall
take place at the offices of LaBarge Weinstein,  333 Preston Street, 11th Floor,
Ottawa,  Ontario,  Canada K1S 5N4 at 10:00 a.m.  local time on January  22, 1999
(such time and date of the Closing being herein called the "Closing Date").

     1.03. Adjustment to Purchase Price.

     The aggregate  purchase  price to be paid by the Buyer for the Stock of the
Company  shall be subject to  adjustment  as follows:  (i) if the total Net Book
Value (as defined below) of the Company  reflected on the Closing  Balance Sheet
("Closing  Net Book Value") is an amount less than CDN  $1,850,000  (the "Base I
Value"),  within forty-five (45) days of the Closing Date, the Sellers,  jointly
and  severally,  will pay to the Buyer,  in immediately  available  funds and in
Canadian  dollars,  the amount  equal to the excess of (a) the Base I Value over
(b) the total  Closing  Net Book  Value and the Base  Value or (ii) if the total
Closing Net Book Value is an amount  greater than CDN  $1,950,000  (the "Base II
Value"),  within forty-five (45) days of the Closing Date, the Buyer will pay to
the Sellers,  in immediately  available funds and in Canadian dollars, an amount
equal to the excess of (a) the total Closing Net Book Value over (b) the Base II
Value.  All payments (other than late payments as described  below) due Buyer or
Sellers  under this  Section  1.03 shall bear  interest at the rate equal to the
applicable  federal  rate as  defined in  Section  1274(d) of the United  States
Internal Revenue Code of 1986, as amended,  in effect as of the Closing Date and
such interest shall be due and payable concurrently with the payment to which it
relates. Late payments shall bear interest at the rate of 10-1/2% per annum from
the  forty-fifth  day  following  the Closing Date. In computing the Closing Net
Book Value for this Section 1.03,  there shall be added back to Closing Net Book
Value  the  aggregate  of  (i)  the  amount,  not  to  exceed  CDN  $50,000,  of
professional  fees invoiced to and paid by the Company prior to the Closing Date
(by LaBarge Weinstein,  McCarthy  Tetrault,  Thomas Busing and any other person)
and (ii) the amount,  if any, not to exceed CDN $50,000,  of the operating  loss
realized by the Company between December 1, 1998 and the Closing Date. Except as
provided in the preceding sentence, the Net Book Value ("Net Book Value") of the
Company  will  be  determined,   in  accordance  with  Canadian  GAAP,   applied
consistently  with the fiscal 1997 financial  statements of the Company and will
be based on a balance  sheet as of the Closing Date  prepared by the Company and
distributed  to the  parties  hereto  within  thirty (30) days after the Closing
Date.  Such balance sheet shall be deemed final and conclusive in the absence of
any written  objection  delivered by a party hereto within ten (10) days deliver
thereof.  Any  disputes  shall be  submitted to  Pricewaterhouse  Coopers  whose
determination shall be binding on the parties. It is expressly understood by the
parties that this Section 1.03 and the escrow agreement attached as Exhibit A to
this  Agreement and not Article XI shall be the exclusive  method and remedy for
any adjustment to Purchase Price.

                                      -4-
<PAGE>
     1.04. Incorporation of Nominee.

     The Buyer, in its sole discretion, shall have the option, but no obligation
whatsoever,  to incorporate the Nominee in any  jurisdiction  that it may chose.
Should  the Buyer  choose to  appoint a Nominee,  the  obligations  of the Buyer
hereunder  shall  become  the joint  and  several  obligations  of the Buyer and
Nominee.

     1.05. Definitions.

     All capitalized  terms used herein and not otherwise defined shall have the
meaning set forth in Appendix A hereto. It is expressly understood that once the
Amalgamation  has taken place,  all references to the Company shall be deemed to
mean the Company, 830212, 729024 and the surviving entity in the Amalgamation.


                                   ARTICLE IIA


                  REPRESENTATIONS AND WARRANTIES OF EACH SELLER


     Each Seller hereby  individually  and severally  represents and warrants to
Buyer as follows:

     2A.01. Power and Capacity.

     Each Seller has the full legal power and  capacity to execute,  deliver and
perform  such  Seller's  obligations  under this  Agreement  including,  without
limitation, the Amalgamation of the Holding Companies with the Company.

     2A.02. Title to Stock.

     Each Seller individually represents and warrants that it (a) is (or if such
Seller holds Stock through a Holding Company,  after the  Amalgamation  will be)
the  beneficial  and  record  owner,  free  and  clear  of any  liens,  pledges,
encumbrances,  charges,  agreements or claims,  of the Stock set forth  opposite
such Seller's name on Schedule I and (b) will sell, transfer, assign and deliver
good and valid title to such shares of the Stock as provided in this  Agreement.
At the Closing,  Buyer will acquire good and valid title to such Stock, free and
clear of any liens, pledges,  encumbrances (except as contained in the Company's
articles of amalgamation), charges, agreements or claims.

     2A.03. Incorporation; Organization; Books and Records.

     The  Company  is and  after the  Amalgamation  will be a  corporation  duly
incorporated or amalgamated and organized, validly existing and in good standing
under the laws of Ontario,  Canada,  with full corporate  power and authority to
carry on its business as presently conducted by it and to own, lease and operate
its properties in the places where it maintains offices and where its properties
are owned,  leased or operated.  Copies of the charter documents and By-laws (or
similar  governing  documents),  corporate minute books containing copies of all
By-laws and resolutions  passed by the shareholders and directors since the date
of its  incorporation,  share  certificate  books,  registers  of  shareholders,
registers  of  transfers  and  registers  of  directors of the Company are true,
correct and complete as of the date hereof and Seller shall cause their delivery
to Buyer in accordance with Section 6.11.


                                   ARTICLE IIB


                    REPRESENTATIONS AND WARRANTIES OF SELLERS


     Sellers hereby jointly and severally  (except for Section 2B.02,  in so far
as it relates  to such  Seller,  which is made  severally  by each  Seller as to
itself) without the benefit of division and discussion,  represents and warrants
to Buyer as follows,  it being  understood  that references to Schedules in this
Article  IIB shall  mean the  Schedules  to be  delivered  by  Sellers  to Buyer
pursuant to Section 6.11:

                                      -5-
<PAGE>

     2B.01. Binding Obligation.

     Each Seller represents that this Agreement  constitutes a valid and binding
obligation of such Seller enforceable against such Seller in accordance with its
terms, subject to the qualification, however, that enforcement of the rights and
remedies  created  hereby is subject to  bankruptcy  and other  similar  laws of
general  application  relating  to or  affecting  the  rights  and  remedies  of
creditors and that the remedy of specific performance or of injunctive relief is
subject to the discretion of the court before which any proceeding  therefor may
be brought.

     2B.02. Non-Contravention.

     The  execution,  delivery and  performance of this Agreement by Sellers and
the  consummation of the transactions  contemplated  hereby do not and will not,
with or  without  the giving of notice or the lapse of time,  or both,  violate,
conflict with, result in the breach of or accelerate the performance required by
any of the terms,  conditions or provisions of the charter  documents or By-laws
or other  governing  documents  of the  Company or any  covenant,  agreement  or
understanding  to which any Seller or the Company is a party or their properties
are  subject  or by which  either  of them is bound or  affected  or any  order,
ruling,   decree,   judgment,   arbitration  award,  law,  rule,  regulation  or
stipulation  to which any Seller or the  Company is subject or their  properties
are subject or by which any of them is bound or affected or constitute a default
thereunder or result in the creation of any lien, charge or encumbrance upon any
of the  properties or assets of the Company or result in, or give any person the
right to seek,  or to cause  (a) the  termination,  cancellation,  modification,
amendment,  variation or  renegotiation of any contract,  agreement,  indenture,
instrument or commitment to which the Company or any of their  properties may be
a party or subject or by which it is bound or affected,  (b) the acceleration or
forfeiture  of any term of payment  or  (c) the  loss in whole or in part of any
material benefit which would otherwise accrue to the Company.

     2B.03. Regulatory Approvals.

     Except as set forth in Schedule 2B.03 to be provided to Buyer in accordance
with Section 6.11, or in connection with the  Amalgamation,  neither Sellers nor
the Company is required to file, seek or obtain any governmental notice, filing,
authorization,  approval,  order or consent,  or any bond in satisfaction of any
governmental  regulation,  in  connection  with  the  execution,   delivery  and
performance of this  Agreement by Sellers or in order to prevent  termination of
any material right, privilege, license or agreement of the Company.

     2B.04. Capitalization of the Company.

     The Company's  authorized capital consists solely of an unlimited number of
common  shares,  with no par value,  of which 1,052 common shares are, and after
the Amalgamation  will be, issued and  outstanding.  Such issued and outstanding
shares are validly  issued and are fully paid and  nonassessable.  Except (a) as
set forth in Schedule  2B.04 to be provided to Buyer in accordance  with Section
6.11,  and (b) for rights  granted to Buyer under this  Agreement,  there are no
outstanding options, warrants or other rights to purchase, obtain or acquire, or
any outstanding securities or obligations  convertible into or exchangeable for,
or any  voting  agreement  or voting  trust or pooling  agreement  or proxy with
respect  to,  any  shares  in the  share  capital  of the  Company  or any other
securities  of the  Company  and the  Company  is not  obligated,  now or in the
future,  contingently or otherwise,  to issue,  purchase or redeem shares in the
share  capital of the Company or any other  securities of the Company to or from
any person.

                                      -6-
<PAGE>
     2B.05. Subsidiaries and Equity Interests.

     The Company  has never  owned and does not own any shares or capital  stock
of, or any interest in, any person, has no equity interest in any person and has
no  obligation  to  form,  subscribe  for  shares  in,  or  participate  in  any
corporation, partnership or person.

     2B.06. Qualifications, etc.

     Schedule 2B.06 to be provided to Buyer in accordance with Section 6.11 sets
forth  (a) each  jurisdiction  in which  the  Company  is duly  qualified  to do
business and in good standing, and (b) each jurisdiction in which the Company is
duly  licensed,  authorized or registered to conduct such business or businesses
as are conducted by it and the type of business or businesses for which it is so
licensed,   authorized  or  registered.   Each  such   qualification,   license,
authorization and registration (collectively,  "Qualification") is in full force
and effect and neither the character of the properties owned or held under lease
or  license  by the  Company  nor the nature of the  business  conducted  by the
Company requires any additional  Qualification  in any such  jurisdiction or any
Qualification in any other  jurisdiction,  except any such jurisdiction  wherein
the failure to be so qualified,  licensed,  authorized  or registered  would not
have a material  adverse effect on the Company.  Except as set forth in Schedule
2B.06, no approval, consent or notification in connection with any Qualification
is necessary in connection with the transactions  contemplated by this Agreement
to prevent the termination or withdrawal of any such  Qualification  as a result
of such transactions.

     2B.07. Financial Statements.

     Sellers will provide to Buyer:

     (a) in accordance with Section 6.11, unaudited financial statements for the
Company  consisting  of (i) balance  sheets at November 30, 1997 and 1996,  (ii)
statements of income and retained earnings for the years ended November 30, 1997
and 1996 and (iii)  statements  of changes in  financial  position for the years
ended  November 30, 1997 and 1996,  together with the review report of Thomas H.
Busing (the "Accountant") thereon and the notes thereto; and

     (b) audited  financial  statements by the  Accountant for the Company to be
delivered  within  forty-five  (45) days of the Closing Date consisting of (i) a
balance sheet at November 30, 1998,  (ii)  statement of income for twelve months
ended  November 30, 1998 and (iii)  statements of changes in financial  position
for the twelve months ended November 30, 1998.

     (c) The financial  statements  described in Section 2B.07(a) above have not
been the subject of an audit and have been prepared in accordance  with Canadian
generally  accepted  accounting   principles  ("Canadian  GAAP")  applied  on  a
consistent basis and present fairly the financial position of the Company at the
dates  thereof  and the  results of  operations  and  changes  in the  financial
position  of the Company for the periods  then ended.  The  financial  books and
records of the  Company  used to prepare  the  financial  statements  in Section
2B.07(a) have been  maintained in accordance  with sound business  practices and
fairly  present and  disclose in  accordance  with  Canadian  GAAP  consistently
applied (i) the financial  position of the Company and (ii) all  transactions of
the Company.

     (d) The financial  statements  described in Section  2B.07(b) above will be
prepared in accordance with Canadian GAAP applied on a consistent basis and will
present  fairly the  financial  position of the Company at the dates thereof and
the results of operations  and changes in the financial  position of the Company
for the periods  then ended.  Except to the extent that it shall be reflected or
reserved  against in the audited  balance  sheet of the Company at November  30,
1998, at November 30, 1998,  the Company did not have any material  liability or
obligation (whether absolute or contingent, or accrued or unaccrued) required to
be disclosed  in  financial  statements,  or in the notes  thereto,  prepared in
accordance with Canadian GAAP. The financial books and records of the Company to
be used to prepare the financial  statements  in Section  2B.07(b) have been and
until Closing will be maintained in accordance with sound business practices and
fairly  present and  disclose in  accordance  with  Canadian  GAAP  consistently
applied (i) the financial  position of the Company and (ii) all  transactions of
the Company.

                                      -7-
<PAGE>
     2B.08. Absence of Certain Changes or Events.

     Except as set forth in Schedule  2B.08 or any other schedule to be provided
to Buyer in accordance with Section 6.11,  since November 30, 1997 there has not
been, with respect to the Company or its businesses or properties:

     (a)  any  material  adverse  change  in  the  business,  assets,  condition
(financial or  otherwise),  results of operations or prospects of the Company or
any event,  condition or  contingency  relating to the Company that is likely to
result in such a material adverse change;

     (b) any material  obligations  or  liabilities  incurred,  except trade and
other obligations or liabilities in usual amounts incurred by the Company in the
ordinary course of business;

     (c) any indebtedness  (contingent or otherwise) for borrowed money incurred
by the Company except under its existing revolving line of credit;

     (d) any destruction,  damage by fire,  accident or other casualty or act of
God of or to any of the material properties or assets of the Company, whether or
not covered by insurance;

     (e) any  action  that,  if taken  after the date of this  Agreement,  would
constitute a breach of any of the  covenants  set forth in Articles VI, VIIA and
VIIB.

