PURCHASE AGREEMENT

        THIS PURCHASE AGREEMENT is made as of the 31st day of December, 1997,
   by and among the purchasers whose names and addresses are shown on the
   signature page to this Purchase Agreement (each a "Purchaser" and together
   the "Purchasers") and METALCLAD CORPORATION, a Delaware corporation, with
   its principal offices at 2 Corporate Plaza, Suite 125, Newport Beach,
   California 92660, United States of America (the "Company").

                                   WITNESSETH:

        WHEREAS, the Company is offering to sell up to U.S. $2,200,000.00
   Principal Amount of its Zero Coupon Secured Notes, each Note to be dated
   and issued as of the date hereof and to be due December 31, 2002 (each a
   "Note" and together the "Notes"), the Purchasers or any other holders of
   the Notes being hereinafter sometimes referred to as the "Noteholders" and
   individually as a "Noteholder", and the Principal Amount of any Note being
   hereinafter sometimes referred to as the "Principal Amount"), each Note to
   be substantially in the form of Exhibit A annexed hereto and made a part
   hereof;

        WHEREAS, under certain circumstances described below and in the
   Notes, the Notes may become convertible into the Company s Common Stock,
   par value U.S. $.10 per share (the "Common Stock"), and may thereafter be
   so converted at the option of the holder of such Note, the Company being
   obligated to issue to the holder of each Note 1,000 "Warrants"
   (hereinafter defined) to purchase the Common Stock of the Company for each
   U.S. $1,000.00 of the "Purchase Price" (hereinafter defined) of the Notes
   then outstanding (whether or not the Notes are then converted by the
   holder thereof), and under certain further circumstances described below,
   the Company may acquire the right, but not the obligation, to require the
   holders of the Notes to convert the Notes into Common Stock (the Company
   previously having issued the Warrants referred to above), neither of which
   circumstances are certain to occur;

        WHEREAS, under certain circumstances described below, on or after
   April 15, 1999: (A) the Noteholders may acquire the right to require the
   Company to redeem the Notes prior to maturity and concurrently therewith
   to issue to the Noteholders 1,000 Warrants to purchase Common Stock for
   each U.S. $1,000.00 of the Purchase Price of the Notes then outstanding
   (provided such Warrants have not previously been issued to the
   Noteholders); and (B) the Company may acquire the right to prepay the
   Notes prior to maturity provided concurrently with the exercise of such
   right, the Company shall issue to the Noteholders 1000 Warrants for each
   such U.S. $1,000.00 of the Purchase Price of the Notes then outstanding
   (provided such Warrants have not previously been issued to the
   Noteholders);
        WHEREAS, the obligations of the Company under the Purchase Agreement
   and the Notes are entitled to the benefits of the Pledge Agreement
<PAGE>




   mentioned below;

        WHEREAS, the placement of the Notes has been arranged directly by and
   between the Company and the Purchasers; and

        WHEREAS, the Company has furnished to the Purchasers, in accordance
   with Section 4.2 (c) hereof, the latest annual and quarterly reports and
   other public information referred to below filed with the United States
   Securities and Exchange Commission ("SEC") constituting all of the filings
   of any nature which the Company has filed and was required to file with
   the SEC from and including January 1, 1997 through and including December
   31, 1997;

        NOW, THEREFORE, in consideration of the premises and the mutual
   covenants contained in this Purchase Agreement, the undersigned agree as
   follows:

   Section 1.  Agreement to Sell and Purchase the Notes.

           1.1 On the basis of the representations, warranties and agreements
   contained in this Purchase Agreement but subject to the terms and
   conditions set forth in this Purchase Agreement, the Company agrees to
   issue and sell to each Purchaser, and each Purchaser agrees to purchase
   from the Company on December 31, 1997, or on such other date as shall be
   mutually agreed upon by the Company and the Purchasers (the "Closing
   Date"), the aggregate Principal Amount of Notes set forth opposite such
   Purchaser s name on Schedule 1 annexed to this Purchase Agreement and made
   a part hereof. The Purchase Price for each Note shall be equal to the
   Principal Amount of such Note multiplied by .68181819 (herein with
   reference to each Note, the "Purchase Price") The total Purchase Price of
   all Notes shall equal U.S. $1,500.000.00 (U.S. $2,200,000.00 Principal
   Amount times .68181819).

