ASSET PURCHASE AGREEMENT

         This Asset Purchase Agreement ("Agreement") made and entered into as of
this 6th day of December,  1996, by and between  TRANSISTOR  DEVICES INC., a New
Jersey  corporation  with a principal  place of business at 85  Horsehill  Road,
Cedar  Knolls,  NJ 07927 (the  "Seller") and ST KELTEC  CORPORATION,  a Delaware
corporation  with a principal  place of business at 84 Hill Avenue,  Fort Walton
Beach, Florida 32548 (the "Buyer").

                                  WITNESSETH:

         WHEREAS,  Seller has conducted and currently conducts a business called
the "Military  Power Systems  Division" which designs,  develops,  manufactures,
markets  and  services  electronic  products,  including  but not limited to Low
Voltage Linear Power Supplies, for military applications (the "Business"); and

         WHEREAS,  Seller desires to sell and Buyer desires to purchase  certain
rights,  properties and assets of Seller pertaining to the Business as described
in this  Agreement in  consideration  of the payment of the  Purchase  Price (as
defined in Section  2.1  hereof),  the  assumption  and  performance  of certain
liabilities of such Business,  and the performance of certain other obligations,
all on the terms and subject to the conditions contained in this Agreement; and

         WHEREAS,  Buyer  is a  wholly-owned  subsidiary  of  Signal  Technology
Corporation ("STC");

         NOW, THEREFORE, in consideration of the mutual covenants and subject to
the terms and  conditions  herein  contained,  and for other  good and  valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

         I. Purchase and Sale of Assets; Assumption of Liability.

                  1.1  On  the  "Closing   Date"  (as  defined  in  Section  3.1
hereof) and  subject to the terms and  conditions  set forth in this  Agreement,
Seller shall convey,  sell,  assign,  transfer,  and deliver to Buyer, and Buyer
shall  purchase  from  Seller,  those  assets  and  properties,   consisting  of
Inventory,  Machinery,  Drawings and rights related thereto, all as described on
Schedule  1.1 (the  "Assets"),  and shall  assign  to Buyer  each and all of the
"Material Contracts" (as defined in Section 8.9 below).

                  1.2  On  the  Closing  Date  and  subject  to  the  terms  and
conditions  set forth in this  Agreement,  Buyer  shall  assume the  liabilities
described on Schedule 1.2 (the  "Assumed  Liabilities").  Except for the Assumed
Liabilities, Buyer does not assume, and shall have no responsibility  whatsoever
for, any

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other liabilities or obligations of Seller, whether known, unknown,  liquidated,
unliquidated, contingent or otherwise.

         II. Purchase Price.

                  2.1 The total purchase price to be paid by Buyer to Seller for
the Assets shall be the sum of the prices of each of "Machinery and  Equipment",
the  "Drawings"  and the  exclusive  right with  respect  thereto and the "Total
Inventory", as set forth on Schedule 1.1 hereof, as the same may be adjusted, by
way of increase or decrease,  as described  hereinafter (the "Purchase  Price").
The Purchase Price shall be paid by Buyer to Seller as follows:

                           a)  One  Million  Dollars   ($1,000,000)  (the  "Down
Payment") shall be paid at the  "Closing"  (as  defined in Section  3.1) by wire
transfer or by certified or bank check.

                           b) The total price set forth in Schedule  1.1 for all
items of Machinery and Equipment  shall be paid by wire transfer or by certified
or bank  check on that  date  thirty  (30)  days  after  the  completion  of the
relocation  of the  machinery  that is being  purchased as a part of the Assets,
which  relocation  shall be at Buyer's  sole  expense  and shall occur at a time
selected by Buyer, but in no event later than one hundred eighty (180) days
after the Closing;

                           c) The  balance  of the  Purchase  Price,  subject to
adjustment as  aforesaid,  shall be paid in two  installments,  the first on the
sixth month anniversary of the Closing Date (the "First  Payment  Date"),  in an
amount equal to Buyer's reasonable estimate of one half of such balance, and the
second on the first anniversary of the Closing Date (the "Second Payment Date"),
in an amount equal to the then unpaid balance,  by wire transfer or by certified
or bank check,  together with  interest at the rate per  annum  announced to the
public and charged by Bank of Boston as its prime commercial lending rate on the
Closing Date at Boston, Massachusetts,  for loans to prime commercial borrowers,
computed from the Closing Date to the date of payment thereof;

                  2.2 a) "Work in Process Inventory" shall mean

                           i)  products  the  manufacture  of which has not been
completed  and the raw material of which has been issued out of stock and are in
the manufacturing process on the Closing Date and

                           ii) all of the  products  in and for a "Backlog  Job"
(as  hereinafter  defined) the manufacture of which has been completed and which
products

                                    [A] have not been shipped to the  respective
customers as of the Closing Date, and

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<PAGE>

                                    [B] are listed on  Schedule  2.2a)  attached
hereto and made a part hereof ("Backlog Finished Goods Inventory"),

and shall be  "Assets"  hereunder.  "Backlog  Job"  shall  mean  products  to be
manufactured  and shipped  pursuant to a contract or purchase order in effect on
the Closing Date.