     (f) any  amendment  to its charter  document or By-laws or other  governing
documents or capital structure;

     (g) any  issuance or sale of any shares of its  capital  stock or any other
securities or issuance of any securities  convertible into or exchangeable  for,
or options,  warrants to purchase,  script,  rights to subscribe  for,  calls or
commitments  of any character  whatsoever  relating to, or any entering into any
contract,  understanding  or  arrangement  with  respect to the issuance of, any
shares of its capital stock or any of its other securities, or any entering into
any  arrangement or contract with respect to the purchase or voting of shares of
its capital stock, or adjustment, split, reacquisition,  redemption, combination
or  reclassification  any of its  securities,  or make any other  changes in its
capital structure;

     (h) any other debt  (contingent  or otherwise)  or other  obligation to pay
money except for normal operating purposes in the ordinary course of business;

     (i) any split,  combination or  reclassification  of any of its shares,  or
redemption,  retirement,  repurchase or acquisition of its shares in its capital
stock or other corporate security or reservation,  declaration, setting aside or
payment  of any  dividends  (in cash or in kind)  on,  or any  distributions  in
respect of, the outstanding  capital stock of the Company or  appropriations  of
profits or capital;

     (j) any entering into, amendment or renewal or termination of any contract,
commitment,  lease  (whether of real or personal  property) or other  agreement,
except in the ordinary course of business;

     (k)  any  loan,  advance  or  assumption,  endorsement,  guarantee  or  any
obligation  to guarantee  the  obligation or  liabilities  of any person,  firm,
corporation or other entity;

     (l) any mortgage,  pledge or any lien,  charge, or other encumbrance of any
of the assets, properties or business of the Company;

     (m) any sale or other  transfer  or lease of any  properties  or  assets or
cancellation  of any debt or claim  or  waiver  of any  right  or any  gift,  or
purchase or otherwise  acquisition or lease of any properties or assets, in each
case except in the ordinary course or business;

                                      -8-
<PAGE>
     (n) any lapse of any right with respect to any  Intellectual  Property used
in the conduct of the business of the Company;

     (o) any grant of any  increase in wages or salary  rates or in  employment,
retirement, severance, termination or other benefits or any payment of any bonus
or any loan to any  officer,  director or employee  or  shareholder,  other than
increases or bonuses in the ordinary  course  consistent  with past  practice or
required by any  agreement in effect as of the date of this  Agreement and which
is disclosed in any of the Schedules  hereto,  or entering  into any  employment
contract with any person, or adopting any bonus,  profit sharing,  compensation,
stock option, pension,  retirement,  deferred compensation,  employment or other
employee benefit plan, agreement,  trust, plan fund or other arrangement for the
benefit or welfare of any employee of the Company;

     (p) any acceleration of the collection of accounts receivable, any delay in
the payment of accounts payable or any deferring with respect to the maintenance
and other expenses,  any reduction of inventories,  or otherwise increase of the
cash on hand, in a manner inconsistent with past practice or not in the ordinary
course of business;

     (q) any  repayment  of any  indebtedness  for  borrowed  money,  except  as
required by existing debt instruments and under the Company's  revolving line of
credit;

     (r) any material tax election  settling or  compromising  any liability for
taxes,  any  filing of tax  returns  other than on a basis  consistent  with the
Company's past practices or, other than in the ordinary course of business,  any
engagement  in any  transaction  or  operation  of the business in a manner that
would directly or indirectly result in any liability for Taxes of the Company;

     (s) any change in its accounting methods or practices;

     (t)  any  termination  of  operation  of its  properties  and  business  as
heretofore  carried on or any failure to maintain all of its properties,  rights
and assets  consistently  with past  practices  or any failure to do any and all
things  reasonably  necessary  and  within  its power to retain  and  pursue the
goodwill of its business;

     (u) any  discharge  of any secured or  unsecured  obligation  or  liability
(whether accrued, absolute, contingent or otherwise,) other than obligations and
liabilities  discharged  in the  ordinary  course  of  business  and in a manner
consistent with past practices;

     (v) any capital expenditure;

     (w) any removal of any director or auditor or  termination  of any officer,
except those directors who will resign in accordance with Section 6.18(c);

     (x) any purchase or acquisition of any corporate  security or  proprietary,
participatory  or profit  interest in any  person,  firm,  corporation  or other
entity; or

     (y)  any  modification  or  change  of  its  business  organization  or its
relationship with its suppliers,  customers and others having business relations
with it.

                                      -9-
<PAGE>
     2B.09. Assets Other than Real Property Interests.

     (a) The  Company  will have  good and  valid  title to and will be the sole
owner of all assets that will be  reflected  on the  November  30, 1998  Balance
Sheet or thereafter  acquired,  except those to be sold or otherwise disposed of
for fair value on or after the date of the November  30, 1998  Balance  Sheet in
the  ordinary  course  of  business  consistent  with past  practice  and not in
violation  of this  Agreement,  in each case  free and  clear of all  mortgages,
liens, security interests, pledges,  encumbrances,  charges, agreements, claims,
restrictions  and  defects  of title of any kind  except (i) as are set forth in
Schedule  2B.09 to be provided to Buyer in accordance  with Section  6.11,  (ii)
mechanics',  carriers',  workmen's,  repairmen's  or other like liens arising or
incurred in the  ordinary  course of business and liens for Taxes (as defined in
Section 2B.15) which are not due and payable or being contested in good faith by
appropriate proceedings,  (iii) other imperfections of title or encumbrances, if
any,  which  mortgages,  liens,  security  interests  and  encumbrances  do not,
individually  or in the  aggregate,  materially  impair  the  continued  use and
operation  of the assets to which they relate in the  business of the Company as
presently conducted.

     (b) All the tangible  personal  property of the Company has been maintained
in all material respects in accordance with the past practice of the Company and
generally accepted industry practice. Each item of tangible personal property of
the Company is in all material respects in good operating  condition and repair,
ordinary wear and tear excepted and adequate and  sufficient  for the continuing
conduct of the  business of the Company as now  conducted.  All leased  personal
property of the Company is in all material respects in the condition required of
such property by the terms of the lease  applicable  thereto  during the term of
the lease and upon the expiration thereof.

     (c) This Section 2B.09 does not relate to (i) real property or interests in
real  property,  such  items  being  the  subject  of  Sections  2B.10  or  (ii)
Intellectual Property, or interests in Intellectual  Property,  such items being
the Subject of Section 2B.11.

     2B.10. Real Property Owned and Leased.

     (a) Schedule 2B.10 to be provided to Buyer in accordance  with Section 6.11
contains a complete and accurate list and full  description of all real property
(including without limitation  plants,  warehouses,  interests in real property,
distribution  centers,  structures and other  buildings)  owned or leased by the
Company  (the "Real  Property").  The  Company is not the owner or lessee of, or
subject  to any  agreement  or  option to own or lease,  any  immovable  or real
property or any interest in any immovable or real  property  other than the Real
Property.  The  Company is the sole owner or lessee,  as the case may be, of the
Real Property and has (a) good and  marketable  title to the real property owned
by it and (b) good and valid title to the leasehold estates in all real property
and interests in real property leased by it, in each case, free and clear of all
mortgages, liens, security interests, pledges, leases, subleases,  encumbrances,
charges,  assignments,  easements,  claims or other  restrictions and defects of
title,  except (i) as are set forth in Schedule 2B.10,  (ii) liens for Taxes not
yet due and payable or being contested in good faith by appropriate  proceedings
and (iii)  which do not  impair the  current  use or  diminish  the value of the
property affected to any material extent. All plants,  warehouses,  interests in
real  property,  distribution  centers,  structures  and other  buildings of the
Company  were  constructed  in  accordance  with  all  applicable  laws  and are
currently  used  in  the  operation  of the  business  of the  Company  and  are
adequately  maintained  and are in good  operating  condition and repair for the
requirements  of the  business  as  presently  conducted  by the Company and the
Company has adequate rights of ingress and egress on them.

     (b) No action,  suit, claim,  investigation,  condemnation or expropriation
proceeding  is pending or, to the knowledge of the Sellers,  threatened  against
any of the Real  Property  which would  preclude or impair the use of any of the
Real Property for the purposes for which they are currently  used.  There are no
outstanding work orders from or required by any municipality, police department,
fire  department,  sanitation,  health or safety  authorities  or from any other
Person and there are no matters under discussion with or by the Company relating
to work  orders.  There are no  agreements  or other  documents  which affect or
relate to title to the Real Property,  other than as registered against title to
the  Company.  The  Company  has not  granted  to any  other  party any right to
purchase,  right of first  refusal,  option  or other  contractual  rights  with
respect to any of Real  Property,  and has not  entered  into any  agreement  to
encumber  or  otherwise  dispose of or impair  the  Company's  right,  title and
interest in and to the Real  Property.  All  municipal  and school,  general and
special taxes affecting the Real Property have been paid and are up to date.

                                      -10-
<PAGE>
     (c) Each  lease is in good  standing,  creates a good and  valid  leasehold
estate in the leased properties  thereby demised and is in full force and effect
without  amendment.  With  respect  to each  lease (i) the lease (or a notice in
respect of the lease) will at closing be properly  registered in the appropriate
land registry office,  (ii) all rents and additional rents have been paid, (iii)
no waiver,  indulgence  or  postponement  of the lessee's  obligations  has been
granted  by the  lessor,  (iv)  there  exists  no event  of  default  or  event,
occurrence,  condition or act (including the purchase of the Stock) which,  with
the giving of notice,  the lapse of time or the  happening of any other event or
condition,  would  become a default by the Company  under the lease,  (v) to the
knowledge  of any of the  Sellers,  all of the  covenants to be performed by any
party (other the Company)  under the lease have been fully  performed,  and (vi)
all leasehold improvements have been completed.

     2B.11. Patents, Trademarks, etc.

     (a) Schedule 2B.11 to be provided to Buyer in accordance  with Section 6.11
sets forth a complete and accurate  listing of all  Canadian,  United States and
foreign patents,  trademarks,  trade names,  service marks industrial design and
copyrights  used  in the  conduct  of the  businesses  of the  Company,  whether
registered or  unregistered,  and any  applications or  registrations  therefor.
Except as set forth in  Schedule  2B.11,  the  Company  solely  owns and has the
exclusive  right to hold and use, free and clear of any payment or  encumbrance,
all such patents,  trademarks,  trade names,  service marks and copyrights  (all
such  patents,  trademarks,  trade names,  service  marks and  copyrights  being
hereinafter  collectively referred to as the "Intellectual  Property").  Each of
the aforesaid Intellectual Property is valid, subsisting and enforceable. Except
as set  forth in  Schedule  2B.11,  there is no claim or  demand  of any  person
pertaining  to, or any  proceedings  which are pending or, to the  knowledge  of
Sellers,  threatened,  which  challenge the  exclusive  rights of the Company in
respect of any  Intellectual  Property whether  registered or  unregistered.  No
Intellectual  Property  is subject to any  outstanding  order,  ruling,  decree,
judgment  or  stipulation  by or with any court,  arbitrator  or  administrative
agency and to the  knowledge  of the  Sellers,  except as set forth in  Schedule
2B.11,  none of the Intellectual  Property  infringes the intellectual  property
rights of others or is being  infringed by others or is used by others  (whether
or not such use constitutes infringement).

     (b) None of the Business know-how (as defined below) in documentary form is
held by Seller or any of their  affiliates  (other than the Company) and Sellers
and their  affiliates  (other than the  Company) do not own or have any right to
use, execute, reproduce, display, perform, modify, enhance, distribute,  prepare
derivative works of or sublicense any of the Business know-how.  The Company has
not granted any licenses or otherwise  disclosed  nor has agreed to disclose any
of the Business  know-how except as set forth in Schedule 2B.11. As used in this
paragraph,  "Business  know-how"  shall mean all (A) schematics and other design
documentation  regardless of form, (B) specifications and performance  criteria,
(C) operating  instructions and maintenance  manuals, (D) source and object code
copies of software and firmware and (E) prototypes,  models or samples,  in each
case,  which (i) are set forth on Schedule II attached to this  Agreement,  (ii)
are owned by the Company and (iii) are used primarily by the Company or held for
use by the Company as of the Closing Date.

     2B.12. Insurance.

     Schedule 2B.12 to be provided to Buyer in accordance with Section 6.11 sets
forth a complete  and  accurate  list of all  casualty,  directors  and officers
liability,  general liability  (including product liability) and all other types
of insurance maintained by the Company, together with the carriers and liability
limits for each such  policy.  Each  policy is duly in force,  and no notice has
been received by the Company from any insurance carrier  purporting to cancel or
reduce coverage under any such policy. The Company is current in all premiums or
other  payments  due  thereunder.  Schedule  2B.12  identifies  which  insurance
policies are "occurrence" or "claims made". All insurance  coverage held for the
benefit of the Company is with responsible and reputable insurers and is in such
amounts,  with  such  deductibles  and  against  such  risks  and  losses as are
reasonable  for the  business  and assets of the  Company.  The  activities  and
operations  of the Company  have been  conducted in a manner so as to conform in
all material respects to all applicable provisions of such insurance policies.

                                      -11-
<PAGE>
     2B.13. Commitments.

     (a)  Except  as set  forth in  Schedule  2B.13 to be  provided  to Buyer in
accordance  with  Section  6.11 or as  otherwise  disclosed  pursuant to Section
2B.18, the Company is not a party to or bound by any written or oral:

     (i) covenant of the Company not to compete or other covenant of the Company
restricting  the  development,  manufacture,  marketing or  distribution  of the
products and services of the Company;

     (ii) agreement,  contract or other  arrangement  with (A) any Seller or any
affiliate  of a Seller  (other  than the  Company)  or (B) any current or former
officer,  director,  employee or independent  contractor of the Company,  or any
affiliate thereof;

     (iii) lease,  sublease or similar agreement with any person under which the
Company is a lessor or sublessor  of, or makes  available  for use to any person
(other  than the  Company),  (A) any Real  Property  or (B) any  portion  of any
premises  otherwise occupied by the Company (other than as disclosed pursuant to
Section 2B.10);

     (iv) lease or similar  agreement  with any person  (other than the Company)
under  which (A) the  Company  is lessee  of, or holds or uses,  any  machinery,
equipment,  vehicle or other tangible  personal  property owned by any person or
(B) the Company is a lessor or sublessor  of, or makes  available for use by any
person,  any tangible personal  property owned or leased by the Company,  in any
such case which has an aggregate future liability or receivable, as the case may
be, in excess  of  CDN $25,000  and,  in the case of any such  lease or  similar
agreement entered into between the date hereof and Closing, is not terminable by
the Company by notice of not more than 60 days without cost or penalty;

     (v) (A)  continuing  agreement  or  contract  for the  future  purchase  of
materials,  supplies or equipment (other than purchase  contracts and orders for
inventory  in the ordinary  course of business  consistent  with past  practice,
provided,  that any such contract or order,  when taken  together with all other
purchase  contracts and orders for inventory relating to the ordered item, would
not  require  the  Company  to  acquire a  quantity  of such item that could not
reasonably  be  expected  to be used in the  ordinary  course of business of the
Company  within  six months  after the date of  execution  or entry of  purchase
contract or order for inventory) or (B) service, consulting, management or other
similar  type of  agreement  or  contract,  in  either  such  case  which has an
aggregate future liability in excess of CDN $25,000 and, in the case of any such
agreement or contract  entered into between the date hereof and Closing,  is not
terminable  by the  Company by notice of not more than 60 days  without  cost or
penalty;

     (vi) continuing  agreement or contract for the distribution of any products
manufactured by the Company, including by franchise arrangement,  except, in the
case of any such agreement or contract  entered into between the date hereof and
the  Closing,  if such  agreement  or contract is  terminable  by the Company by
notice of not more than 60 days without cost or penalty;

     (vii)  continuing  agreement  or contract  for the purchase of any products
manufactured  by parties  other  than the  Company,  except,  in the case of any
agreement or contract  entered into between the date hereof and the Closing,  if
such  agreement or contract is  terminable  by the Company by notice of not more
than 60 days without cost or penalty;

     (viii)  continuing  agreement or contract for products  manufactured by the
Company on behalf of parties other than the Company,  except, in the case of any
agreement or contract  entered into between the date hereof and the Closing,  if
such  agreement or contract is  terminable  by the Company by notice of not more
than 60 days without cost or penalty;

     (ix) agreement, contract or arrangement for the placement of advertising or
other  promotional  activities which has an aggregate future liability in excess
of CDN $25,000  and, in the case of any such agreement,  contract or arrangement
entered  into  between the date hereof and  Closing,  is not  terminable  by the
Company by notice of not more than 60 days without cost or penalty;

                                      -12-
<PAGE>
     (x) except as set forth in Schedule 2B.11, any material license,  option or
other agreement  relating in whole or in part to the  Intellectual  Property set
forth in Schedule 2B.11  (including any license or other  agreement  under which
the Company is licensee or  licensor of any such  Intellectual  Property)  or to
trade secrets,  confidential  information or proprietary rights and processes of
the Company or any other person;

     (xi) agreement,  contract or other  instrument  under which the Company has
borrowed any money from, or issued any note,  bond,  debenture or other evidence
of  indebtedness  to, any person or any other  note,  bond,  debenture  or other
evidence  of  indebtedness  issued  to  any  person  in  any  such  case  which,
individually, is in excess of CDN $25,000;

     (xii)  agreement,   contract  or  other  instrument   (including  so-called
take-or-pay or keepwell  agreements) under which (A) any person (has directly or
indirectly guaranteed indebtedness, liabilities or obligations of the Company or
(B) the Company has directly or indirectly guaranteed indebtedness,  liabilities
or  obligations  of any person (in each case  other  than  endorsements  for the
purpose of  collection  in the ordinary  course of  business),  in any such case
which, individually, is in excess of CDN $25,000;

     (xiii) agreement, contract or other instrument under which the Company has,
directly or indirectly,  made any advance,  loan, extension of credit or capital
contribution  to, or other  investment  in, any person,  in any such case which,
individually, is in excess of CDN $25,000;

     (xiv)  mortgage,  pledge,  security  agreement,  deed  of  trust  or  other
instrument  granting a lien or other  encumbrance upon any Real Property,  which
lien or other encumbrance is not set forth in Schedule 2B.09 or 2B.10;

     (xv) agreement, contract or instrument providing for indemnification of any
person with respect to liabilities relating to any current or former business of
the Company, or any predecessor person; or

     (xvi) other agreement,  contract, lease, license,  commitment or instrument
to which  the  Company  is a party or by or to which it or any of its  assets or
business is bound or subject  which has an  aggregate  future  liability  to any
person  in  excess  of  CDN $25,000  and,  in the  case of any  such  agreement,
contract, lease, license, commitment or instrument entered into between the date
hereof and Closing,  is not terminable by the Company by notice of not more than
60 days without cost or penalty.