                1.2 Payment of the Purchase Price for each Note shall be made
   by each Purchaser to the Company by wire transfer net of all wire transfer
   charges of immediately available funds for value on December 31, 1997 or
   such earlier date as the Company and the Purchasers shall agree in United
   States dollars to:

             Account:      Metalclad Corporation
             Account No.:  040116487
             ABA No.:      122003516
             Bank:         Sanwa Bank, Santa Ana Main Branch
                           1622 North Main Street
                           Santa Ana, California 92701
                           United States of America

   PURCHASER MUST INSTRUCT ITS PAYING BANK PRIOR TO THE CLOSING DATE TO WIRE
   FUNDS FOR SAME DAY VALUE ON OR BEFORE THE CLOSING DATE, IN ORDER TO HAVE
   SUCH FUNDS TRANSFERRED TO THE ABOVE ACCOUNT PRIOR TO THE CLOSING.

        Alternatively, at the option of any Purchaser, payment may be made in
   escrow in advance of the Closing Date by wire transfer of the Purchase
   Price to be paid by such Purchaser in immediately available funds to:




   <PAGE>                             2
<PAGE>





             Account:        Gilmartin, Poster & Shafto Trust
             Account No.:    04278931
             ABA No.:        0210000089
             Bank:           Citibank, N.A.
                             One Broadway, New York, New York 10004
                             United States of America
                             Attention:  Ms. Lena Circosta

        Should the funds be transferred in such alternative manner and should
   the Closing take place at a time of day when it is no longer practicable
   or possible to wire transfer said funds to the above mentioned account of
   the Company, Purchaser will cause Messrs. Gilmartin, Poster & Shafto
   ("Agent"), concurrently with the Closing, to: (i) issue and deliver to the
   Company the Agent s irrevocable and unconditional confirmation that
   concurrently with the Closing the Agent holds such Purchase Price solely
   and exclusively for the benefit of the Company, and (ii) issue and deliver
   to Citibank, N.A. no later than the opening of business on the following
   Business Day its irrevocable and unconditional instructions to Citibank,
   N.A. forthwith to wire transfer net of all wire transfer charges the total
   Purchase Price of all the Notes to the Company s account with said Sanwa
   Bank above mentioned.

           1.3  The completion of the sale and purchase of the Notes (the
   "Closing") shall take place at the offices of the Agent, 5th Floor, One
   William Street, New York, New York 10004, at 10:00 a.m. local time on the
   Closing Date. At the Closing, the Company shall deliver to the Agent for
   the account of Purchasers, one Note for each Purchaser in the aggregate
   Principal Amount of the Note being purchased by such Purchaser, such Note
   being registered in the name of such Purchaser or its nominees,
   representing the Notes being purchased by each Purchaser, against payment
   of the Purchase Price therefor in immediately available funds to the
   account of the Company designated in or otherwise as provided in Section
   1.2 of this Purchase Agreement. Upon mutual Agreement of the Company and
   the Purchasers, the Closing may take place earlier than December 31,1997,
   but such earlier Closing shall have no effect on the dating of any
   documents, including the Notes. In the event of such earlier closing the
   Company shall pay interest to the Purchasers at the rate of 9 1/3% per
   annum from the date of receipt of the Purchase Price by the Company to and
   including December 30, 1997, such interest to be paid by the Company to
   the Agent for distribution to the Purchasers no later than January 10,
   1998.

           1.4  The obligation of each Purchaser to purchase the Notes at the
   Closing shall be conditional upon the delivery by the Company to the
   Agent, on behalf of all the Purchasers, of:

                1.4.1  The Pledge Agreement by and between the Company and
   the Agent dated as of the Closing Date substantially in the form of
   Schedule 2 annexed hereto and made a part hereof pursuant to which the
   Company pledges to the Agent for the benefit of the Noteholders and as
   security for, among other things, the obligations of the Company under the
   Notes and this Purchase Agreement, all of the issued and outstanding
   capital stock ("MIC Shares") of the Company s wholly owned subsidiary,
<PAGE>




   Metalclad Insulation Corporation ("MK"), a California corporation.