                           b) "Stock  Inventory" shall mean items which are held
by Seller in stock on the  Closing  Date.  Such  items are not  included  in the
Assets,  but will be accepted by Buyer on consignment  and will be used by Buyer
from  time to time at  Buyer's  sole  option,  except as  hereinafter  otherwise
provided. All Stock Inventory not used by Buyer will remain inventory of Seller.
With  respect to each item of Stock  Inventory  used by Buyer,  Buyer  shall pay
Seller  on the  First  Payment  Date an  amount  equal to the sum of the cost to
Seller of such item plus ten percent  (10%) of such cost (the  "Stock  Inventory
Price") for those  items so used by Buyer after the Closing  Date but before the
First  Payment  Date and shall pay Seller on the Second  Payment  Date an amount
equal to the Stock  Inventory  Price for those  items so used by Buyer after the
First  Payment Date but before the Second  Payment  Date.  Seller shall have the
right to use those items of Stock  Inventory  that are in excess of then current
requirements to fulfill the Buyer's then production and delivery schedules,  and
Buyer shall purchase those items of Stock Inventory that are required to fulfi11
production and delivery schedules of Backlog Jobs.

                           c) "Non-Backlog Finished  Goods Inventory" shall mean
all of the products for each  Non-Backlog Job (as defined in Section 2.7) below)
the  manufacture  of which has been  completed  and which  products i) have been
returned  to and are  included  in stores as of the  Closing  Date,  and ii) are
listed on Schedule 2.2c) attached hereto and made a part hereof,  and such items
are not included in the Assets, but will be accepted by Buyer on consignment and
will be  acquired by Buyer from time to time as Buyer  receives  orders for such
items.

                  2.3 With respect to each item of  Non-Backlog  Finished  Goods
Inventory listed on Schedule 2.2c),  Buyer shall pay Seller on the First Payment
Date the amount of the price listed on Schedule 2.2c) for each item thereof that
has been so  acquired  by Buyer  after the  Closing  Date but  before  the First
Payment  Date and on the Second  Payment  Date the amount of the price listed on
Schedule  2.2c) for each item  thereof  that has been so acquired by Buyer after
the First Payment Date but before the Second Payment Date;  provided that,  with
respect  to such  items  that  have not been sold by Buyer  prior to the  Second
Payment  Date,  Buyer  shall have the right  thereafter  to sell the same at any
price and shall  thereafter  remit to Seller  Seventy-Five  Percent (75%) of the
price actually received by Buyer for each sale thereof thereafter made.

                  2.4 Items received after the Closing Date that were under open
purchase  orders  from  Seller  to  vendors  as of the  Closing  Date are  Stock
Inventory as the same are received.


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<PAGE>
         III. Closing.

                  3.1 Subject to the  conditions  precedent to closing set forth
herein,  the  consummation  of the sale and  purchase  of Assets  for which this
Agreement  provides (the "Closing") shall take place at the offices of ST Keltec
Corporation on or about 6 December 1996 or at and on such other place, time, and
date as may be mutually agreed to by Seller and Buyer (the "Closing Date"),  and
shall be deemed to occur as of the close of business on the Closing Date. If the
Closing has not occurred prior to 15 January 1997, then at any time thereafter a
party that is not in breach of this Agreement shall have the unilateral right to
terminate this Agreement without liability on its part.

                  3.2 At the Closing the following shall take place:

                           a) the receipt of the Down Payment shall be confirmed
to Buyer by Seller;

                           b) Seller  shall  deliver  to Buyer a bill of sale in
the form attached hereto as Exhibit A and hereby made a part hereof;

                           c) At the  close of  business  on the  Closing  Date,
Buyer shall take  delivery of all of the Assets at the  Seller's  premises at 35
Hill Avenue, Fort Walton Beach,  Florida 32548 (the "Plant"). Buyer shall remove
all  Assets  from the Plant  within  one  hundred  eighty  (180)  days after the
Closing.

         IV. Conditions  Precedent to Seller's  Obligations.  The obligations of
Seller  hereunder are subject to the fulfillment to the reasonable  satisfaction
of Seller and its counsel,  at or prior to the Closing  Date,  of the  following
conditions, unless otherwise waived by Buyer in writing:

                  4.1 All  representations  and  warranties of Buyer made herein
shall be true and accurate in all material  respects as of the Closing Date with
the same effect as though such  representations  and warranties had been made on
the Closing Date.

                  4.2  No  action  or  proceeding   shall  be  then  pending  or
threatened before a court or other  governmental body or by any public authority
to restrict or prohibit the acquisition by Buyer of the Assets.