     (b) Except as set forth in Schedule  2B.13  provided to Buyer in accordance
with Section 6.11, all agreements,  contracts, leases, licenses,  commitments or
instruments of the Company  listed in the Schedules  hereto  (collectively,  the
"Contracts") are valid, binding and in full force and effect and are enforceable
by the Company in accordance with their respective terms. Except as set forth in
Schedule 2B.13, the Company has performed all material  obligations  required to
be performed by it to date under the Contracts and they are not (with or without
the lapse of time or the giving of notice,  or both) in breach or default in any
material respect  thereunder and, to the knowledge of the Company or any Seller,
no other party to any of the  Contracts is (with or without the lapse of time or
the giving of notice,  or both) in breach or  default  in any  material  respect
thereunder.  Sellers  have  provided to Buyer a true and correct copy of each of
the Contracts.

     2B.14. Legal Proceedings.

     Except as set forth in Schedule 2B.14 provided to Buyer in accordance  with
Section 6.11,  the Company is not engaged in or a party to, or, to the knowledge
of the Company or any Seller,  threatened with, any suit,  investigation,  legal
action or other proceeding before any court,  administrative agency, arbitration
panel or other similar  authority  which (a) involves  (individually,  or in the
aggregate  for cases arising out of the same or  substantially  similar facts or
circumstances)  the  possibility  of  liability  of the  Company  in  excess  of
CDN $50,000  (whether or not covered by insurance),  (b) seeks injunctive relief
or (c) relates to the  transactions  contemplated  by this Agreement and neither
the Company nor any Seller knows of any basis for any such suit,  investigation,
legal action or proceeding.  There are no outstanding orders, rulings,  decrees,
judgments  or  stipulations  by  or  with  any  court,   administrative  agency,
arbitration  panel  or other  similar  authority  which  are  applicable  to the
Company's  properties,  assets,  operations  or business or which  challenge  or
otherwise relate to the transactions  contemplated by this Agreement.  Except as
set  forth in  Schedule  2B.14,  there is no  material  lawsuit  or claim by the
Company  pending,  or which the Company  intends to initiate,  against any other
person.

                                      -13-
<PAGE>
     2B.15. Taxes.

     (a) For the purposes of this  Agreement,  the term "Tax" or,  collectively,
"Taxes"  shall mean (i) any and all federal,  provincial,  municipal,  local and
foreign taxes, assessments and other governmental charges,  duties,  impositions
and  liabilities  including  Canada  Pension  Plan and  Provincial  Pension Plan
contributions and unemployment insurance  contributions and employment insurance
contributions including taxes based upon or measured by gross receipts,  income,
profits, sales, capital use and occupation,  goods and services, value added, ad
valorem,  transfer,  franchise,  withholding,  payroll,  recapture,  employment,
excise and property taxes,  together with all interest,  penalties and additions
imposed with respect to such amounts and (ii) any  liability  for the payment of
any amounts of the type  described in clause (i) of this  Section  2B.15(a) as a
result of any express or implied  obligation to indemnify any other person or as
a result of any obligations  under any agreements or arrangements with any other
person with respect to such amounts and  including  any liability for taxes of a
predecessor entity.

     (b) (i) The Company has correctly  computed all Taxes prepared and duly and
timely  filed all federal,  provincial,  local and foreign  returns,  estimates,
information  statements  and reports  ("Tax  Returns"),  required to be filed by
them,  have  timely  paid all  Taxes  which  are due and  payable  and will make
adequate  provision  in the November  30, 1998  balance  sheet,  or in any other
financial record that is required to be produced by the Company pursuant to this
Agreement, for the payment of all Taxes not yet due and payable for any taxation
year ending on or prior to the Closing Date.  The Company has also made adequate
and timely installments of Taxes required to be made.

     (ii) With  respect to any periods  for which Tax Returns  have not yet been
required to be filed or for which Taxes are not yet due and payable, the Company
has only incurred liabilities for Taxes in the ordinary course of their business
and in a manner and at a level  consistent  with prior periods.  All such Taxes,
including  Taxes for the period  between  December 1,  1997 and the date hereof,
have been, or will be, reflected as a current liability on the November 30, 1998
balance sheet or on any other  financial  record that is required to be produced
by the Company pursuant to this Agreement;

     (iii) All Tax Returns of the Company have been  assessed  through and up to
and including  each of the dates set forth in Schedule  2B.15,  and there are no
outstanding  waivers of any  limitation  periods or agreements  providing for an
extension  of time for the filing of any Tax Return or the payment of any Tax by
the Company or any  outstanding  objections to any assessment or reassessment of
Taxes.   Any   deficiencies   proposed  as  a  result  of  such  assessments  or
reassessments  of the Tax Returns  through and  including  the date set forth in
Schedule 2B.15 have been paid and settled;

     (iv) There are no  contingent  Tax  liabilities  or any grounds  that could
prompt  an  assessment  or  reassessment,  including,  but  without  limitation,
aggressive treatment of income, expenses,  deductions,  credits or other amounts
in the filing of earlier or current Tax  Returns,  nor has the Company  received
any indication from any taxation  authorities that an assessment or reassessment
of Tax is proposed or imminent;

     (v) The Company has  withheld  from each  payment made to any of their past
and present shareholders,  directors,  officers, employees and agents the amount
of all Taxes and other  deductions  required to be  withheld  and have paid such
amounts when due, in the form required  under the  appropriate  legislation,  or
made adequate  provision for the payment of such amounts to the proper receiving
authorities;

     (vi) The Company has  collected  from each receipt from any of its past and
present customers (or other persons paying amounts to the Company) the amount of
all Taxes (including goods and services tax and provincial sales taxes) required
to be  collected  and have  remitted  such Taxes when due, in the form  required
under the appropriate  legislation or made adequate provision for the payment of
such amount to the proper receiving authorities;

     (vii) The Company is not subject to any assessments,  levies,  penalties or
interest  with respect to Taxes which will result in any liability on their part
in respect of any period  ending on or prior to the Closing  Date,  in excess of
the amount to be provided for in the financial statements, the November 30, 1998
balance sheet or in any other  financial  record that is required to be produced
by the Company pursuant to this Agreement;

                                      -14-
<PAGE>
     (viii) The Company has not been and is not  currently  required to file any
returns,  reports,  elections,  designations  or other filings with any taxation
authority located in any jurisdiction  outside Canada or outside the province of
Ontario;

     (ix) The Company has not filed nor has been party to any election  pursuant
to  Sections  83 or 85 of  the  Income  Tax  Act  (Canada)  (the  "ITA")  or the
corresponding provisions of any provincial statute;

     (x) The Company has not at any time benefited from a forgiveness of debt or
entered into any transaction or arrangement  (including  conversion of debt into
shares of its share  capital)  which could have resulted in the  application  of
Section 80 and following of the ITA;

     (xi) All  research  and  development  investment  tax credits  ("ITCs") and
expenditures  were  claimed by the  Company in  accordance  with the ITA and the
relevant  provincial  legislation  and the  Company  satisfied  at all times the
relevant criteria and conditions entitling it to such ITCs and expenditures. All
refunds of ITCs received or receivable by the Company in any financial year were
claimed in accordance with the ITA and the relevant  provincial  legislation and
the  Company  satisfied  at all  times  the  relevant  criteria  and  conditions
entitling it to claim a refund of such ITCs;

     (xii)  Since its date of  incorporation,  the  Company has been a "Canadian
controlled private corporation" within the meaning of the ITA;

     (xiii) The Company is not, nor has it been at any time,  associated (within
the meaning of the ITA) with any other  corporation  other than  845470  Ontario
Inc.;

     (xiv) There are (and immediately  following the Closing Date there will be)
no  liens,  pledges,  hypothecs,  charges,  claims,  restrictions  on  transfer,
mortgages,  security interests or other encumbrances of any sort  (collectively,
"Liens") on the assets of the Company relating to or attributable to Taxes other
than Liens for Taxes not yet due and payable;

     (xv) As of the Closing  Date,  there will not be any  contract,  agreement,
plan or  arrangement,  including,  but not  limited to, the  provisions  of this
Agreement,  covering  any  employee  or former  employee  of the  Company  that,
individually or collectively,  could give rise to the payment of any amount that
would not be deductible by the Company as an expense under  applicable Law other
than  reimbursements of a reasonable amount of entertainment  expenses and other
non  deductible  expenses  that  are  commonly  paid by  similar  businesses  in
reasonable amounts;

     (xvi) The Company's tax basis in its assets (and the undepreciated  capital
cost of such  assets)  for  purposes  of  determining  its future  amortization,
depreciation and other Federal income Tax deductions is accurately  reflected on
the Company's Tax Returns and records;

     (xvii) The Company has not acquired  property or services  from, nor has it
disposed of property or provided services to a person with whom it does not deal
at arm's length (within the meaning of the ITA) for an amount that is other than
the fair market value of such  property or services,  or has been deemed to have
done so for purposes of the ITA; and

     (xviii)  Each  of the  Sellers  other  than  Gillian  Pershaw  individually
represents and warrants as to himself, herself or itself that such Seller is not
a non-resident of Canada within the meaning of the ITA.

                                      -15-
<PAGE>
     2B.16. Compliance with Laws.

     Except as set forth in Schedules 2B.14 and 2B.16 to be provided to Buyer in
accordance  with  Section  6.11  (a) the  Company  has  complied,  and is now in
compliance,  in all material respects with all laws,  ordinances and regulations
(including,   without  limitation,  those  relating  to  employment,  labor  and
employment  practices,  and  occupational  safety and health)  applicable to the
Company, (b) no claims or complaints from any governmental  authorities or other
parties have been asserted or received by the Company which are still pending or
outstanding and, to the knowledge of the Company or Sellers, none is threatened,
that the Company is in material  violation of any applicable  building,  zoning,
occupational  safety and health,  or similar  law,  ordinance or  regulation  in
relation to its plants,  warehouses,  distribution centers,  structures or other
buildings or equipment,  or the operation  thereof,  or of any  applicable  fair
employment,  equal opportunity,  human rights, employment, labor or similar law,
ordinance or  regulation,  and (c) the Company has not received  notice from any
governmental  authorities of any pending  proceedings to take all or any part of
the properties of the Company (whether leased or owned) by condemnation or right
of eminent  domain and, to the  knowledge  of Seller,  no such  proceedings  are
threatened.  Schedule 2B.16 sets forth all  governmental  permits,  licenses and
authorizations  necessary  or  desirable  for the  operation or occupancy of the
properties  and  the  conduct  of the  business  of  the  Company  as  presently
conducted. Except as set forth in Schedule 2B.16, all such licenses, permits and
authorizations  have been validly  issued,  are in full force and effect and are
validly held by the Company.  The Company has complied in all material  respects
with all terms  and  conditions  thereof  and the same  will not be  subject  to
suspension, modification,  revocation or nonrenewal as a result of the execution
and  delivery  of  this  Agreement  or  the  consummation  of  the  transactions
contemplated  hereby. All such licenses,  permits and  authorizations  which are
held in the  name of any  employee,  officer,  director,  shareholder,  agent or
otherwise on behalf of the Company shall be deemed included under this warranty.

     2B.17. Environment.

     For the purpose of this Section 2B.17, the following definitions apply:

     "Environmental Claim" means any and all administrative or judicial actions,
suits, orders,  claims, liens, notices,  notices of violations,  investigations,
proceedings,  whether  criminal  or  civil,  pursuant  to  or  relating  to  any
applicable  Environmental Law by any Person (including governmental authority or
private  person)  based upon,  alleging,  asserting,  or claiming  any actual or
potential  (i)  violation  of or liability  under any  Environmental  Law,  (ii)
violation of any  Environmental  Permit,  or (iii)  liability for  investigation
costs,  cleanup costs,  removal costs,  remedial costs,  response costs, natural
resource damages,  property damage, personal injury, fines, or penalties arising
out of,  based on,  resulting  from,  or related to the  presence,  release,  or
threatened release into the environment, of any Hazardous Substances at the Real
Property.

     "Environmental  Laws"  means any and all  applicable  federal,  provincial,
municipal or local Laws pertaining to the environment, health and safety matters
or conditions, Hazardous Substances, pollution or protection of the environment,
including,  without  limitation,  Laws  relating  to:  (i) on site  or  off-site
contamination;   (ii)  chemical   substances  or  products;   (iii)  release  of
pollutants,  contaminants,  chemicals or other industrial,  toxic or radioactive
substances or Hazardous  Substances into the environment;  (iv) the manufacture,
processing,   distribution,   use,  treatment,  storage,  transport,  packaging,
labeling,  sale,  recycling,  disposal,   destruction,   incineration,   burial,
advertising, display or handling of Hazardous Substances; and (v) any preventive
measures, remedial actions and notifications in connection with the foregoing.

                                      -16-
<PAGE>
     "Environmental  Permit" means any federal,  local,  provincial,  or foreign
permits,  licenses,  certificates  of  approvals,  registrations,   consents  or
authorizations  required by any  governmental  authority  under or in connection
with any  Environmental  Law and includes any and all orders,  consent orders or
binding agreements issued or entered into by a governmental  authority under any
applicable Environmental Law.

     "Hazardous Substance" means any substance,  whether waste, liquid,  gaseous
or solid matter, fuel,  micro-organism,  ray, odour, radiation,  energy, vector,
plasma and organic or inorganic matter, which is or is deemed to be, alone or in
any combination,  hazardous,  hazardous waste, toxic, a pollutant, a deleterious
substance,  a contaminant  or a source of pollution or  contamination  under any
Environmental  Law,  whether or not such substance is defined as hazardous under
the Environmental Law.