                1.4.2  Evidence satisfactory to the Agent of the authority of
   the persons executing the Notes, the Pledge Agreement and all other
   transaction documents on behalf of the Company.

                1.4.3  The Notes.

                1.4.4  The MIC Share Certificates and the MIC Stock Powers.

                1.4.5  UCC Financing Statements relating to the Collateral to
   be filed in such jurisdictions as are determined appropriate by the Agent.

   Section 2.   Contingent Rights of the Noteholders and the Company to
   Require Conversion of the Notes; Obligation of the Company to Issue
   Warrants Under Certain Circumstances; Right of the Noteholders to Require
   Redemption of the Notes After April 15. 1999; Right of the Company to
   Prepay the Notes Prior to Conversion After April 15. 1999; Certain Rights
   of Noteholders Upon the Occurrence of an Event of Default; Registration
   Rights.

           2.1  When used in this Purchase Agreement, the following terms
   shall have the following meanings:

                2.1.1  "Agent" shall have the meaning set forth in Section
   1.2 of this Purchase Agreement.

                2.1.2  "Business Day" shall mean a day on which banks are
   open for business in each of Los Angeles, California, New York City, New
   York, London, England and the Channel Islands.

                2.1.3  "Closing Date" shall have the meaning set forth in
   Section 1.1 of this Purchase Agreement.

                2.1.4  "Common Stock" shall have the meaning set forth in the
   second recital of this Purchase Agreement.

                2.1.5  "Company" shall have the meaning set forth in the
   first paragraph of this Purchase Agreement.

                 2.1.6  "Conversion Rate" shall mean 667 shares of Common
   Stock for each U.S. $1,000.00 of the Purchase Price of any Note, which
   number of shares shall be subject to adjustment pursuant to the OFW
   Ratchet Clause.

                 2.1.7  "Conversion Shares" shall mean the shares of Common
   Stock of the Company issuable upon conversion of the Notes.

                 2.1.8  "Default Rate" shall be a per annum rate of interest
   equal to (i) the greater of (w) 15% or (x) the sum of 6% plus the rate
   announced from time to time by Citibank, N.A. as its prime or stated rate
   for unsecured short term U.S. dollar commercial loans in the United
   States.





   <PAGE>                             4
<PAGE>




                 2.1.9  "Discounted Present Value" with respect to any Note
   shall be based on a simple interest rate of 9 1/3% per annum without
   compounding and shall mean with respect to any Note an amount calculated
   in accordance with the following formula:

                            n
                           ----
        PP + (46 2/3% PP x 1826)

   wherein PP equals the Purchase Price of a Note, n equals the number of
   days elapsed from and including the date of issuance of any Note to and
   including (A) the date of payment pursuant to the exercise by any
   Noteholder of its contingent right of redemption or (B) the date of
   payment pursuant to the exercise by the Company of its contingent right of
   prepayment or (C) the date of occurrence of an Event of Default, as the
   case may be, and 1826 equals the total number of days from and including
   the date of issuance to and including the date of maturity of the Note
   (December 31, 1997 through and including December 31, 2002).

                 2.1.10  "Event of Default" shall mean any of the events
   referred to in Section 7 of this Purchase Agreement; and "Events of
   Default" shall mean more than one such event.

                 2.1.11  "Mandatory Redemption" shall mean the exercise by
   any Noteholder, at any time after April 15, 1999 and prior to the timely
   receipt by such Noteholder of notice from the Company of the occurrence of
   a Trigger Event, of the right to require the Company to redeem such Note
   at a price equal to the Discounted Present Value from the date of payment
   of the redemption price and the concurrent delivery by the Company to such
   Noteholder of 1,000 Warrants for each $1,000.00 of the Purchase Price of
   such Note.

                 2.1.12  "Market Price" shall have the meaning set forth in
   the form of Warrant annexed to this Purchase Agreement as Exhibit B and
   made a part hereof.
                 2.1.13  "MIC Shares" shall mean all of the issued and
   outstanding capital stock of Metalclad - Insulation Corporation, a
   California corporation.