         V.  Conditions  Precedent to Buyer's  Obligations.  The  obligations of
Buyer hereunder are subject to the fulfillment to the reasonable satisfaction of
Buyer  and its  counsel,  at or  prior to the  Closing  Date,  of the  following
conditions, unless otherwise waived by Buyer in writing:

                  5.1  All  representations and warranties of Seller made herein
shall be true and accurate in all material  respects as of the Closing Date with
the

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<PAGE>

same effect as though such  representations  and warranties had been made on the
Closing Date.

                  5.2  No  action  or  proceeding   shall  be  then  pending  or
threatened before a court or other  governmental body or by any public authority
to restrict or prohibit  the sale by Seller or the  acquisition  by Buyer of the
Assets,  or which  could  terminate  or cancel  any of the  contracts,  the work
pursuant to which was then part of a Backlog Job.

         VI. Seller's Continuing Obligations.

                  6.1 Seller shall  authorize Buyer to use and occupy the Plant,
during  the period  from the  Closing  Date until the date upon which  Buyer has
removed all of the Assets  therefrom (the "Move Date"),  all in accordance  with
the provisions of Section 7.4 hereof.

                  6.2 Upon  Buyer's  request at any time  during a period of one
(1) year  following the Closing Date,  Seller shall execute and deliver to Buyer
any documents  not delivered to Buyer on the Closing Date that Buyer  reasonably
requests  from  Seller  for  perfecting  the  transfer of the  Assets  to  Buyer
contemplated by this Agreement.

                  6.3 a) For a  period  of five (5)  years  after  the  Closing,
Seller shall not, directly or indirectly, in any capacity whatsoever, propose to
design or manufacture,  or design or manufacture any products listed in Schedule
6.3,  or any  products  substantially  similar to such  products,  or conduct or
assist  others in  conducting  or be involved or interested in any manner in any
business which is in competition with the developing, manufacturing, production,
distribution, marketing or selling of any such products;

                           b) For a period of two (2) years  after the  Closing,
Seller shall not, directly or indirectly, in any capacity whatsoever:

                                    i)  propose  to  design or  manufacture,  or
design or manufacture any 1power supplies or DC to DC converters used or similar
to those used in the  programs  listed in  Schedule  6.3,  or conduct or assist
others in  conducting or be involved or interested in any manner in any business
which  is  in  competition  with  the  developing,  manufacturing,   production,
distribution, marketing or selling of any such products used or similar to those
used in any of such programs; and

                                    ii) recruit or solicit,  or assist any other
person or party in recruiting  or  soliciting  any  "Employee"  (as  hereinafter
defined), or induce or attempt to induce or assist any other person or entity in
inducing  or  attempting  to  induce  any  Employee  to  terminate  or alter his
relationship with Buyer (collectively  "Recruiting Activity").  For the purposes
of this Section 6.3c),  the term "Employee" shall mean any person who is, on the
Closing Date, an

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<PAGE>

employee or  consultant  of Seller and who was engaged in any work in connection
with the  Military  Power  Systems  Division of Seller and whose  employment  or
consulting  arrangement  had not been  terminated by Buyer as of the date of any
such Recruiting Activity.

                  6.4  Seller   acknowledges  that  the  business  of  Buyer  is
international in scope, and that  geographical  limitations on the covenants set
forth in this Article VI are therefore not appropriate. Seller acknowledges that
the scope of each of the covenants  contained in Section 6.3 is reasonable as to
time,  area and persons and is  necessary  to protect  the  legitimate  business
interests of Buyer.  Furthermore,  such  covenants will be regarded as divisible
and if any such covenant is found by any court of competent  jurisdiction  to be
unenforceable because it extends for too long a period of time or over too great
a range of activities or persons or in too broad a geographic  area, it shall be
interpreted  to extend over the maximum  period of time,  range of activities or
persons, or geographic area as to which it may be enforceable. The provisions of
this Article VI shall survive the Closing and the termination of the Agreement.

                  6.5 All  commissions  incurred by Seller and which are, or are
to become,  due to  third-party  sales  representatives  of Seller  shall be the
responsibility of Seller, except as specifically  otherwise provided in Section
7.6 below.

         VII. Buyer's Continuing Obligations.

                  7.1 After the  Closing  Date,  Buyer shall make  available  to
Seller  any  books  of  account,  financial  records,  original  bills  of sale,
contracts,  or other written instruments or records delivered to Buyer by Seller
pursuant to this Agreement at any reasonable  time during business hours for any
proper  purpose  (including,  but  not  limited  to,  performing  all  necessary
accounting   functions  in  order  for  Seller  to  prepare  year-end  financial
statements).