     Except as set forth in Schedule 2B.17 provided to Buyer in accordance  with
Section 6.11;

     (a) The Company has obtained and holds all necessary  Environmental Permits
required to operate the  business;  

     (b) The Company is in compliance with all terms,  conditions and provisions
of all applicable (i) Environmental Permits and (ii) Environmental Laws;

     (c) There are no past, pending, or threatened  Environmental Claims against
the  Company,  and  the  Seller  nor the  Company  are  aware  of any  facts  or
circumstances  which  could  reasonably  be  expected  to form the basis for any
Environmental Claim against the Company;

     (d) No Releases of Hazardous Substances have occurred at, from, in, to, on,
or under any Real Property and no Hazardous Substances are present in, on, about
or  migrating  to  or  from  any  Real  Property  that  could  give  rise  to an
Environmental Claim against the Company;

     (e) The Company, nor, to the best of its knowledge,  any predecessor of the
Real Property, has transported or arranged for the treatment, storage, handling,
disposal, or transportation of any Hazardous Substances to any off-site location
which could result in an environmental claim against the Company;

     (f) There are no (a) underground  storage tanks,  active or abandoned,  (b)
polychlorinated   biphenyl  containing   equipment,   or  (c)  friable  asbestos
containing material at any Real Property; and

     (g)  There  have been no  environmental  investigations,  studies,  audits,
tests, reviews or other analyses conducted by, on behalf of, or which are in the
possession  of any of the Company  with  respect to any Real  Property or to any
adjoining  property or  properties  that may have an impact on the Real Property
which have not been delivered to Buyer prior to execution of this Agreement.]

                                      -17-
<PAGE>
     2B.18. Employee Benefit Plans; Termination and Severance Agreements.

     (a)  Schedule  2B.18  provided to Buyer in  accordance  with  Section  6.11
accurately lists each employment, termination and severance agreement, contract,
arrangement and  understanding  (whether  written or oral) with employees of the
Company.  Except  as set forth in  Schedule  2B.18,  there are no  shareholders,
directors,  officers,  employees  or agents of the Company who are entitled to a
specified  notice of  termination  or fixed term of  employment or who cannot be
dismissed  upon  such  notice  as is  required  by law.  Except  as set forth in
Schedule  2B.18,  the  purchase  by Buyer or its  Nominee  of the Stock will not
result in any  obligation  to pay any  employee  of the Company  severance  pay,
notice pay or termination  benefits so long as such employee remains employed by
the  Company  or Buyer or its  Nominee  under  substantially  the same terms and
conditions as currently exist after the Closing.

     (b) Sellers will cause the Company to deliver to Buyer in  accordance  with
Section  6.11  correct  and  complete  copies  of  each  of  all  written,   and
descriptions  of  all  oral,  employment,   termination,  notice  and  severance
agreements, contracts, arrangements and understandings listed in Schedule 2B.18.

     (c) Except as set forth in Schedule  2B.18  provided to Buyer in accordance
with Section 6.11, the Company is not a party to any pension, retirement, bonus,
profit sharing,  compensation,  incentive,  stock purchase,  stock option, stock
appreciation, severance, change-of-control, savings, thrift, insurance, medical,
hospitalization,  disability,  death  or  other  similar  program,  or  practice
providing directors,  officers,  shareholders or employee benefits (the "Benefit
Plans").  Sellers  will provide to Buyer in  accordance  with Section 6.11 full,
true and up to date copies of all Benefit  Plans,  all  summaries  thereof,  all
related funding agreements and the most recent actuarial valuations therefor.

     (d) Each Benefit Plan has been duly  registered  when  required  (including
under the Income Tax Act  (Canada))  and has been  administered  and invested in
accordance  with its terms and all laws.  There are no  outstanding  defaults or
violations by the Company of any payment obligation  required to be performed by
it  in  connection  with  any  Benefit  Plan.  There  are  no  actions,  claims,
investigations, arbitrations or other proceedings which, to the knowledge of the
Seller,  are pending or threatened with respect to the Benefit Plans (other than
routine claims for benefits) against the Company,  the funding agent or the fund
of such Benefit Plan. No proceeding  has been initiated to terminate any Benefit
Plan.

     (e) All Benefit Plans which are funded plans are funded in accordance  with
their  rules and all laws and are fully  funded  on both a  going-concern  and a
termination  basis in  accordance  with the  actuarial  methods and  assumptions
utilized in the most recent actuarial reports therefor.

                                      -18-
<PAGE>
     2B.19. Employee and Labor Matters.

     (a)  Schedule  2B.19  provided to Buyer in  accordance  with  Section  6.11
contains a complete and accurate list of the employees of the Company  including
those who are on maternity or parental leave or who are absent on the grounds of
disability  or  other  long  term  leave of  absence  and who have or may have a
statutory or contractual right to return to work with the company, together with
their  titles  and  their  number  of years of  service.  Except as set forth in
Schedule  2B.19,  the  Company  is  not a  party  to any  collective  bargaining
agreement or other contract with or commitment to any labor union or association
representing any employee of the Company, nor does any labor union or collective
bargaining  agent  represent  any employees of the Company.  No such  agreement,
contract or other  commitment has been  requested by, or is under  discussion by
management of the Company (or any  management  group or association of which the
Company is a member or otherwise a participant)  with, any group of employees or
others,  nor are there any other  current  activities  known to the  Company  or
Sellers to organize any  employees  of the Company into a collective  bargaining
unit.  There are no  pending,  or to the  knowledge  of the  Company  or Sellers
threatened,  union  grievances  against  the  Company  as to  which  there  is a
reasonable possibility of a material adverse  determination.  The Company is not
engaged  in any  unfair  labor  practice.  There  is no  unfair  labor  practice
complaint  pending or, to the  knowledge  of the Company or Sellers,  threatened
against the Company. Except as disclosed in Schedule 2B.19, there is, and during
the past  five  years  there  has  been,  no labor  strike,  dispute,  lock-out,
slow-down  or work  stoppage  pending,  or, to the  knowledge  of the Company or
Sellers,  threatened against the Company. Except as set forth in Schedule 2B.19,
there  are  no  pending,  or,  to  the  knowledge  of the  Company  or  Sellers,
threatened,  charges  against  the  Company or any  current or former  employee,
officer or director of the Company  before the Human  Rights  Commission  or any
federal,  provincial or local agency  responsible for the prevention of unlawful
employment practices.

     (b) The Company has no employees working in the United States.

     2B.20. Capital Expenditures.

     Based on management's  best good faith estimate as of the date hereof,  the
aggregate contractual commitments of the Company for new capital expenditures do
not exceed CDN $25,000.

     2B.21. Warranties.

     Sellers will deliver in accordance with Section 6.11 to the Buyer copies of
all forms of written  warranties  currently in effect  covering  the  respective
products and services of the Company. During the past three years, the aggregate
warranty expenses  experienced during any one year by the Company did not exceed
CDN $25,000.

                                      -19-
<PAGE>
     2B.22. Powers of Attorney.

     Schedule 2B.22  provided to Buyer in accordance  with Section 6.11 contains
(i) the name of each person with whom the Company maintains an account of safety
deposit box and the names of all persons  authorized  to draw thereon as to have
access thereto and (ii) a complete and accurate list of all  outstanding  powers
of attorney or similar authorizations given by the Company.

     2B.23. Customer Accounts Receivable; Inventories.

     (a) All customer accounts  receivable of the Company,  whether reflected on
the November 30, 1997 balance sheet or  subsequently  created,  have arisen from
bona fide  transactions  in the  ordinary  course of  business  and are good and
collectible at the aggregate  recorded  amounts  thereof,  net of any applicable
reserves  for  doubtful  accounts  which are  reflected on the November 30, 1997
balance  sheet or accrued  after the date of the balance  sheet in the  ordinary
course of business.  The Company has good and  marketable  title to its accounts
receivable,  free and clear of all liens, except as set forth in Schedule 2B.23.
During the two year period prior to the date  hereof,  the Company has not sold,
pledged or otherwise  disposed of any of its accounts  receivable  in connection
with any  receivables-type  financing  or  factoring-type  financing  or similar
transaction.

     (b) The inventories of the Company,  whether  reflected on the November 30,
1997 balance  sheet or  subsequently  acquired,  are  generally of a quality and
quantity usable and/or salable at customary gross margins in the ordinary course
of business.  The  inventories  of the Company are reflected on the November 30,
1997 balance sheet and in its books and records in accordance with Canadian GAAP
(except as described in the notes to the balance sheet).

     2B.24. Customers and Suppliers.

     Schedule 2B.24 provided to Buyer in accordance with Section 6.11 accurately
lists (a) the 10  largest  customers  of the  Company  for the 12  months  ended
October 31, 1998 and the percentage of the Company's total sales  represented by
sales to each such customer during such period, and (b) the 10 largest suppliers
of the  Company  for the 12 months  ended  October  31,  1998 and the  amount of
purchases therefrom during such period.

     2B.25. No Material Misstatement or Omission.

     Neither this Agreement  (including any Schedule hereto) nor any certificate
furnished by Sellers in connection  herewith  contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading.

     2B.26. Stand Alone.

     Except as set forth in Schedule 2B.26 provided to Buyer in accordance  with
Section  6.11,  no part of the business of the Company is conducted  through any
person  other than the Company.  Each of the Sellers does not have,  and none of
the Company's directors or officers has, any interest in any property, immovable
or real, movable or personal,  tangible or intangible,  used in or pertaining to
the business of the Company.

     2B.27.  Year 2000  Compliant.  Except as disclosed in Schedule  2B.27,  the
information technology systems including, without limitation, hardware, software
and data used,  in whole or in part in, or required  for, the carrying on of the
business of the Company in the manner heretofore  carried on, are designed to be
used prior to,  during and after the calendar year 2000 A.D..  Without  limiting
the foregoing,  the information technology systems are designed to correctly and
adequately  (i)  manage  and  manipulate   data   involving   dates,   including
single-century  formulas  and  multi-century  formulas,  and are designed to not
cause an abnormally ending scenario within the application or generate incorrect
values  or  invalid  results   involving  either   single-century   formulas  or
multi-century  formulas,  (ii)  provide  that all  date-related  user  interface
functionalities  and data fields  include the  indication of century,  and (iii)
provide  that  all  date-related  data  interface  functionalities  include  the
indication of century.
                                      
     2B.28. Retiree Liability.

     The  Company  has no  liability  for  retiree  health  and  life  insurance
benefits.

                                      -20-
<PAGE>

                                   ARTICLE III


                     REPRESENTATIONS AND WARRANTIES OF BUYER


     Buyer hereby represents and warrants to Sellers as follows:

     3.01. Organization and Authority.

     Buyer  is a  corporation  duly  organized,  validly  existing  and in  good
standing  under  the  laws  of its  jurisdiction  of  incorporation,  with  full
corporate power and authority to execute and deliver this Agreement,  to perform
its  obligations  hereunder  and to  consummate  the  transactions  contemplated
hereby.

     3.02. Due Authorization; Binding Obligation.

     The execution,  delivery and performance by Buyer of this Agreement and the
consummation of the transactions  contemplated  hereby have been duly authorized
by all necessary  corporate action on the part of Buyer. This Agreement has been
duly executed and delivered by Buyer.  This Agreement  constitutes the valid and
binding obligation of Buyer enforceable in accordance with its terms, subject to
the qualification,  however, that enforcement of the rights and remedies created
hereby is subject to bankruptcy  and other  similar laws of general  application
relating  to or  affecting  the rights and  remedies of  creditors  and that the
remedy  of  specific  performance  or of  injunctive  relief is  subject  to the
discretion of the court before which any proceeding therefor may be brought.

     3.03. Non-Contravention.

     The execution,  delivery and performance of this Agreement by Buyer and the
consummation of the transactions  contemplated  hereby do not and will not, with
or without the giving of notice or the lapse of time, or both, violate, conflict
with,  result in the breach of or accelerate the performance  required by any of
the terms,  conditions or  provisions of the  Certificate  of  Incorporation  or
By-laws of Buyer or any covenant, agreement or understanding to which Buyer is a
party or any order,  ruling,  decree,  judgment,  arbitration  award, law, rule,
regulation  or  stipulation  to which Buyer is subject or  constitute  a default
thereunder or result in the creation of any lien, charge or encumbrance upon any
of Buyer's properties or assets.

     3.04. Regulatory Approvals.

     Other than  those  notices,  filings,  authorizations,  approval  orders or
consents  required pursuant to the Investment Canada Act and the Competition Act
(Canada) and except as set forth in Schedule 3.04 provided to Sellers within two
weeks of the date  hereof,  Buyer is not  required  to file,  seek or obtain any
governmental notice, filing,  authorization,  approval, order or consent, or any
bond in  satisfaction  of any  governmental  regulation,  in connection with the
execution, delivery and performance of this Agreement by Buyer.

     3.05. Investment Intent.

     Buyer is acquiring  the Stock for its own account for  investment  purposes
only and not with a view to,  or for sale or  resale  in  connection  with,  any
public   distribution   thereof  or  with  any  present  intention  of  selling,
distributing or otherwise disposing of the Stock.

     3.06.  Nominee.   Should  the  Buyer  appoint  a  Nominee,   the  foregoing
representations  and warranties of the Buyer shall apply,  mutatis mutandis,  to
the Nominee.

                                      -21-
<PAGE>

                                   ARTICLE IV


              REPRESENTATIONS AND WARRANTIES OF 830212 SHAREHOLDERS


     4.01. Organization and Authority.

     The 830212 Shareholders hereby represent and warrant that:

     (a) 830212 has never  engaged in since its formation and does not currently
engage  in and  will  not  engage  at any  time  from  the  date  hereof  to the
consummation of the  Amalgamation in any type of business other than the holding
of its Stock.

     (b) 830212 is a corporation  duly organized,  validly  existing and in good
standing under the laws of Ontario,  Canada  incorporation or organization  with
all requisite power and authority  (corporate or otherwise) to execute,  deliver
and perform its obligations under this Agreement.

     (c)  The  execution  and  delivery  by  830212  of this  Agreement  and the
consummation  of  the  transactions  contemplated  hereby,  including,   without
limitation, the Amalgamation,  have been duly authorized by all necessary action
(corporate  or  otherwise)  on the  part  of  830212  and its  shareholders  and
constitute  the legal,  valid and  binding  obligation  of  830212,  enforceable
against it in accordance with its terms,  except as such  enforceability  may be
limited by bankruptcy,  insolvency,  reorganization,  moratorium or similar laws
relating to or affecting the  enforcement of creditors  rights in general and by
general principles of equity.

     4.02. Non-Contravention.

     The execution, delivery and performance of this Agreement by 830212 and the
consummation of the transactions contemplated hereby and thereby do not and will
not,  with or  without  the  giving of  notice  or the  lapse of time,  or both,
violate,  conflict with,  result in the breach of or accelerate the  performance
required by any of the terms,  conditions or provisions of the charter documents
or By-laws,  trust  agreement or other  governing  documents  of 830212,  or any
covenant,  agreement or  understanding  to which 830212 is a party or any order,
ruling,   decree,   judgment,   arbitration  award,  law,  rule,  regulation  or
stipulation to which 830212 or constitute a default  thereunder or result in the
creation of any lien, charge or encumbrance upon any of Stock owned by 830212.

     4.03. Regulatory Approvals.

     Except for the Amalgamation, 830212 is not required to file, seek or obtain
any governmental notice, filing,  authorization,  approval, order or consent, or
any bond in satisfaction of any governmental regulation,  in connection with the
execution, delivery and performance of this Agreement.