                 2.1.14  "MIC Stock Powers" shall mean stock powers executed
   in blank, with signature guaranteed, in form sufficient to enable the
   Agent to transfer the registered and beneficial ownership of the whole or
   any portion of the MIC Shares pursuant to the terms of the Pledge
   Agreement.

                 2.1.15  "MTLC Optional Conversion Event" shall mean the
   occurrence of both of (i) the receipt of timely notice by the Noteholder
   of the occurrence of a Trigger Event, (ii) the receipt by the Noteholders
   of notice from the Company that the Market Price of the Common Stock has
   equaled or exceeded U.S. $3.00 per share for not less than 60 consecutive
   trading days, which such notice must be given by the Company not later
   than 15 calendar days after the occurrence of such MTLC Optional
   Conversion Event.





   <PAGE>                             5
<PAGE>




                 2.1.16  "Noteholder" and "Noteholders" shall have the
   meanings set forth in the first recital of this Purchase Agreement.

                 2.1.17  "Obligations" shall have the meaning set forth in
   Pledge Agreement.

                 2.1.18  "OFW Ratchet Clause" shall have the meaning set
   forth in the form of Warrant annexed hereto as Exhibit B and made a part
   hereof.

                 2.1.19  "Pledge Agreement" shall mean that certain Pledge
   Agreement by and between the Company and the Agent dated as of December
   31, 1997, substantially in the form of Exhibit C annexed hereto and made a
   part hereof, pursuant to which, among other things, the Company pledges to
   the Agent for the benefit of the Noteholders and as security for all of
   the Obligations, the MIC Shares.

                 2.1.20  "Principal Amount" shall mean with respect to all of
   the Notes, U.S. $2,200,000, and with respect to any Note, shall mean the
   Purchase Price thereof multiplied by 1.466666667.

                 2.1.21  "Purchaser" and "Purchasers" shall have the meanings
   set forth in the first paragraph of this Purchase Agreement.

                 2.1.22  "Purchase Price" of any Note shall mean the
   Principal Amount thereof multiplied times .68181819.

                 2.1.23  "SEC" shall have the meaning set forth in the last
   recital of this Purchase Agreement.

                 2.1.24  "Total Interest" in respect of any Note shall mean
   the total interest thereon from the date of issuance to the date of
   maturity and shall be equal to the Principal Amount of such Note
   multiplied times .318181.

                 2.1.25  "Trigger Event" shall mean the timely receipt by the
   Noteholder of Notice from the Company that the Market Price of the Common,
   Stock shall have equaled or exceeded U.S. $1.50 per share for a period of
   10 consecutive trading days (which Notice the Company shall be obligated
   to give upon the first occurrence thereof).

                 2.1.26  "Warrant" shall mean the non-redeemable right to
   purchase one share of the Common Stock at the Warrant Exercise Price; and
   "Warrants" shall mean the plural thereof, each Warrant to be substantially
   in the form of Exhibit B annexed hereto and made a part hereof.

                 2.1.27  "Warrant Exercise Price" shall mean U.S. $1.50 per
   share of Common Stock as the same may be adjusted pursuant to the OFW
   Ratchet Clause.

                 2.1.28  "Warrant Shares" shall mean the shares of Common
   Stock of the Company issuable upon exercise of the Warrant.

           2.2  Upon the occurrence of a Trigger Event following the issuance




   <PAGE>                             6
<PAGE>




   of the Notes: (i) the Notes shall become convertible at the option of the
   holder thereof at the Conversion Rate; (ii) the Company shall issue to
   such holder 1,000 Warrants for each $1,000.00 of the Purchase Price of
   such Note; and (iii) the right of the Noteholder to receive Total Interest
   in respect of his Note, whether accrued or to be accrued, shall be
   canceled if, and only if, such Note is actually converted by such
   Noteholder following the owner of a Trigger Event or (B) following the
   occurrence of an MTLC Optional Conversion Event as hereinafter provided.