                  7.2 Buyer shall honor Seller's  warranty  policy  described on
Schedule  7.2 with  respect to products of Seller  shipped to  customers  within
twelve (12) months  prior to the  Closing in the  ordinary  course of  business;
provided that Buyer shall have no such  obligations  with respect to any cost or
expense of any kind arising out of any design defect,  whether patent or latent,
in any product shipped by Seller at any time, and all of such costs and expenses
shall be borne by  Seller,  but if any of such costs are borne by Buyer they may
be  recovered  by Buyer in any manner,  including,  without  limitation,  offset
against the unpaid balance of the Purchase  Price.  In any case of design defect
hereunder that comes to the attention of Buyer,  Buyer shall give notice thereof
to Seller,  and if, in any such case, in Buyer's reasonable opinion a cost of at
least Five  Thousand  Dollars ($5,000) will  be involved,  Seller shall have the
option  promptly  upon  receipt of such  notice  either to elect to pay the cost
thereof as soon as the same is reasonably  determined or to perform the services
required to

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<PAGE>

remedy the matter, and in any such event, Seller shall deal directly with Buyer,
and Buyer shall deal with the customer involved therein

                  7.3 Buyer shall have the right granted by Seller in the nature
of a  license  (the  "License")  to use and  occupy  the Plant and to use in the
ordinary  course of business  all of  Seller's  equipment  and other  personalty
located  therein,  during the period from the  Closing  Date until the Move Date
(which Move Date shall,  as  hereinabove  stated,  be within One Hundred  Eighty
(180)  days from the date  hereof) in order that Buyer may use the Assets in the
optimal manner, in its discretion,  from and after the Closing. For such license
Buyer shall pay to Seller Eight  Hundred  Dollars  ($800) per  day (the "License
Fee") commencing on 1 March 1997 and ending on the Move Date. In addition to the
payment of the License  Fee,  during the  License  period,  Buyer shall  perform
normal  maintenance of the Plant, pay the cost of  utilities,  and shall provide
liability  insurance,  in the amounts shown on Schedule 7.3, insuring both Buyer
and Seller. All other costs of ownership  and use of the Plant shall be borne by
Seller.  On the Move Date, the License shall terminate and Buyer shall leave the
Plant "broom clean", and shall leave the said equipment in the same condition as
at the Closing Date,  reasonable wear and tear and damage by casualty  excepted.
Buyer shall indemnify Seller from and against all loss, cost, damage and expense
caused by or  arising  from any act or  omission  to act of Buyer,  its  agents,
employees  and invitees  with respect to such  licensed use of the Plant and the
equipment.

                  7.4 a) As of the Closing Date, Seller shall terminate each and
all of the employees  employed in the Business,  and shown on the list set forth
as part of Schedule 7.4 attached  hereto and made a part hereof  ("Employees  of
the Business"),  and Buyer shall  thereupon,  without  interruption,  employ the
Employees of the Business.

                           b) All costs of any type or  amount,  arising  in any
way from the  employment  of employees  by Seller prior to Closing  shall be the
responsibility of Seller, and Buyer shall have no responsibility therefor.

                           c) Any  employee  of Seller who  is absent  from work
and who is receiving workmen's compensation,  or who is on leave of absence, and
whose name is not on, or expressly  excluded form the list set forth on Schedule
7.4 shall not be one of the Employees of the Business.

                           d) During the period from the Closing  Date until the
Move  Date or that date  which is  thirty  (30)  days  after  the  Closing  Date
(whichever  first occurs)  (hereinafter  called the  "Transition  Period") Buyer
shall  continue to employ,  and to maintain  the payroll with respect to, all of
the Employees of the Business.

                           e)  Effective  at the end of the  Transition  Period,
Buyer shall have the right to terminate Employees of the Business; provided,

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<PAGE>

however,  that Buyer shall  retain in its employ  thereafter  for such period of
time as Buyer  shall  determine  at least  thirty (30) of the  Employees  of the
Business.  Seller shall  thereupon  assume and be  responsible  for all costs of
severance  pay,   vacation  pay,  health   insurance  until  31  December  1996,
unemployment insurance and costs related thereto,  worker's compensation arising
from  incidents that occurred on or prior to the Closing Date, of each and every
of the Employees of the Business so terminated by Buyer  ("Termination  Costs"),
and Buyer will have no liability therefor.

                           g) If any of such  Termination  Costs  are  borne  by
Buyer,  Seller shall indemnify Buyer with respect thereto in accordance with the
provisions of Article XIII hereof.

                  7.5  Buyer shall pay  commissions due with respect to products
shipped  by Buyer in any Backlog Job in the amounts and to the third-party sales
representatives of Seller listed on Schedule 7.5 attached hereto.

         VIII.   Representations   and  Warranties  of  Seller.   Seller  hereby
represents and warrants to Buyer as follows:

                  8.1  a)  Seller  is  a  corporation  duly  organized,  validly
existing and in good  standing  under the laws of the State of New Jersey and is
duly  qualified  to conduct  business as a foreign  corporation  in the State of
Florida.