     4.04. Title to Stock.

     830212 is the  beneficial  and record  owner,  free and clear of any liens,
pledges,   encumbrances,   charges,  agreements,   claims,  security  interests,
equities,  options,  proxies,  voting  restrictions,  rights of first refusal or
other limitation on disposition or encumbrance of any kind, of the shares of the
Stock set forth opposite its name on Schedule I.

                                      -22-
<PAGE>
     4.05. Capitalization.

     830212's authorized capital stock consists solely of an unlimited number of
shares of common  stock,  no par value,  of which 3,000 common shares are issued
and outstanding and there are no other issued shares of 830212.  Such issued and
outstanding shares are validly issued, fully paid and nonassessable.  Except for
rights granted to Buyer under this Agreement,  there are no outstanding options,
warrants or other  rights to  purchase,  obtain or acquire,  or any  outstanding
securities or obligations  convertible  into or exchangeable  for, or any voting
agreements  with respect to, any shares of capital  stock of 830212 or the stock
into which it will be converted in the  Amalgamation or any other  securities of
830212  and  830212 is not  obligated,  now or in the  future,  contingently  or
otherwise,  to issue,  purchase or redeem  capital  stock of 830212 or any other
securities of 830212 to or from any person.

     4.06. Subsidiaries and Equity Interests; Transactions with Affiliates.

     830212 owns the shares of the Stock  listed in Schedule I attached  hereto.
Except for the Stock, 830212 does not own any assets of or other equity interest
in,  or  has  any  obligation  to  form  or  participate  in,  any  corporation,
partnership  or other  person.  830212 has full title to the shares of the Stock
owned  by it,  free and  clear of any  liens,  pledges,  encumbrances,  charges,
agreements or claims.

     4.07. Organization; Books and Records.

     Copies  of  the  charter   documents  and  By-laws  (or  similar  governing
documents),  corporate minute books,  stock certificate books and stock transfer
books of 830212 will be delivered to Buyer in  accordance  with Section 6.11 and
will be true, correct and complete.

     4.08. Compliance with Laws.

     830212 has complied,  and is now in  compliance,  in all material  respects
with all federal,  state, local and foreign laws, ordinances and regulations (b)
no claims or complaints from any governmental  authorities or other parties have
been asserted or received by 830212 which are still pending or outstanding  and,
to the knowledge of the 830212, none is threatened.

     4.09. No Material Misstatement or Omission.

     Neither this Agreement  (including any Schedule hereto) nor any certificate
or other document furnished by 830212 in connection herewith contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements  contained herein or therein not misleading.  To the knowledge of
830212,  there is no fact  specifically  relating to 830212 which 830212 has not
disclosed  to Buyer in writing  which has resulted  in, or would  reasonably  be
expected to result in, a Material Adverse Change.

     4.10. No Undisclosed Liabilities.

     There are no liabilities of 830212 of any kind whatsoever, whether accrued,
contingent,  absolute,  determined,  determinable or otherwise,  and there is no
existing condition,  situation or set of circumstances which could reasonably be
expected to result in such  liability,  other than as disclosed in the Schedules
to this Agreement.

                                      -23-
<PAGE>

                                    ARTICLE V



              REPRESENTATIONS AND WARRANTIES OF 729024 SHAREHOLDERS


     5.01. Organization and Authority.

     The 729024 Shareholders hereby represent and warrant that:

     (a) 729024 has never  engaged in since its formation and does not currently
engage  in and  will  not  engage  at any  time  from  the  date  hereof  to the
consummation of the  Amalgamation in any type of business other than the holding
of its Stock.

     (b) 729024 is a corporation  duly organized,  validly  existing and in good
standing under the laws of Ontario,  Canada  incorporation or organization  with
all requisite power and authority  (corporate or otherwise) to execute,  deliver
and perform its obligations under this Agreement.

     (c)  The  execution  and  delivery  by  729024  of this  Agreement  and the
consummation  of  the  transactions  contemplated  hereby,  including,   without
limitation, the Amalgamation,  have been duly authorized by all necessary action
(corporate  or  otherwise)  on the  part  of  729024  and its  shareholders  and
constitute  the legal,  valid and  binding  obligation  of  729024,  enforceable
against it in accordance with its terms,  except as such  enforceability  may be
limited by bankruptcy,  insolvency,  reorganization,  moratorium or similar laws
relating to or affecting the  enforcement of creditors  rights in general and by
general principles of equity.

     5.02. Non-Contravention.

     The execution, delivery and performance of this Agreement by 729024 and the
consummation of the transactions contemplated hereby and thereby do not and will
not,  with or  without  the  giving of  notice  or the  lapse of time,  or both,
violate,  conflict with,  result in the breach of or accelerate the  performance
required by any of the terms,  conditions or provisions of the charter documents
or By-laws,  trust  agreement or other  governing  documents  of 729024,  or any
covenant,  agreement or  understanding  to which 729024 is a party or any order,
ruling,   decree,   judgment,   arbitration  award,  law,  rule,  regulation  or
stipulation to which 729024 or constitute a default  thereunder or result in the
creation of any lien, charge or encumbrance upon any of Stock owned by 729024

     5.03. Regulatory Approvals.

     Except for the Amalgamation, 729024 is not required to file, seek or obtain
any governmental notice, filing,  authorization,  approval, order or consent, or
any bond in satisfaction of any governmental regulation,  in connection with the
execution, delivery and performance of this Agreement.

     5.04. Title to Stock.

     729024 is the  beneficial  and record  owner,  free and clear of any liens,
pledges,   encumbrances,   charges,  agreements,   claims,  security  interests,
equities,  options,  proxies,  voting  restrictions,  rights of first refusal or
other limitation on disposition or encumbrance of any kind, of the shares of the
Stock set forth opposite its name on Schedule I.

                                      -24-
<PAGE>
     5.05. Capitalization.

     729024's issued and outstanding  capital stock consists solely of 75 shares
of A common stock and 1 share of C common stock,  no par value.  Such issued and
outstanding shares are validly issued, fully paid and nonassessable.  Except for
rights granted to Buyer under this Agreement,  there are no outstanding options,
warrants or other  rights to  purchase,  obtain or acquire,  or any  outstanding
securities or obligations  convertible  into or exchangeable  for, or any voting
agreements  with respect to, any shares of capital  stock of 729024 or the stock
into which it will be converted in the  Amalgamation or any other  securities of
729024  and  729024 is not  obligated,  now or in the  future,  contingently  or
otherwise,  to issue,  purchase or redeem  capital  stock of 729024 or any other
securities of 729024 to or from any person.

     5.06. Subsidiaries and Equity Interests; Transactions with Affiliates.

     729024 owns, the shares of the Stock listed in Schedule I attached  hereto.
Except for the Stock 729024 does not own any assets or other equity interest in,
or has any obligation to form or participate in, any corporation, partnership or
other person. 729024 has full title to the shares of the Stock owned by it, free
and clear of any liens, pledges, encumbrances, charges, agreements or claims.

     5.07. Organization; Books and Records.

     Copies  of  the  charter   documents  and  By-laws  (or  similar  governing
documents),  corporate minute books,  stock certificate books and stock transfer
books of 729024 will be delivered to Buyer in  accordance  with Section 6.11 and
will be true, correct and complete.

     5.08. Compliance with Laws.

     729024 has complied,  and is now in  compliance,  in all material  respects
with all federal,  state, local and foreign laws, ordinances and regulations (b)
no claims or complaints from any governmental  authorities or other parties have
been asserted or received by 729024 which are still pending or outstanding  and,
to the knowledge of the 729024, none is threatened.

     5.09.  No  Material  Misstatement  or  Omission.   Neither  this  Agreement
(including any Schedule hereto) nor any certificate or other document  furnished
by 729024 in  connection  herewith  contains any untrue  statement of a material
fact or  omits  to  state a  material  fact  necessary  to make  the  statements
contained herein or therein not misleading. To the knowledge of 729024, there is
no fact specifically  relating to 729024 which 729024 has not disclosed to Buyer
in writing which has resulted in, or would  reasonably be expected to result in,
a Material Adverse Change.

     5.10. No Undisclosed Liabilities.

     There are no liabilities of 729024 of any kind whatsoever, whether accrued,
contingent,  absolute,  determined,  determinable or otherwise,  and there is no
existing condition,  situation or set of circumstances which could reasonably be
expected to result in such  liability,  other than as disclosed in the Schedules
to this Agreement.

                                      -25-
<PAGE>
                                   ARTICLE VI

                              PRE-CLOSING COVENANTS


     6.01. Corporate Investigation by Buyer.

     Sellers  shall  give and shall  cause the  Company to give to Buyer and its
attorneys,  accountants  and other  representatives,  full access  during normal
business hours to make or cause to be made such  investigation of the properties
and business of the Company and of its  financial  and legal  condition as Buyer
deems  necessary  or  advisable  to  familiarize  itself  with such  properties,
business and other matters, provided that such investigation shall not interfere
unnecessarily with normal operations. Each of the Sellers agrees to furnish, and
to cause the Company to furnish,  such  financial and  operating  data and other
information  with respect to the business and properties of the Company as Buyer
shall from time to time reasonably request.

     6.02. Confidentiality.

     (a) From the date hereof up to the Closing  Date,  Buyer  shall,  and shall
cause each of its  affiliates and each of the  directors,  officers,  employees,
agents,  advisors  and  representatives  ("Representatives")  of  Buyer  and its
affiliates to, (i) maintain in confidence any and all information concerning the
Company provided to them by Sellers or the Company or otherwise  learned by them
in the  course  of the  negotiation  of  this  Agreement  and  the  transactions
contemplated  hereby and by their investigation of the Company and (ii) disclose
such information only to persons, corporations or other entities which are under
the control of Buyer or an affiliate  thereof,  or to third  parties  serving as
Buyer's advisors.  If the transactions  contemplated by this Agreement shall not
be consummated  (whether this Agreement is terminated pursuant to Article XII or
otherwise),  such confidence shall be maintained and such information  shall not
be used in competition with the Company.  It is understood that Buyer shall have
no liability  hereunder for disclosure or use of any such information  which (i)
is in or, through no fault of Buyer,  its  affiliates,  the  Representatives  of
Buyer or its  affiliates,  comes  into the public  domain,  or (ii) was known to
Buyer  prior to  September  1, 1998,  or (iii) was  acquired by Buyer from other
sources,  provided  such  sources  are not, to Buyer's  knowledge,  bound by any
confidentiality  agreement with Sellers or the Company or any affiliate  thereof
or (iv) which Buyer is legally required to disclose.

     (b)  If  the   transactions   contemplated   by  this  Agreement  shall  be
consummated,  Sellers shall,  and shall cause each of its affiliates and each of
the  Representatives  of  Sellers  and  their  affiliates  to  (i)  maintain  in
confidence any and all information  concerning the Company and (ii) refrain from
using any and all  information  for their own benefit or in competition  with or
otherwise to the  detriment  of Buyer or its  affiliates  or the Company.  It is
understood that Sellers shall have no liability  hereunder for disclosure or use
of any such  information  which (i) is in or,  through no fault of  Seller,  its
affiliates,  the Representatives of Sellers or their affiliates,  comes into the
public  domain,  or (ii) was  acquired by Sellers from other  sources  after the
Closing,  provided  such  sources are not, to Sellers'  knowledge,  bound by any
confidentiality  agreement with Buyer,  any affiliate of Buyer or the Company or
(iii) Sellers are legally required to disclose.

     6.03. Intentionally Deleted.

     Intentionally Deleted.

     6.04. Maintenance of Insurance.

     From the date  hereof up to the Closing  Date,  Sellers  shall  maintain or
cause the Company to maintain  in full force and effect all  presently  existing
insurance  coverage  with  respect  to the  Company  and  the  operation  of its
business,  and will take no action which will cause a retroactive  cancellation,
or a lapse or reduction of the benefits, thereof.

                                      -26-
<PAGE>
     6.05. Additional Disclosure.

     (a) Sellers  shall  promptly  notify Buyer in writing of, and furnish Buyer
any  information  it may  reasonably  request with respect to, the occurrence to
Sellers'  knowledge  of any event or  condition  or the  existence  to  Sellers'
knowledge  of any  fact  that  would  cause  any of the  conditions  to  Buyer's
obligation to consummate  the purchase and sale of the Stock not to be fulfilled
or that will cause or constitute a breach of any of the Sellers' representations
and warranties as of the date of this Agreement.

     (b) Any agreements, contracts, leases, licenses, commitments or instruments
of the Company  entered into between the date hereof and Closing that would have
been  required to be listed on Schedule  2B.13 if entered into prior to the date
hereof shall be delivered to Buyer by Sellers  promptly after being entered into
and shall be deemed to be "Contracts".

     6.06. Certain Licenses and Permits.

     Each of the Sellers covenants that all licenses, permits and authorizations
which are held in the name of Sellers or any of its affiliates,  or any of their
respective employees, officers, directors,  shareholders, agents or otherwise on
behalf of the  Company  shall be duly and  validly  transferred  to the  Company
without   consideration   prior  to  the  Closing   and  that  the   warranties,
representations,  covenants and  conditions  contained in this  Agreement  shall
apply to the same as if held by the Company as of the date hereof.

     6.07. Non-Interference.

     Each of the  Sellers  shall not for a period of three years  following  the
Closing  Date  interfere  with the  Company's  relationships  with,  solicit the
employment  of any person or endeavor to employ or entice away from the Company,
any person who at any time on or after the date  hereof was an  employee  of the
Company  (other than those  individuals  resigning  as  contemplated  by Section
6.18(c)).  This  provision  shall not apply to any general and  anonymous  media
advertisements  or action of  employee  recruitment  firms  not  focused  on the
Company's employees.

     6.08. Other Transactions.

     From the date of this Agreement up to the Closing, none of the Sellers, the
Company nor any other  affiliate of Sellers shall,  nor shall they permit any of
their respective  officers,  directors or other  representatives to, directly or
indirectly,  encourage,  solicit,  initiate or  participate  in  discussions  or
negotiations  with, or provide any  information  or assistance to, any person or
group (other than Buyer and its representatives)  concerning any merger, sale of
securities,  sale of  substantial  assets or similar  transaction  involving the
Company.  Without limiting the foregoing, it is understood that any violation of
the restrictions set forth in the preceding sentence by any officer, director or
other  representative of Sellers, the Company or any other affiliate of Sellers,
whether  or not such  person is  purporting  to act on behalf  of  Sellers,  the
Company,  any other  affiliate of Sellers or otherwise,  shall be deemed to be a
breach of this Section 6.09 by Sellers. In the event that Sellers,  the Company,
or any other  affiliate  of Sellers  receives a  proposal  relating  to any such
transaction, Sellers shall promptly notify Buyer of such proposal.

     6.09. Effect of Termination and Abandonment.

     If the  Closing  contemplated  by  Section  1.02 does all not occur for any
reason other than by those specifically  provided for in Article XII (other than
a breach by the Sellers or the Company),  then the Company  agrees to pay to the
Buyer the  amount of US  $200,000  to cover the  expenses  of the  Buyer.  It is
expressly  understood  that nothing in this Section 6.09 is intended to limit in
any way the Buyer's right to the remedies provided for in Article XI.

     6.10. Amalgamation of 830212 and 729024 with the Company.

     830212,  the 830212  Shareholders,  729024,  the 729024  Shareholders,  the
Company  and the  Sellers  agree to vote  their  shares  in  order to cause  the
Amalgamation of 830212 and 729024 with the Company prior to the Closing Date. It
is  expressly  understood  that  once the  Amalgamation  has  taken  place,  all
references  to the  Company  shall be deemed  to mean the  Company,  830212  and
729024.
                                      -27-
<PAGE>
     6.11. Schedules.