           2.3  Upon the occurrence of an MTLC Optional Conversion Event,
   provided the Noteholders shall have received notice thereof not later than
   15 calendar days following the occurrence thereof, the Company shall have
   the right (but not the obligation) to require the Noteholders to convert
   the Notes into Common Stock at the Conversion Rate at any time prior to
   maturity of the Notes. In the event such notice is not received by such
   Noteholder within such 15 calendar days, the right of the Company to
   require such conversion shall lapse without prejudice to the right of the
   Company to require such conversion upon the occurrence of an MTLC Optional
   Conversion Event provided notice thereof is given to the Noteholders
   within such 15 day period. Upon the exercise by the Company of such right
   to require conversion following the occurrence of an MTLC Optional
   Conversion Event, (A) the Notes shall be converted into Common Stock at
   the Conversion Rate and (B) the Company shall, concurrently with such
   conversion, issue to such Noteholder 1000 Warrants for each $1000.00 of
   Purchase Price of such Note (unless such Warrants have previously been
   issued to such Noteholder).

           2.4  In the event a Trigger Event shall not have occurred on or
   before April 14, 1999, the holder of any Note shall thereafter have the
   right (but not the obligation) to require the Company to redeem such Note
   and upon the exercise of such right, the Company will (i) pay to such
   Noteholder the Discounted Present Value of such Note calculated to the
   date of payment thereof, which payment shall be effected by the Company
   within 30 calendar days following the date of such demand for redemption,
   and (ii) issue to such holder 1,000 Warrants for each $1,000.00 of the
   Purchase Price of such Note.

           2.5  At any time after April 15, 1999 prior to the exercise (i) by
   any Noteholder or the Company of their rights of conversion pursuant to
   Sections 2.2 or 2.3, or (ii) by any Noteholder of its right of redemption
   under Section 2.4, the Company may, but shall not be required to, prepay
   the Notes in whole but not in part by (A) paying to each Noteholder the
   Discounted Present Value of his Note calculated to the date of such
   prepayment, and (B) issuing to each Noteholder 1,000 Warrants for each
   $1,000.00 of the Purchase Price of his Note (unless such Noteholders shall
   have previously received such amount of Warrants).

           2.6  Upon the occurrence of an Event of Default and so long as the
   same shall be continuing, any Noteholder shall have the right to declare
   his Note to be in default. In the event of any such declaration the
   Discounted Present Value of such Note shall be calculated to the date of
   the occurrence of such Event of Default and, (i) thereafter, such
   Discounted Present Value of the Note shall bear interest at the Default
   Rate until all amounts due such Noteholder are paid in full, and (ii)




   <PAGE>                             7
<PAGE>




   unless previously issued to such Noteholder, the Company will forthwith
   issue to the Noteholder 1,000 Warrants for each $1,000.00 of the Purchase
   Price of such Note. Upon the occurrence of an Event of Default any
   Noteholder may instruct the Agent to exercise any one or more or all of
   the Agent s rights under the Pledge Agreement, all without prejudice to
   the Noteholders  rights in law or equity.

           2.7  If the SEC or any other agency of the government of the
   United States abolishes, modifies or otherwise changes the terms of
   Regulation S or Rule 144 promulgated under the Securities Act of 1933, as
   amended, so as to (i) extend the holding period under Regulation S to a
   period greater than 40 days, or (ii) extend the holding period under Rule
   144 to greater than one year, the Purchasers adversely affected thereby
   shall have the registration rights set forth in the Registration Rights
   Agreement attached hereto as Exhibit D and incorporated herein by this
   reference.

   Section 3.  Representations and Warranties of the Company.

        The Company hereby represents and Warrants to each Purchaser as
   follows:

           3.1  Organization and Qualification. The Company is a corporation
   duly organized, validly existing and in good standing under the laws of
   the State of Delaware and has all requisite corporate power and authority
   to own and lease its properties and to conduct its business as presently
   conducted and as described in the Offering Memorandum. The Company and its
   subsidiaries are duly qualified to do business as foreign corporations and
   are in good standing in every jurisdiction where such qualification is
   required by controlling law and where the failure to so qualify would have
   a material adverse effect on the Company and its subsidiaries, taken as a
   whole.