                           b) Seller has  corporate  power and authority to sell
the Assets, and to execute,  deliver and perform this Agreement.  The execution,
delivery and  performance  of this  Agreement  have been duly  authorized by all
necessary corporate action on the part of Seller, including that of its Board of
Directors  and  its  Shareholders,  and no  further  approval  of the  Board  of
Directors  of  Seller  (or any  committee  thereof)  or of the  Shareholders  is
necessary for the consummation of the transactions contemplated hereby.

                           c) The  execution  and delivery of this  Agreement by
Seller and the  consummation by Seller of the transactions  contemplated  hereby
are not prohibited by and do not violate any provision of the organic  documents
of  incorporation  of Seller,  or violate any  provision  of law, or violate any
provision, or result in the breach, of, or accelerate or permit the acceleration
of the performance required by, any term of any contract, agreement,  indenture,
mortgage, note, bond, commitment, license or other instrument to which Seller is
a party or by which any of the Assets is bound,  and has not  resulted  and will
not result in the creation or imposition of any lien on any of the Assets.

                           d) Seller has not filed,  or had filed  against it, a
petition in bankruptcy or a petition to take  advantage of any other  insolvency
act;  admitted  in writing its  inability  to pay its debts  generally;  made an
assignment  for the benefit of  creditors;  consented  to the  appointment  of a
receiver for itself or any

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substantial part of its property;  or generally  committed any act of insolvency
(including the failure to pay obligations as they become due) or bankruptcy.

                  8.2  All  necessary  tax  returns  of  Seller  for  all of the
jurisdictions  in which  returns are due have been  filed,  and payment has been
made of all such taxes  indicated as due on such returns  (insofar as such taxes
are due and payable at the date hereof).

                  8.3 Seller has the power to sell all of the Assets  being sold
and transferred hereunder, and will do so, free and clear of all liens, charges,
security  interests,  and  encumbrances,  and all of such  Assets  are listed on
Schedule 1.1.

                  8.4 This  Agreement has been duly  authorized,  executed,  and
delivered on behalf of Seller and is a valid obligation of Seller enforceable in
accordance with its terms.

                  8.5      a) There exists no default in the  performance of any
of the contracts listed in Schedule 8.9;

                           b) There are no design defects in any products in any
Backlog Job;

                           c) All units  manufactured or partially  manufactured
by Seller have been so manufactured in a good and workmanlike  manner and are in
compliance  with  the  specifications   under  which  they  were  to  have  been
manufactured.

                  8.6 Except as listed on Schedule  8.6 attached  hereto,  as of
the date hereof there are no actions, suits or proceedings pending or threatened
which involve transactions of or otherwise relate to Seller or the Assets or the
transactions  contemplated by this Agreement, at law or in equity, or before any
arbitrator of any kind, or before or by any federal,  state,  municipal or other
governmental   department,   commission,   board,   bureau,   agency   or  other
instrumentality, domestic or foreign.

                  8.7  There  are no  outstanding  orders,  writs,  injunctions,
decrees,  judgments,  awards,  determinations  or   directions,  which   involve
transactions of or  otherwise  relate to Seller or the Assets,  of any courts or
arbitrators or under any outstanding order, regulation or demand of any federal,
state,  municipal or other  governmental  instrumentality,  domestic or foreign,
except those listed on Schedule 8.7.

                  8.8 Seller's  ownership and use of the Assets, and the conduct
of the Business do not  conflict  with the rights of any other  person,  firm or
corporation  or violate,  or with or without the giving of notice or the passage
of time, or both, will violate,  conflict with or result in a default,  right to
accelerate  or loss of  rights  under,  any  terms or  provisions  of any  lien,
encumbrance,

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mortgage,  deed  of  trust,  lease,  license,   agreement,   understanding  law,
ordinance,  rule or regulation, or any order, judgment or decree to which Seller
is a party or by which it may be bound or affected.

                  8.9 a)  Schedule  8.9 hereto  contains a complete  and correct
list of all  agreements,  contracts  and  commitments,  whether  written or oral
relating to the Business (the  "Material  Contracts")  by which Seller or any of
the Assets is bound.

                           b) Complete  and correct  copies or  originals of all
written  Material  Contracts,  together  with all  amendments  thereto have been
delivered  to Buyer.  All  Material  Contracts  are in full force and effect and
there is no default thereunder by any party thereto.

                  8.10 Seller has received no unliquidated  advanced,  milestone
or progress payments from or on behalf of its customers under or with respect to
any of the  open  Material  Contracts,  and  there  are no  other  funds  due to
customers (i) on  products  to be shipped by Buyer in any Backlog Job or (ii) on
any products heretofore shipped by Seller.

                  8.11  No   representation   or  warranty  by  Seller  in  this
Agreement,  nor any  statement  or  certificate  furnished or to be furnished to
Buyer  pursuant  hereto  or in  connection  with the  transactions  contemplated
hereby,  contains or will contain any untrue  statement of a material  fact,  or
omits or will omit to state a material  fact  necessary  to make the  statements
contained therein not misleading.