     Within  fourteen  (14) days of the signing of this  Agreement,  the Sellers
shall deliver to the Buyer all the  schedules  referred to in Articles IIA & IIB
of this Agreement.  Upon delivery to Buyer and acceptance thereof by Buyer, such
schedules shall be the Schedules to Articles IIA & IIB of this Agreement for all
purposes,  including,  without  limitation,  Buyer's due diligence  rights under
Section 6.13 and related termination rights under Section 12.03.

     6.12. Financial Statements.

     Sellers  shall cause the Company to deliver the Tax Returns  referred to in
Section 2B.15(b)(i) to the Buyer.

     6.13. Due Diligence.

     Buyer shall have  forty-five (45) days from the date hereof to complete its
due diligence review of the Company and its operations,  during which period the
Sellers  shall cause the Company to comply with all  reasonable  requests by the
Buyer for all additional  information concerning the Company and its operations.
If at the end of such  forty-five  (45) day period Buyer has not  exercised  its
termination  rights under Section  12.03,  Buyer shall be deemed to be satisfied
with its due diligence review;  provided,  however,  such satisfaction shall not
limit in any way indemnification rights of Buyer under this Agreement.

     6.14. Assistance.

     Should the Buyer wish to  incorporate  a Nominee  pursuant to Section 1.04,
Sellers will reasonably cooperate in the formation of the Nominee, including any
continuation  of the Company,  in the  jurisdiction  that the Buyer elects.  The
Sellers shall not, however,  be obligated to become shareholders of an unlimited
liability corporation.

     6.15. Form 116.

     Gillian  Pershaw  shall  deliver to Purchaser a  certificate  issued by the
Minster  of  National  Revenue  under  Subsection  116(2) of the  Income Tax Act
(Canada)  exempting  Purchaser from  withholding any amount under Section 116 of
the Income Tax Act (Canada) with respect to the  acquisition by Purchaser of the
Stock of the Company owned by Gillian Pershaw.

     6.16. Escrow.

     At the Closing,  Sellers shall place the amount of CDN $500,000 into escrow
for a period of six  months  upon the  terms of the  Escrow  Agreement  attached
hereto as  Exhibit  A to cover any  amounts  due the  Buyer  pursuant  to either
Article XI or Section 1.03.

     6.17. Real Estate.

     The Buyer agrees to the lease  executed by the Company,  a copy of which is
attached  hereto as Exhibit B,  which  lease  shall be amended on Closing by (i)
extending the term to seven years from Closing (ii) adjusting the rent to $8 per
square  foot on a fully net basis and  allowing  Buyer the  option to extend the
lease for a period of up to three  years on fair market rent not to be less than
the rent payable during the first seven years after Closing.

     6.18. Closing for Seller.

     If each  pre-closing  covenant  set forth in  Article VI  and each  closing
condition set forth in Article IX are (i) performed or complied with by Buyer or
(ii)  waived  by the  Sellers,  and if  this  Agreement  is  not  terminated  in
accordance with Article XII, then the Sellers shall, on the Closing Date:

     (a) take,  and shall  cause the  Company  to take,  all  actions  as may be
required by legal counsel for the Buyer, acting reasonably,  to duly and validly
transfer the Stock to the Buyer or its Nominee,  including,  without limitation,
to cause the Company (i) to make the necessary  inscriptions  in the register of
the  Company in order to record the  transfer of the Stock in favor of the Buyer
or its  Nominee,  and (ii) to  deliver  to the  Buyer or its  Nominee,  upon the
cancellation  of the  old  share  certificates  representing  the  Stock,  a new
certificate in its name representing the Stock;

                                      -28-
<PAGE>
     (b)  deliver  to the  Buyer or its  Nominee  at the  place of  Closing  (i)
certificates  for the Stock,  duly  endorsed  for  transfer  to the Buyer or its
Nominee,  and (ii) a  certificate  executed by each of the Sellers to the effect
that each of the  Sellers'  representations  and  warranties  in this  Agreement
(except as qualified in the certificate) are true and correct in all respects as
of the  Closing  Date as if made on the Closing  Date and that the Sellers  have
complied with each of their covenants in this Agreement.  

     (c) if required by the Buyer,  cause all or any of the directors,  officers
and auditors of the Company (i) to resign from the Company,  as the case may be,
effective on the Closing Date,  and (ii) to deliver to the Company,  as the case
may be, at the place of Closing  resignations and releases  substantially in the
form of Schedule 6.18(c) provided to Buyer in accordance with Section 6.11;

     (d)  deliver  to the  Buyer at the  place of  Closing  certified  copies of
resolutions of the directors of the Company (in form and substance  satisfactory
to the Buyer's legal counsel,  acting reasonably)  (i) authorizing and approving
the sale,  assignment and transfer of the Stock from the Sellers to the Buyer or
its Nominee and their registration in the name of the Buyer or its Nominee, (ii)
accepting  the  resignations  effective  on the Closing  Date of the  directors,
officers and auditors referred to in  Section 6.18(c)  and (iii) appointing such
new  directors,  officers and  accountants of the Company as may be nominated by
the Buyer;

     (e) deliver to the Buyer duly executed and delivered  Employment  Contracts
between the Company,  on the one hand, and Ram Ramachandran and Craig Sutton, on
the other hand,  substantially  in the form of  Exhibits C and D,  respectively,
attached hereto, provided that they are satisfactory to Buyer;

     (f)  deliver to the Buyer a duly  executed  and  delivered  non-competition
agreement between the Company and Philip White (i) containing provisions similar
to the  non-competition  provisions set forth in Exhibits C and D, (ii) language
which shall  explicitly  provide  that Philip White will not and will never use,
will not and will never license  others to use and will not permit  Filtran Ltd.
or any successor to use, the name (a) "Filtran  Microcircuits"  or any variation
thereof  for any  product  and (b)  "Filtran"  in  connection  with any  product
utilizing  microcircuitry  technology,  except  that  such  agreement  will  not
restrict  Philip White from  continuing  his current  role as CEO,  Chairman and
shareholder of Filtran Ltd.

     (g)  deliver  to the  Buyer a  certificate  and  articles  of  amalgamation
together with the relevant corporate  resolutions and documents  evidencing that
the Amalgamation among 830212, 729024 and the Company has taken place; and

     (h)  deliver to the Buyer the  opinion of LaBarge  Weinstein,  counsel  for
Seller, substantially in the form set forth as Exhibit E.

     6.19. Closing for Buyer.

     If each  pre-closing  covenant  set forth in Article  VI, and each  closing
condition  set forth in  Article  VIII are (i)  performed  or  complied  with by
Sellers, 729024 and 830212, as the case may be, or (ii) waived by the Buyer, and
if this  Agreement is not  terminated in  accordance  with Article XII, then the
Buyer shall, on the Closing Date:

     (a)  deliver to Sellers at the place of Closing a  certificate  executed by
the Buyer to the effect that each of the Buyer's  representations and warranties
in this Agreement  (except as qualified in the  certificate) is true and correct
in all  respects as of the Closing  Date as if made on the Closing Date and that
the Buyer  has  complied  with  each of its  covenants  in this  Agreement.  The
representations  and  warranties of the Buyer made as of the Closing Date in the
Buyer's  certificate  shall be deemed made as of the Closing  Date with the same
effect as the representations and warranties made by the Buyer herein; and

     (b) deliver to the Sellers at the place of Closing certified checks made to
the order of, or stock  certificates  of Buyer's common stock  registered in the
name  of the  Sellers  in  accordance  with  and in the  proportions  set out in
Schedule I; and

     (c) deliver to Sellers the opinion of Stikeman,  Elliot, counsel for Buyer,
substantially in the form set forth as Exhibit F.

                                      -29-
<PAGE>
                                  ARTICLE VIIA


                               CONDUCT OF BUSINESS


     7A.01. Conduct of Business.

     Each of the Sellers agrees to cause the Company, from the date hereof up to
the  Closing  Date,  (a) to  conduct  its  business  in the  ordinary  course in
accordance with present  policies and as heretofore  conducted,  (b) to preserve
its business  organization  intact, (c) consistent with efficient and economical
management, to retain the services of its present officers, employees and agents
to the end that it may  retain in all  material  respects  the  goodwill  of the
Company and preserve in all material  respects its business  relationships  with
customers,  suppliers  and others,  and (d) to maintain  all  existing  material
business permits,  licenses,  qualifications and  authorizations.  Sellers shall
not,  and shall not permit the Company  to, take any action that would,  or that
could reasonably be expected to, result in any of the conditions to the purchase
and sale of the Stock  set forth in  Article  VI not being  satisfied.  From and
after  the  date  hereof,  and up to  the  Closing  Date  without  limiting  the
generality of the foregoing Sellers will prevent the Company,  without the prior
written approval of Buyer, from:

     (i) amending its charter documents or By-laws or other governing  documents
except as necessary to effect the Amalgamation;

     (ii)  issuing  or  selling  any  shares of its  capital  stock or any other
securities or issuing any securities  convertible  into or exchangeable  for, or
options,  warrants  to  purchase,  script,  rights to  subscribe  for,  calls or
commitments  of any  character  whatsoever  relating  to, or  entering  into any
contract,  understanding  or  arrangement  with  respect to the issuance of, any
shares of its capital stock or any of its other securities, or entering into any
arrangement  or contract with respect to the purchase or voting of shares of its
capital stock, or adjusting,  splitting,  reacquiring,  redeeming,  combining or
reclassifying any of its securities,  or making any other changes in its capital
structure;

     (iii)  incurring  (contingent or otherwise) any  indebtedness  for borrowed
money except in the ordinary course of business;

     (iv)  incurring  (contingently  or  otherwise)  any  other  debt  or  other
obligation  to pay money  except for normal  operating  purposes in the ordinary
course of business;

     (v) splitting,  combining or reclassifying any of its shares, or redeeming,
returning,  repurchasing or otherwise  acquiring  shares in its capital stock or
other corporate  security or reserving,  declaring,  setting aside or paying any
dividends  (in cash or in kind) on, or making any  distributions  in respect of,
the  outstanding  capital stock of the Company or  appropriations  of profits or
capitals;

     (vi) entering into,  amending or affirmatively  renewing or terminating any
contract,  commitment,  lease  (whether of real or personal  property)  or other
agreement, except in the ordinary course of business;

     (vii) making any loan or advance or assuming,  endorsing,  guaranteeing  or
entering into any  obligation to guarantee the  obligation or liabilities of any
person,  firm,  corporation  or other entity,  except in the ordinary  course of
business;

     (viii)  mortgaging,  pledging or  subjecting  to any lien,  charge or other
encumbrance any of the assets, properties or business of the Company;

     (ix) selling or otherwise  transferring or leasing any properties or assets
or  canceling  any debt or claim or  waiving  any right or making  any gift,  or
purchasing or otherwise  acquiring or leasing any properties or assets,  in each
case except in the ordinary course of business;

     (x) permitting to lapse any right with respect to any Intellectual Property
asset used in the conduct of the business of the Company;

                                      -30-
<PAGE>
     (xi)  granting  any  increase  in wages or salary  rates or in  employment,
retirement, notice, severance, termination or other benefits or paying any bonus
or making any loan to any officer,  director or employee or  shareholder,  other
than increases or bonuses in the ordinary  course  consistent with past practice
or  required by any  agreement  in effect as of the date of this  Agreement  and
which  is  disclosed  in any of the  Schedules  hereto,  or  entering  into  any
employment  contract  with any person,  or adopting any bonus,  profit  sharing,
change of control,  compensation,  stock option, pension,  retirement,  deferred
compensation, employment or other employee benefit plan, agreement, trust, plan,
fund or other  arrangement  for the  benefit or welfare of any  employee  of the
Company;

     (xii)  accelerating  the  collection of accounts  receivable,  delaying the
payment  of  accounts  payable  or  deferring  maintenance  and other  expenses,
reducing  inventories,  or  otherwise  increasing  cash  on  hand,  in a  manner
inconsistent with past practice or not in the ordinary course of business;

     (xiii) repaying any indebtedness for borrowed money,  except as required by
existing debt instruments;

     (xiv)  making any  material  tax  election,  settling or  compromising  any
liability  for Taxes,  preparing  and filing tax  Returns  other than on a basis
consistent  with the  Company's  past  practices  or, other than in the ordinary
course of business,  engaging in any  transaction or operating the business in a
manner that would  directly or  indirectly  result in any liability for Taxes of
the Company;

     (xv) making any change in its accounting methods or practices; or

     (xvi) agreeing, in writing or otherwise, to do any of the foregoing.

     (xvii)  ceasing to operate its  properties  and carrying on its business as
heretofore  carried on or failing to maintain all of its properties,  rights and
assets  consistently  with past  practices  or  failing to do any and all things
reasonably  necessary  and within its power to retain and pursue the goodwill of
its business;

     (xviii)  discharging  any  secured or  unsecured  obligation  or  liability
(whether accrued, absolute, contingent or otherwise,) other than obligations and
liabilities  discharged  in the  ordinary  course  of  business  and in a manner
consistent with past practices;

     (xix) making any capital expenditure except as disclosed in Section 2B.20;

     (xx)  removing  any director or auditor or  terminate  any officer,  except
those directors who will resign in accordance with Section 6.18(c);

     (xxi)  purchasing  or  otherwise   acquiring  any  corporate   security  or
proprietary,  participatory or profit interest in any person, firm,  corporation
or other entity; and

     (xxii) modifying or changing its business  organization or its relationship
with its suppliers, customers and others having business relations with it.

     In addition, and without limiting the generality of the foregoing, from the
date hereof up to the Closing Date, the Seller shall cause the Company to:

     (i) (A) comply with all laws, (B) duly and punctually  file all reports and
returns  required to be filed by any laws and (C) pay or provide for the payment
of all taxes;

     (ii) maintain its books in a manner that fairly and accurately reflects its
income,   expenses  and  liabilities  in  accordance  with  generally   accepted
accounting  principles  consistently  applied  and  using  accounting  policies,
practices and  calculations  applied on a basis consistent with past periods and
throughout the periods involved;

     (iii)  maintain in full force and effect  insurance  policies on all of its
properties providing coverage and amounts of coverage comparable to the coverage
and amounts of coverage  provided under its insurance  policies in effect on the
date hereof;

     (iv) perform duly and  punctually  all of its  contractual  obligations  in
accordance with the terms thereof; and

     (v) maintain and keep its  properties in good  condition and working order,
except for ordinary wear and tear.

                                      -31-
<PAGE>

                                  ARTICLE VIIB


                 PRE-CLOSING COVENANTS OF THE HOLDING COMPANIES


     7B.01. Pre-Closing Covenants of the Holding Companies.

     From the date hereof, neither of the Holding Companies shall: (i) incur any
liability  or (ii)  engage in any  business  except the  ownership  of shares of
Stock.


                                  ARTICLE VIII


                        CONDITIONS TO BUYER'S OBLIGATIONS


     The  obligations  of Buyer  hereunder are subject to the  satisfaction,  or
waiver in writing by Buyer,  on or prior to the Closing  Date,  of the following
conditions:

     8.01. Accuracy of Representations and Warranties.

     The  representations  and warranties of the Holding  Companies set forth in
Articles IV & V hereof and  representations  warranties  of Sellers set forth in
Articles IIA & IIB hereof shall be true and correct in all material  respects on
the  Closing  Date  with the same  effect  as though  such  representations  and
warranties had been made on and as of such date, and each of the Sellers and the
Holding  Companies  shall have  delivered to Buyer a certificate to that effect,
dated the Closing Date,  and signed by the President or a Vice President of each
of the Sellers and of the Holding Companies.