         IX. Representation and Warranties of Buyer. Buyer hereby represents and
warrants to Seller as follows:

                  9.1 Buyer is a corporation duly organized,  validly  existing,
and in good standing under the laws of the State of Delaware.

                  9.2 The  execution  and  delivery  of this  Agreement  and the
performance by Buyer of all of its  obligations  to be performed  hereunder have
been duly authorized by all necessary corporate action.

                  9.3 This  Agreement  and all  obligations  of Buyer  contained
herein are legally  binding on Buyer and  enforceable  in accordance  with their
terms.

                  9.4 The execution and delivery of this  Agreement by Buyer and
the  consummation  by  Buyer of the  transactions  contemplated  hereby  are not
prohibited  by and do not violate any  provision  of the  organic  documents  of
incorporation  of Buyer,  or  violate  any  provision  of law,  or  violate  any
provision, or result in the breach, of, or accelerate or permit the acceleration
of the performance required by, any term of any contract, agreement, indenture,

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mortgage, note, bond, commitment,  license or other instrument to which Buyer is
a party.

                  9.5 No representation  or warranty by Buyer in this Agreement,
nor any statement or certificate furnished or to be furnished to Seller pursuant
hereto or in connection with the transactions  contemplated  hereby,  contain or
will contain any untrue  statement  of a material fact, or omits or will omit to
state a material fact  necessary to make the  statements  contained  therein not
misleading.

         X.  Access and  Information.  Seller  will give to Buyer and its agents
full access during normal  business  hours,  throughout  the period prior to the
Closing,  to such of the  properties,  books,  contracts,  commitments and other
records of Seller  related to the Military  Power Systems  Division of Seller as
Buyer  reasonably  may request.  If the Closing does not take place,  Buyer will
return to Seller all written  material  received  from  Seller  pursuant to such
access.

         XI. Conduct of Business Pending Closing.

                  11.1 Prior to the Closing Seller shall:

                           a) conduct its business  only in the ordinary  course
and in compliance  with  applicable  laws,  and in  furtherance of the foregoing
shall not engage in any  transaction  or make any contract or commitment  except
for full value;

                           b) insure  the items of  tangible  personal  property
included within the Assets against damage or destruction for not less than their
fair market value;

                  11.2 To the  extent  that the  assignment  by  Seller  and the
assumption by Buyer of any Material Contract, or other contract, lease, license,
permit or approval  shall  require  the consent or approval of any third  party,
this  Agreement  shall not constitute an  assignment,  sublease,  subcontract or
assumption  thereof if such attempted  assignment,  sublease or assumption would
constitute a breach thereof.

                  11.3  Until any  novation  agreements  legally  required  with
respect  to  any  Material  Contracts,  or  the  required  consents,  approvals,
novations  or  waivers of  third  parties  with  respect to any other  contract,
lease, license, permit or approval,  have been executed,  Buyer shall perform or
discharge all of such liabilities, responsibilities, obligations and commitments
thereunder,  and shall enjoy all of the rights,  benefits and  entitlements,  of
Seller under same. Pending any novation  agreements  required by law, Seller and
Buyer  shall  take  all  reasonable  action  to  have  Buyer  recognized  by the
respective Government

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<PAGE>

agencies  that are parties to each such Material  Contract as the  subcontractor
Seller.

         XII. Bulk Sale.

                  12.1 Seller shall  indemnify and save and hold Buyer  harmless
from any liabilities  arising from the failure of Buyer or Seller to comply with
any bulk sales or similar law  applicable to the  transactions  contemplated  by
this Agreement.

         XIII. Indemnification

                  13.1 Buyer shall defend,  indemnify and hold harmless  Seller,
its employees,  officers,  directors, agents and affiliates from and against any
and all claims,  demands, causes of action, suits,   judgments,  debts, damages,
losses, liabilities and expenses (including without limitation,  court costs and
attorneys' fees) (each a "Loss" and collectively "Losses"),  and shall reimburse
Seller upon demand for any and all Losses  suffered or incurred by Seller or its
affiliates resulting from or arising out of any of the following:

                           (a) any untrue representation,  breach of warranty or
nonfulfillment  of any covenant or agreement by Buyer contained herein or in any
certificate,  document  or  instrument  delivered  to Seller  pursuant  to or in
connection herewith;

                           (b) any  liabilities of Seller  expressly  assumed by
Buyer pursuant to this Agreement and listed on Schedule 1.2;

                           (c)  incident to any of the  foregoing or incurred in
investigating  or  attempting  to avoid  the same or to  oppose  the  imposition
thereof, or in enforcing this indemnity.