     8.02. Performance of Covenants.

     Each and all of the covenants  and  agreements of Seller to be performed or
complied with prior to or on the Closing Date shall have been duly  performed or
complied  with  by  Sellers,  and  Sellers  shall  have  delivered  to  Buyer  a
certificate  to that effect,  dated the Closing Date and signed by the President
or a Vice President of Seller.

     8.03. Government Approvals.

     There shall have been obtained from all appropriate  governmental  agencies
and  authorities all approvals,  consents and assurances,  in form and substance
reasonably  satisfactory  to the Buyer's  legal  counsel,  necessary in order to
permit the transactions  contemplated herein to be completed on the Closing Date
without affecting or resulting in the termination,  cancellation,  modification,
amendment,  variation  or  renegotiation  of  this  Agreement  or any  Contract,
including  without  limitation  all  such  approvals,  consents  and  assurances
required pursuant to the Investment Canada Act.

     8.04. Consents.

     All consents, waivers and approvals set forth in Schedule 8.04 hereto shall
have been received.

     8.05. No Legal Proceedings.

     No  investigation,  action or  proceeding  by or before  any court or other
governmental  authority shall have been commenced or threatened,  and no inquiry
shall  have  been  received,  that in the  reasonable  judgment  of the Board of
Directors of Buyer may lead to an action or  proceeding to restrain or challenge
the transactions contemplated by this Agreement or may impose material liability
on Buyer or its affiliates or the Company if such transactions are consummated.

     8.06. Stock Certificates.

     Each of the Sellers shall have delivered to Buyer certificates representing
the Stock, duly endorsed in blank, or accompanied by appropriate stock powers in
proper form for transfer.

                                      -32-
<PAGE>
     8.07. No Material Changes.

     On or after  the  date of this  Agreement  there  shall  not have  been any
material adverse change in the financial condition, business, assets, results of
operations or prospects of the Company nor shall any change of law have occurred
which, in the reasonable  opinion of Buyer,  materially and adversely affects or
may materially and adversely affect the company.

     8.08. Employment Contract.

     On or prior to the Closing Date, each of Ram  Ramachandran and Craig Sutton
shall  have  executed  and  delivered  to the  Company  an  Employment  Contract
substantially in the form of Exhibits C and D attached  hereto,  said form being
satisfactory to Buyer.

     8.09. Intercompany Accounts.

     Effective  immediately  prior to the  Closing,  all amounts then payable by
Sellers or any  affiliate  of Sellers to the  Company  shall have been repaid in
full.

     8.10.  Amalgamation.  The  Amalgamation  contemplated by Section 6.10 shall
have been consummated.


                                   ARTICLE IX


                       CONDITIONS TO SELLER'S OBLIGATIONS


     The obligations of Sellers  hereunder are subject to the  satisfaction,  or
waiver in writing by Sellers,  on or prior to the Closing Date of the  following
conditions:

     9.01. Accuracy of Representations and Warranties.

     The representations and warranties of Buyer set forth in Article III hereof
shall be true and correct in all material  respects on the Closing Date with the
same effect as though such  representations  and warranties had been made on and
as of such date,  and Buyer shall have delivered to Seller a certificate to that
effect,  dated the Closing Date, and signed by the President or a Vice President
of Buyer.

     9.02. Performance of Covenants.

     Each and all of the  covenants  and  agreements of Buyer to be performed or
complied with prior to or on the Closing Date shall have been duly  performed or
complied with by Buyer,  and Buyer shall have delivered to Sellers a certificate
to that effect,  dated the Closing  Date,  and signed by the President or a Vice
President of Buyer.

     9.03. Governmental Approvals.

     All  provisions  under the  Investment  Canada  Act and any other  required
governmental  approvals  shall have been compiled with, and the waiting  periods
thereunder shall have expired or have been terminated.

     9.04. No Legal Proceedings.

     No  investigation,  action or  proceeding  by or before  any court or other
governmental  authority shall have been commenced or threatened,  and no inquiry
shall have been received, that in the reasonable judgment of Sellers may lead to
an action or proceeding to restrain or challenge the  transactions  contemplated
by  this  Agreement  or may  impose  material  liabilities  on  Sellers  if such
transactions are consummated.

     9.05. Payment of Purchase Price.

     Buyer shall have  delivered  to each  Seller,  and each  Seller  shall have
received,  the  Purchase  Price  payable to Sellers at the  Closing  pursuant to
Section 1.01 above.

                                      -33-
<PAGE>
                                    ARTICLE X


                                    SURVIVAL


     10.01. Survival.

     The  representations  and  warranties set forth in this  Agreement,  in the
Schedules hereto or in any certificate or other document  delivered with respect
thereto will be deemed to be representations and warranties  hereunder and shall
survive for a period of two years following the closing date except for: (i) any
representation  and warranty in respect of which a claim based on fraud is made,
and except for those  representations and warranties contained in Section 2A.02,
Articles IV and V, which in each such case shall remain in full force and effect
for  an  unlimited   period  of  time  following  the  Closing  Date;  (ii)  any
representation  or warranty  relating to Tax matters,  which shall survive until
sixty days after the last date on which the relevant  tax  authority is entitled
to  assess or  reassess  the  Company  with  respect  to such Tax  matters.  All
covenants,  representations,  warranties and agreements  made by Seller shall be
unaffected by any investigation  made by Buyer or by any knowledge obtained as a
result thereof or otherwise.


                                   ARTICLE XI


                                 INDEMNIFICATION

     11.01. Environmental Indemnification by Sellers.

     Each of the Sellers will jointly and severally, indemnify, defend, save and
hold Buyer,  or its Nominee,  if any, which it designates to purchase the Stock,
and their affiliates (including,  after the Closing, the Company) and any of its
and  their  respective  directors,   officers,  employees  or  agents  ("Buyer's
Affiliates")  harmless  from and against any and all  damage,  liability,  loss,
penalty,  expense,  assessment,  judgment or deficiency of any nature whatsoever
(including,  without  limitation,   reasonable  attorneys'  fees  and  expenses,
consultants' and investigators' fees and expenses,  and other costs and expenses
incident to any suit, action or proceeding or any governmental  investigation of
any environmental  condition incurred by Buyer or any of the Buyer's Affiliates)
(together, "Losses") incurred or sustained by Buyer or any of Buyer's Affiliates
or which may be claimed against Buyer or any of Buyer's  Affiliates  which shall
arise out of or result from (i) any breach of any  representation  and  warranty
given or made by Seller in Section 2B.17 or in any  certificate  delivered  with
respect  thereto or (ii) by reason of, in  connection  with,  arising  out of or
resulting directly or indirectly from, the transportation, treatment, storage or
disposal  of  any  Hazardous   Substance  not  in  accordance   with  applicable
Environmental  Laws or with standards  existing at Closing,  including,  without
limitation,  the Guideline for Use at Contaminated  Sites in Ontario  (February,
1997),  or any  release  to the  environment  of a  Hazardous  Substance  not in
accordance  with  applicable  Environmental  Laws or with standards  existing at
Closing,  including,  without limitation,  the Guideline for Use at Contaminated
Sites  in  Ontario  (February,   1997),   attributable  to  any  act,  omission,
occurrence,  state  of  facts,  condition  or  circumstance  taking  place or in
existence  prior to the Closing Date,  but excluding any Losses arising from any
matter disclosed in Schedule 11.01.

     11.02. Other Indemnification by Sellers.

     Subject to Section  11.06,  each of the Sellers will jointly and  severally
(except for  subsection  (b) below which shall be  severally  as to each Seller)
indemnify,  defend,  save and hold Buyer and any of Buyer's Affiliates  harmless
from and against any and all Losses  incurred  or  sustained  by Buyer or any of
Buyer's Affiliates (other than any relating to environmental  matters, for which
indemnification provisions are set forth in Section 11.01) which shall arise out
of or result from (a) any breach of any  representation  and  warranty  given or
made by Sellers or the Holding Companies herein or in any certificate  delivered
with respect thereto (except for any breach of any  representation  and warranty
given or made by a Seller in Article IIA or in any  certificate  delivered  with
respect  thereto),  (b) any breach of any  representation  and warranty given or
made by a Seller  in  Article  IIA or any  certificate  delivered  with  respect
thereto,  (c)  the  noncompliance  with  or  nonperformance  of  any  agreement,
obligation or covenant of Sellers under this Agreement or (d) the  noncompliance
with or  nonperformance  of any agreement,  obligation or covenant of the 830212
Shareholders  or the 729024  Shareholders  under this  Agreement.  Any claim for
indemnification  hereunder  must be made by notice to Sellers'  Agent within the
applicable time period specified in Section 10.01.

                                      -34-
<PAGE>

     11.03. Indemnification by Buyer.

     Buyer  will  indemnify,  defend,  save  and hold  Sellers  and any of their
respective  affiliates  and  any  of  their  or  their  affiliate's   respective
directors,  officers,  employees or agents ("Seller's Affiliates") harmless from
and  against  any and all  Losses  incurred  or  sustained  by Sellers or any of
Sellers'  Affiliates  which  shall arise out of or result from (a) any breach of
any  representation  and  warranty  given  or made  by  Buyer  herein  or in any
certificate  delivered  with respect  thereto or (b) the  noncompliance  with or
nonperformance  of any  agreement,  obligation  or  covenant of Buyer under this
Agreement.  Any  claim  for  indemnification  hereunder  for  any  breach  of  a
representation or warranty must be made by notice to Buyer within the applicable
time period specified in Section 10.01.

     11.04. Third-Party Claims.

     Reasonably  promptly  after service of notice of any claim or of process by
any third person in any matter in respect of which  indemnity may be sought from
the other party  pursuant to this  Agreement,  the party in receipt of the claim
(the  "Indemnified  Party")  shall  notify the other  party  (the  "Indemnifying
Party") of the receipt thereof.  Failure to give such notice reasonably promptly
shall not relieve the Indemnifying Party of its obligation hereunder;  provided,
however,  that if such  failure to give  notice  reasonably  promptly  adversely
affects  the  ability  of the  Indemnifying  Party  to  defend  such  claims  or
materially increases the amount of indemnification  which the Indemnifying Party
is  obligated  to pay  hereunder,  the  amount of  indemnification  to which the
Indemnified  Party will be  entitled  to  receive  shall be reduced to an amount
which the Indemnified  Party would have been entitled to receive had such notice
been timely given.  Unless the  Indemnifying  Party shall notify the Indemnified
Party  that it elects to assume  the  defense  of any such  claim or  process or
settlement  thereof (such notice to be given as promptly as reasonably  possible
in view of the necessity to arrange for such defense (and in no event later than
10  days   following  the  aforesaid   notice)  and  to  be  accompanied  by  an
acknowledgment  of  the  Indemnifying   Party's   obligation  to  indemnify  the
Indemnified Party in respect of such matter), the Indemnified Party shall assume
the defense of any such claim or process or  settlement  thereof.  Such  defense
shall be conducted  expeditiously  (but with due regard for  obtaining  the most
favorable outcome reasonably likely under the circumstances, taking into account
costs and expenditures) and the Indemnifying  Party or Indemnified Party, as the
case may be, shall be advised promptly of all developments.  If the Indemnifying
Party  assumes  the  defense,  the  Indemnified  Party  will  have the  right to
participate  fully  in any such  action  or  proceeding  and to  retain  its own
counsel,  but the fees and  expenses of such  counsel will be at its own expense
unless (i) the  Indemnifying  Party shall have agreed to the  retention  of such
counsel  for both the  indemnifying  and  indemnified  parties or (ii) the named
parties to any such suit, action or proceeding (including any impleaded parties)
include both the Indemnifying Party and the Indemnified Party and representation
of both  parties by the same  counsel  would be  inappropriate  due to actual or
potential  differing  interests between them. No settlement of a claim by either
party shall be made without the prior written consent of the other party,  which
consent  shall not be  unreasonably  withheld  or delayed.  Notwithstanding  the
foregoing, the Indemnifying Party shall not be entitled to assume the defense of
any such action or proceeding  (and shall be liable for the fees and expenses of
counsel  incurred by the Indemnified  Party in defending such matter) seeking an
order,  injunction  or other  equitable  relief or relief  for other  than money
damages against the Indemnified  Party and the Indemnified  Party shall have the
sole and exclusive right to settle such matter.

     11.05. Offset.

                                      -35-
<PAGE>
     Each of the  Sellers  acknowledges  and  agrees  that  the  Buyer  shall be
entitled to offset any amount payable as an indemnity claim under Sections 11.01
and 11.02 against any payment due to such Seller pursuant to this Agreement,  at
Buyer's sole option;  provided that,  prior to the due date of any such payment,
the Buyer shall have  delivered to the Seller's  Agent (as defined  hereafter) a
notice of its intention to offset against such payment together with all details
of the amount of, and basis for, such offset.  In the event an indemnity  claim,
other  than a  frivolous  indemnity  claim,  under  Sections 11.01  and 11.02 is
disputed by the Sellers,  then any payments due by Buyer to Sellers  pursuant to
this  Agreement,  may be suspended to the extent of such  indemnity  claim until
such dispute is finally resolved without such suspension being deemed a default.

     11.06. Indemnification Limitations and Mitigation.

     Notwithstanding anything else contained in this Agreement:

     (a) the  indemnification  provided for by the Sellers in this Article XI or
any  other  claim by the Buyer  against  the  Sellers  in  connection  with this
Agreement shall be subject to the limitation  that any and all payments  payable
to the Buyer and/or the Buyer's  Affiliates  pursuant to  indemnification by the
Sellers  under this  Article XI or pursuant to any other claim made by the Buyer
in  connection  with this  Agreement  shall not,  in the  aggregate,  exceed the
Purchase Price as adjusted by Section 1.03, provided,  however, that with regard
to any indemnification by the Sellers pursuant to Section 11.02(a) or (d), there
shall be no limit on the  amounts  payable  by the 830212  Shareholders  and the
729024 Shareholders;

     (b)  except  as  provided  in the  proviso  to  paragraph  (a)  above,  the
indemnification  provided  for by the  Sellers  in this  Article XI or any other
claim by the Buyer against the Sellers in connection  with this Agreement  shall
be subject to the further  limitation  that any and all payments  payable to the
Buyer  and/or  the  Buyer's  Affiliates   pursuant  to  indemnification  by  any
particular  Seller  under this Article XI or pursuant to any other claim made by
the Buyer in connection with this Agreement shall not, in the aggregate,  exceed
100% of the proceeds received by such Seller under this Agreement;

     (c) without  prejudice  to Buyer's  rights of recovery  against the Sellers
except as provided  in Sections  10.01,  11.02 or clauses  11.06(a),  (b) or (e)
herein,  where any claim hereunder relates to any matter which is in whole or in
part insured by any insurance  policy in respect of the Company or Sellers,  the
Buyer  shall  take all  necessary  steps to ensure  that such claim is also made
against the relevant insurer and pursued with all reasonable expedition;

                                      -36-
<PAGE>
     (d) where the  Company or the Buyer is  entitled  to  recover  from a third
party or claim  reimbursement of any sum in respect of which it also has a claim
or potential  claim under this  Agreement,  the Buyer shall take all  reasonable
steps to enforce the recovery or reimbursement;

     (e) the liability of Sellers under this  Agreement  shall be reduced by the
amount of any  recoveries  which have been actually  received or obtained by the
Company  or the Buyer  from any  insurer or third  party  responsible  or partly
responsible for the act, matter or  circumstances  giving rise to such breach or
claim or from any  insurance  policy  covering  such  breach  or  claim.  If any
recovery is made after the Sellers  have made full  payment to the Buyer in full
satisfaction  of any such  liability  or claim,  the Buyer  and/or  the  Buyer's
Affiliates  shall  refund or procure  that there is refunded to such Sellers the
lesser of (i) the amount of such  payment by such  Sellers to the Buyer and (ii)
the amount of such recovery; and

     (f) no  monetary  amount  will be payable by the  Sellers to the Buyer with
respect to the  indemnification  of any claims  pursuant to  Sections 11.01  and
11.02(a) until the aggregate amount of Losses incurred by the Buyer with respect
to such  claims  shall  exceed on a  cumulative  basis an amount  equal to fifty
thousand  Canadian  dollars (CDN  $50,000)  (the  "Basket"),  in which event the
Sellers shall be responsible only for the amounts in excess of the Basket.