                  13.2 Seller shall defend,  indemnify and hold harmless  Buyer,
its employees,  officers,  directors, agents and affiliates from and against any
and all  Losses,  and shall  reimburse  Buyer upon demand for any and all Losses
suffered or incurred by Buyer or its affiliates resulting from or arising out of
any of the following:

                           (a) any untrue representation,  breach of warranty or
nonfulfillment of any covenant by Seller contained herein or in any certificate,
document or  instrument  delivered  to Buyer  pursuant  hereto or in  connection
herewith;

                           b) any finder's fee or brokerage or other  commission
arising by reason of any  services  alleged to have been  rendered  to or at the
instance of Seller with  respect to this  Agreement  or any of the  transactions
contemplated hereby;

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<PAGE>

                           (c) the  closing of the Plant or the  termination  by
Seller of its employees;

                           d) any claims of  restitution  or  retribution by any
customer,  or any fines or penalties  arising or resulting  from any  proceeding
arising out of facts that arose on or prior to the  Closing  Date now pending or
hereafter  imposed or levied by any competent  entity whether the same is listed
on a Schedule attached hereto or not;

                           e) any costs, whether direct or indirect, of any kind
related to employees now employed by Seller who become employed by Buyer and are
thereafter debarred or otherwise  prohibited by any entity other than Buyer from
working on government contracts, or whose employment is terminated by Buyer as a
result of demands by such an entity;  provided,  however,  that with  respect to
employees now employed by Seller who become employed by Buyer and who spend time
away from work for Buyer, whether in court or otherwise,  in connection with any
legal proceedings related to Seller or its officers, shareholders,  directors or
affiliates, Buyer shall not be indemnified for (i) the cost of the first two (2)
hours per week so spent away from work and (ii) a total of One Thousand  Dollars
($1,000) of expenses incurred by such employees in that regard;

                           f) any curtailment, cancellation or other termination
of any  Material  Contract by any entity  other than Buyer  arising out of facts
that arose on or prior to the Closing Date; and

                           g)  incident to any of the  foregoing  or incurred in
investigating  or  attempting  to avoid  the same or to  oppose  the  imposition
thereof, or in enforcing this indemnity.

                  13.3  The  party  seeking   indemnification   hereunder   (the
"Indemnitee")  shall  give to the party  from  which  indemnification  is sought
hereunder (the "Indemnitor") written notice of any claim which is subject to the
indemnity  obligations  set forth in Section l3.1 or 13.2, as  applicable,  with
sufficient  promptness  so as not to prejudice  the other  party's  interests in
respect of such claim and any obligation of indemnity  arising  therefrom.  Such
notice  shall set forth all facts and other  information  which the party giving
the notice has as to the claim.  The  failure to give  prompt  notice  shall not
affect the rights of the Indemnitee to indemnity  hereunder except to the extent
that such failure either shall have materially  prejudiced the Indemnitor in the
defense of such claim or shall have  increased  the amount of the  obligation of
the Indemnitor.  The Indemnitor  receiving such notice shall, within thirty days
of receipt of such notice,  (a) deny in writing the claim, (b) pay the amount of
the claim if a monetary  amount is involved,  or (c) if a claim of a third party
is involved,  have the right to assume the defense of such claim. The Indemnitor
shall have the exclusive  right to conduct and control,  through  counsel of its
own  choosing,  the defense of any such claim or any action  arising  therefrom,
provided, that in

                                       13
<PAGE>

conducting the defense of any such claim or action,  the Indemnitor  shall,  and
shall cause its counsel to,  consult with the  Indemnitee  and  counsel, if any,
selected  by it  (the  costs  and  fees of  which  counsel  shall  be  borne  by
Indemnitee),  and shall keep such  counsel,  if any,  and the  Indemnitee  fully
advised of the progress  thereof.  If the Indemnitor  fails or refuses to assume
the conduct  and  control of the  defense of any such claim or action,  then the
Indemnitee shall conduct and control such defense; provided, however, that in so
conducting the defense of any such claim or action,  the Indemnitee  shall,  and
shall cause its counsel to,  consult  with the Indemnitor  and counsel,  if any,
selected by it, and shall keep such counsel,  if any, and the  Indemnitor  fully
advised  of  the  progress  thereof.  No  settlement  of  any  claim  for  which
indemnification  is sought  hereunder shall be made without either (x) the prior
written consent of both the Indemnitor and the  Indemnitee,  which consent shall
not be  unreasonably  withheld or delayed,  or (y) the release of the Indemnitee
from all  liability  relating to such claim,  in form and  substance  reasonable
satisfactory to the Indemnitee and its counsel.

                  13.4 In  addition  to  Buyer's  rights of offset  against  the
unpaid portion of the Purchase Price specifically set forth in other Sections of
this Agreement, Buyer has the right to set off against the unpaid portion of the
Purchase  Price any  judgment it may receive for  indemnification  hereunder  in
addition to, and not in  limitation of any other rights Buyer may have at law or
in equity.

                  13.5  The   foregoing   provisions   of  this   Article   XIII
notwithstanding, no claim for indemnification hereunder with respect to breaches
of any  representation  or warranty  provided  in  Sections  8.1 through 8.4 and
Sections  8.6 through  8.11 and  Article IX shall be valid  unless such claim is
made by notice to the  Indemnitor  within two (2) years after the Closing  Date.
Other claims for indemnification may be made at any time.

         XIV Miscellaneous.

                  14.1  Seller and Buyer may amend this  Agreement  at any time,
but only by written instrument duly authorized and executed by each of them.

                  14.2 No waiver of any term,  provision,  or  condition of this
Agreement,  whether by conduct or otherwise, in any one of more instances, shall
be deemed to be, or  construed  as, a further or  continuing  waiver of any such
term, provision,  or condition or of any other term, provision,  or condition of
this Agreement.

                  14.3 If any one or more of the  provisions  contained  in this
Agreement is held for any reason to be invalid, illegal, or unenforceable in any
respect, such invalidity,  illegality,  or unenforceability shall not affect any
other provision hereof and this Agreement shall be construed as if such invalid,
illegal, or unenforceable provision had never been contained herein.

                                       14
<PAGE>

                  14.4 This Agreement,  together with the Schedules and Exhibits
attached  hereto,  represents  the entire  agreement  between the  parties  with
respect to the subject matter hereof.

                  14.5 All  terms  and  provisions  of this  Agreement  shall be
binding upon and inure to the benefit of and be  enforceable  by and against the
respective  successors  and  assigns  of the  parties  hereto.  Nothing  in this
Agreement,  expressed  or implied, is intended to confer upon any person,  other
than the parties hereto and their respective  successors and assigns, any rights
or remedies under or by reason of this Agreement.

                  14.6 All notices to a party shall be  addressed  to such party
at the address set forth  below or to such other place as may be  designated  by
written notice to the other party.  Notice shall be sufficient when delivered by
hand; when sent by telecopy with the original thereof posted  first-class  mail,
postage prepaid, within two (2) business days thereafter;  when posted certified
mail, postage prepaid,  return receipt requested; or when delivered by a private
courier,  requesting evidence of receipt as part of its service. Any such notice
shall be addressed to the party at its telecopy number or its address  described
below, and shall be effective when first received.  Unless otherwise notified in
writing,  each party  shall  direct all sums  payable to the other  party at its
address for notice purposes.  For purposes hereof,  the addresses of the parties
shall be as follows:

         Seller:

               85 Horsehill Road
               Cedar Knolls, NJ 07927

               Attention: Mr. Norman R. Wolf, III, President

               Telecopier: 904-684-0630

         With a copy to:

               Robert A. Knee, Esquire
               Rand, Algeier, Tosti & Woodruff
               Courthouse Plaza
               60 Washington Street
               Morristown, NJ 07960

               Telecopier: 201-984-0430

                                       15
<PAGE>

         Buyer:

                ST Keltec Corporation
                In care of Signal Technology Corporation
                975 Benicia Avenue
                Sunnyvale, California 94086

                Attention: Mr. Michael D. Smith, President

                Telecopier: 408-245-3396

         With a copy to:

                Harry R. Hauser, Esquire
                Gadsby & Hannah LLP
                125 Summer Street
                Boston, MA 02110-1616

                Telecopier: 617-345-7050

         14.7 This Agreement shall in all respects be construed,  enforced,  and
given effect according to the laws of the State of Delaware.

         14.8  The  headings  contained  in this  Agreement  are  for  reference
purposes only and shall not affect in any way the  interpretation of substantive
provisions of this Agreement.

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

                                       16
<PAGE>

         14.10  Each party  represents  and  warrants  to the other that (i) all
negotiations relative to this Agreement have been carried on by it directly with
the other,  without the intervention of any person on behalf of the former,  and
(ii) it will indemnify the other and hold it harmless  against and in respect of
any claim for brokerage or other commissions  relative to this Agreement,  or to
the   transactions   contemplated   hereby,   in  violation  of  the   foregoing
representation and warranty.

         IN WITNESS  WHEREOF,  the parties  have  executed  this  Agreement as a
sealed instrument on the date first above written.

  TRANSISTOR DEVICES INC.            ST KELTEC CORPORATION

/s/ Norman R. Wolf, III                   /s/ Michael D. Smith
-------------------------------          --------------------------------
By: Norman R. Wolf, III              By: Michael D. Smith
Title: President                             President
       Military Power Systems & Division


The undersigned Signal Technology Corporation hereby unconditionally  guaranties
the performance by ST Keltec  Corporation of its obligations  under and pursuant
to the foregoing Agreement.


                         SIGNAL TECHNOLOGY CORPORATION

                         /s/ Dale L. Peterson
                         ----------------------------------------
                         By: Dale L. Peterson, Chairman of the
                         Board of Directors

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