                                   ARTICLE XII


                                   TERMINATION


     12.01. Mutual Agreement.

     This Agreement may be terminated at any time prior to the Closing by mutual
written agreement of Buyer and Seller.

     12.02. Noncompliance or Nonperformance.

     This  Agreement may be terminated by written  notice by Buyer to Sellers or
by Sellers to Buyer,  without  prejudice to the  terminating  party's  rights to
claim  damages  or other  relief,  if  (a)(i)  any of the  terms,  covenants  or
conditions  of this  Agreement to be complied with or performed at or before the
Closing by the Buyer,  if Sellers  propose to terminate,  or any of the Sellers,
the Company,  830212, or 729024, if Buyer proposes to terminate,  shall not have
been complied with or performed on the Closing Date, and (ii) such noncompliance
or  nonperformance  shall not have been  waived  by the party  giving  notice of
termination  or (b) the Closing  shall not have occurred on or prior to February
15, 1999.

     12.03. Due Diligence Termination.

     Buyer may,  by written  notice to  Sellers'  Agent  within the time  period
specified in Section 6.13, terminate the Agreement if it is dissatisfied, acting
reasonably,  with its due diligence of the Company and its  operations.  In such
case  each  party  shall  bear its own costs and  expenses;  provided,  however,
nothing   contained   within   Section   12.03  shall  relieve  any  party  from
responsibility for any breach that occurred prior to such termination.


                                  ARTICLE XIII


                                  MISCELLANEOUS


     13.01. Integration; Amendment.

     Except with respect to the nondisclosure agreements signed in contemplation
of this Agreement, this Agreement (including the Schedules and Exhibits attached
hereto)  constitutes  the entire  agreement  and  understanding  of the  parties
relating to the subject matter hereof and  supersedes  all prior  agreements and
understandings,  whether oral or written, relating to the subject matter hereof.
There are no conditions,  waivers,  representations  or other agreements between
the parties in connection  with the subject  matter of this  Agreement  (whether
written  or  oral,  express  or  implied,  statutory  or  otherwise)  except  as
specifically  set out in this Agreement.  The terms of this Agreement  cannot be
changed, modified, released or discharged orally.

                                      -37-
<PAGE>
     13.02. Sellers' Agent.

     In order to administer  efficiently  the  determination  of certain matters
under this Agreement,  including the defense and/or settlement of any claims for
which  the  Sellers  may  be  required  to  indemnify  the  Buyer   pursuant  to
Sections 11.01  and 11.02 of this  Agreement,  the  Sellers  hereby  irrevocably
appoint Philip White (the "Sellers'  Agent") or any successor  thereto appointed
by the Sellers with the prior  written  consent of the Buyer,  which Agent shall
have full power and  authority  to make all  decisions  relating  to each of the
Sellers' respective rights and remedies under this Agreement.  All decisions and
actions by the  Sellers'  Agent shall be binding  upon all the  Sellers,  and no
Seller shall have the right to object, dissent, protest or otherwise contest the
same.

     Except as  otherwise  specifically  provided in this  Agreement,  the Buyer
shall deal only with the Sellers' Agent in respect of all matters  arising under
this  Agreement,  except with respect to notices  which shall be provided by the
Buyer to each of the Sellers in accordance with the terms of this Agreement.  In
no event shall the Buyer be concerned to see to the application or allocation of
any  moneys  paid to the  Sellers'  Agent by the Buyer,  and the Buyer  shall be
entitled to rely upon the notice  provided to the Buyer by the Sellers' Agent or
action taken by the Sellers'  Agent  acting  within the scope of his  authority,
except that, as contemplated by, and subject to the provisions of, Section 1.03,
it is understood that the Company may pay certain  professional fees relating to
this  transaction  so long as such fees are both  invoiced and paid prior to the
Closing Date.

     13.03. Assignment.

     This  Agreement  shall be binding  upon,  and inure to the  benefit of, the
parties  hereto and their  respective  successors  and permitted  assigns.  This
Agreement  may not be assigned by Buyer  without  the prior  written  consent of
Seller or by Seller without the prior written  consent of Buyer.  Any assignment
without the prior written consent of the other party shall be void.

     13.04. Counterparts.

     This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original,  but all of which together  shall  constitute
one and the same  instrument.  Delivery of a facsimile  copy of a signature page
shall be deemed to be an original signature page.

     13.05. Headings.

     The headings in this  Agreement are included for  convenience  of reference
only and shall not in any way  affect  the  meaning  or  interpretation  of this
Agreement.

     13.06. Waiver; Requirement of Writing.

     This  Agreement  cannot be changed or any  performance,  term or  condition
waived in whole or in part except by a writing  signed by the party against whom
enforcement  of the change or waiver is sought.  Any term or  condition  of this
Agreement may be waived at any time by the party hereto  entitled to the benefit
thereof.  No delay or failure on the part of any party in exercising  any rights
hereunder,  and no partial or single exercise thereof,  will constitute a waiver
of such rights or of any other rights hereunder.

     13.07. Finder's Fees; Brokers.

     Each of the Sellers  represents and warrants to Buyer and Buyer  represents
and  warrants to Sellers  that there are no claims (or any basis for any claims)
for brokerage  commissions,  finder's  fees or like payments in connection  with
this Agreement or the transactions contemplated hereby resulting from any action
taken by it or on its behalf.

     13.08. Expenses.

     Each of the parties hereto shall pay, without right of  reimbursement  from
the other party or from the  Company,  all the costs  incurred by it incident to
the preparation, execution and delivery of this Agreement and the performance of
its obligations hereunder,  whether or not the transactions contemplated by this
Agreement shall be consummated.

                                      -38-
<PAGE>
     13.09. Notices.

     Any notice,  request,  consent,  waiver or other communication  required or
permitted  hereunder  shall be effective only if it is in writing and personally
delivered  or sent by prepaid  cable or telecopy or sent,  postage  prepaid,  by
registered, certified or express mail or reputable overnight courier service and
shall be deemed  given when so delivered by hand,  cabled or  telecopied,  or if
mailed, ten days after mailing (two business days in the case of express mail or
overnight courier service), as follows: If to Sellers:

                           Philip White
                           229 Colonnade Road
                           Ottawa, Ontario
                           K2E 7K3

                  with a copy to:

                           LaBarge Weinstein
                           333 Preston Street
                           11th Floor
                           Ottawa, Ontario, Canada K1S 5N4

                           Attention:            Lawrence Weinstein

                  If to Buyer:

                           [Buyer or Nominee]
                           c/o Merrimac Industries, Inc.
                           41 Fairfield Place
                           West Caldwell, New Jersey  07006

                           Attention:            Mason N. Carter
                                                 Chairman, President and
                                                 Chief Executive Officer

                  with a copy to:

                           Thomas C. Meriam, Esq.
                           Chadbourne & Parke LLP
                           30 Rockefeller Plaza
                           New York, New York  10112

     or such other person or address as the  addressee  may have  specified in a
notice duly given to the sender as provided herein.

     13.10. Applicable Law; Consent to Jurisdiction.

     This  Agreement will be construed and  interpreted  in accordance  with and
governed  by the  internal  laws of the  Province of Ontario  without  regard to
conflicts of laws principles.  Each of the parties hereto hereby irrevocably and
unconditionally  consents to submit to the exclusive  jurisdiction of the courts
of the  Province of Ontario  and Canada for any  actions,  suits or  proceedings
arising out of or relating to this Agreement and the  transactions  contemplated
hereby (and  agrees not to commence  any  action,  suit or  proceeding  relating
thereto  except in such courts),  and further  agrees that,  except as set forth
below, service of any process, summons, notice or document by registered mail to
its respective  address set forth in Section 13.09 shall be effective service of
process for any action, suit or proceeding brought against it in any such court.
Each of the parties hereto hereby  irrevocably  and  unconditionally  waives any
objection to the laying of venue of any action,  suit or proceeding  arising out
of this Agreement or the transactions  contemplated  hereby in the courts of the
Province Ontario, and hereby further irrevocably and unconditionally  waives and
agrees  not to plead or claim in any such court  that any such  action,  suit or
proceeding brought in any such court has been brought in an inconvenient forum.

     13.11. Public Announcements.

     None of the  parties  shall make any press  release or public  announcement
with respect to the transactions  contemplated hereby without (a) in the case of
Buyer,  obtaining  the prior  approval  of Seller and (b) in the case of Seller,
obtaining  the prior  approval  of Buyer,  except as may be  required  by law or
regulations of securities  exchanges.  Approvals  under this Section 13.11 shall
not be unreasonably withheld.

                                      -39-
<PAGE>
     13.12. No Third-Party Beneficiaries.

     Nothing in this  Agreement  will be construed  as giving any person,  firm,
corporation or other entity, other than the parties hereto, their successors and
permitted  assigns,  any  right,  remedy or claim  under or in  respect  of this
Agreement or any provision hereof.


     IN WITNESS  WHEREOF,  the parties hereto have executed this  Agreement,  or
caused this Agreement to be duly executed by their respective officers thereunto
duly authorized, as of the date first above written.


                                                     Merrimac Industries, Inc.

                                                     /s/ Mason N. Carter
                                                     ---------------------------
                                                         Mason N. Carter
                                                         Chairman, President and
                                                         Chief Executive Officer

                                                     K.N. Ramachandran


                                                     By_________________________
                                                       Name:
                                                       Title:



                                                     B. Jaya Ramachandran


                                                     By_________________________
                                                       Name:
                                                       Title:



                                                     Peter Smiley


                                                     By_________________________
                                                       Name:
                                                       Title:



                                                     John Andrews


                                                     By_________________________
                                                       Name:
                                                       Title:



                                                     S.L. Ross


                                                     By_________________________
                                                       Name:
                                                       Title:



                                                     Rita Bhatia


                                                     By_________________________
                                                       Name:
                                                       Title:

                                      -40-
<PAGE>

                                                     Tigner Family Trust


                                                     By_________________________
                                                       Name:
                                                       Title:



                                                     Ross Chiarelli


                                                     By_________________________
                                                       Name:
                                                       Title:



                                                     Howard Soucie


                                                     By_________________________
                                                       Name:
                                                       Title:



                                                     Ashwina Bijoor


                                                     By_________________________
                                                       Name:
                                                       Title:



                                                     Craig Sutton


                                                     By_________________________
                                                       Name:
                                                       Title:



                                                     Filtran Microcircuits, Inc.


                                                     By_________________________
                                                     Name:
                                                     Title:


                                                     830212 Ontario Inc.


                                                     By_________________________
                                                       Name:
                                                       Title:
                                                     830212 Ontario Inc.


                                                     729024 Ontario Ltd.


                                                     By_________________________
                                                       Name:
                                                       Title:

                                      -41-
<PAGE>

                                                     Eapen Koshy


                                                     By_________________________
                                                       Name:
                                                       Title:



                                                     Rachel Koshy in trust


                                                     By_________________________
                                                       Name:
                                                       Title:



                                                     Rachel Koshy


                                                     By_________________________
                                                       Name:
                                                       Title:



                                                     Ian Bolt


                                                     By_________________________
                                                       Name:
                                                       Title:



                                                     Doren White


                                                     By_________________________
                                                       Name:
                                                       Title:



                                                     Derek White


                                                     By_________________________
                                                       Name:
                                                       Title:



                                                     Gillian Pershaw


                                                     By_________________________
                                                       Name:
                                                       Title:



                                                     Philip White


                                                     By_________________________
                                                       Name:
                                                       Title:


                                                     Coranne White


                                                     By_________________________
                                                       Name:
                                                       Title:

                                      -42-
<PAGE>

                                   APPENDIX A


                                   DEFINITIONS

     "Accountant" shall have the meaning set forth in Section 2B.07.

     "Amalgamation" shall have the meaning set forth in the Recitals.

     "Base I Value" shall have the meaning set forth in Section 1.03.

     "Base II Value" shall have the meaning set forth in Section 1.03.

     "Basket" shall have the meaning set forth in Section 11.06(f).

     "Benefit Plans" shall have the meaning set forth in Section 2B.17(c).

     "Business know-how" shall have the meaning set forth in Section 2B.11.

     "Buyer" shall have the meaning set forth in the Preamble.

     "Buyer's Affiliates" shall have the meaning set forth in Section 11.01.

     "Canadian GAAP" shall have the meaning set forth in Section 2B.07(c).

     "Closing" shall have the meaning set forth in Section 1.02.

     "Closing Date" shall have the meaning set forth in Section 1.02.

     "Closing Net Book Value" shall have the meaning set forth in Section 1.03.

     "Company"  shall have the  meanings  set forth in the  Preamble and Section
6.10.

     "Contracts"  shall  have the  meanings  set forth in  Section 2B.13(b)  and
6.05(b).

     "Financial Statements" shall have the meaning set forth in Section 2B.08.

     "GAAP" shall have the meaning set forth in 2B.07.

     "Holding Companies" shall have the meaning set forth in the Preamble.

     "Indemnified Party" shall have the meaning set forth in Section 11.04.

     "Indemnifying Party" shall have the meaning set forth in Section 11.04.

     "Intellectual Property" shall have the meaning set forth in Section 2B.11.

     "ITA" shall have the meaning set forth in Section 2B.15(b)(ix).

                                      -43-
<PAGE>
     "ITCs" shall have the meaning set forth in Section 2B.15(b)(x).

     "Liens" shall have the meaning set forth in Section 2B.15(b)(xv).

     "Losses" shall have the meaning set forth in Section 11.02.

     "Net Book Value" shall have the meaning set forth in Section 1.03.

     "Nominee" shall have the meaning set forth in the Recitals.

     "Purchase Price" shall have the meaning set forth in Section 1.01.

     "Qualification" shall have the meaning set forth in Section 2B.06.

     "Real Property" shall have the meaning set forth in Section 2B.10.

     "Representatives" shall have the meaning set forth in Section 6.02.

     "Sellers" shall have the meaning set forth in the Preamble.

     "Seller's Affiliates" shall have the meaning set forth in Section 11.03.

     "Sellers' Agent" shall have the meaning set forth in Section 13.02.

     "729024 Shareholders" shall have the meaning set forth in the Preamble.

     "Stock"  shall have the meaning set forth in the Recitals and shall include
all the shares of the Corporation resulting from the Amalgamation.

     "Tax" shall have the meaning set forth in Section 2B.15(a).

     "Tax Returns" shall have the meaning set forth in Section 2B.15(b).

     "830212  Shareholders"  shall mean Ian Bolt,  Doreen  White,  Derek  White,
Gillian Pershaw, Philip White and Coranne White.

     "729024  Shareholders"  shall mean Eapen  Koshy,  Rachek Koshy in trust and
Rachel Koshy.

                                      -44-