           3.2  MIC Shares. The MIC Shares consist of 1,000 shares of Common
   Stock, no par value, represent all of the issued shares of capital stock
   of the Company, have been duly and validly authorized and issued, and are
   fully paid and nonassessable. The MIC Shares are owned directly by the
   Company and are free and clear of any claim, lien, security interest,
   mortgage, pledge, charge or other encumbrance of any nature whatsoever.

           3.3  Due Execution. Delivery and Performance of the Purchase
   Agreement. The execution, delivery and performance of this Purchase
   Agreement, the Notes, the Pledge Agreement, the Warrant, and all other
   documents delivered by the Company in connection with this Purchase
   Agreement (a) have been duly authorized by all requisite corporate action
   of the Company, and (b) will not violate (i) the Certificate of
   Incorporation or Bylaws of the Company or (ii) any law applicable to the
   Company, any of its subsidiaries or any rule, regulation or order of any
   court or governmental agency or body having jurisdiction over the Company
   or any of its subsidiaries or (iii) any provision of any indenture,
   mortgage, agreement, contract or other instrument to which the Company is
   bound.

           3.4  Issuance and Delivery of the Conversion Shares and the




   <PAGE>                             8
<PAGE>




   Warrant Shares. The offer, issuance, sale and delivery of the Conversion
   Shares and the Warrant Shares, as in accordance with the Purchase
   Agreements, have been duly authorized by all requisite corporate action of
   the Company. The Conversion Shares and the Warrant Shares, when issued,
   will conform to the terms of the Common Stock set forth in the Company s
   Certificate of Incorporation. The Conversion Shares when issued pursuant
   to the conversion of the Note and this Purchase Agreement, and the Warrant
   Shares, when exercised in accordance with the Warrant and this Purchase
   Agreement, will be duly and validly issued and outstanding, fully paid and
   non-assessable, will not be subject to any pre-emptive or similar right,
   and Purchaser will receive good and valid record title to the Conversion
   Shares and the Warrant Shares, respectively, free and clear of any claim,
   lien, security interest, mortgage, pledge, charge or other encumbrance of
   any nature whatsoever, except such as may have been created by the
   Purchaser. No consent or approval by the stockholders of the Company or of
   any other person is required to be obtained by the Company for the
   consummation of the issuance, sale and delivery of the Conversion Shares
   and the Warrant Shares pursuant to the terms of this Purchase Agreement.
   The Conversion Shares and the Warrant Shares have been duly and validly
   authorized and reserved for issuance.

           3.5  Notes and Warrants Authorized. At the Closing, the Notes and
   the Warrants will be duly and validly executed and delivered by the
   Company and will constitute the valid and legally binding obligations of
   the Company, enforceable against the Company in accordance with their
   respective terms, except as the enforceability thereof may be limited by
   any applicable bankruptcy, insolvency, reorganization or other similar
   laws relating to or affecting the enforcement of creditors  rights
   generally and by general equitable principles, regardless of whether such
   enforceability is considered in a proceeding in equity or at law.

           3.6  Compliance with Regulation S. The Company is a "reporting
   issuer" (as defined in Regulation S promulgated by the SEC). The Company,
   its affiliates and any person acting on behalf of, or as agent of, any of
   the foregoing, whether as principal or agent, (a) has offered and sold the
   securities which are the subject of this Purchase Agreement, including the
   Notes, the Conversion Shares and the Warrant Shares (the "Securities") to
   the Purchasers only in an "offshore transaction" (as defined in Regulation
   5), (b) has not engaged with respect to the Securities in any "directed
   selling efforts" (as defined in Regulation 5) in or directed toward the
   United States, and (c) has complied with all "offering restrictions" (as
   defined in Regulation 5) in respect of the Securities.

   Section 4.  Representations. Warranties and Covenants of Purchaser.

        Each Purchaser hereby represents, warrants and covenants to the
   Company as follows:

           4.1  Compliance with United States Securities Laws. Each Purchaser
   understands and acknowledges that (a) the Securities have not been and
   will not be registered under the Securities Act, and may not be offered or
   sold in the United States or to, or for the account or benefit of, any
   "U.S. person" (as defined in Regulation 5, which definition is set out in
   Schedule 4 hereto), unless such securities are registered under the




   <PAGE>                             9
<PAGE>




   Securities Act and any applicable state securities or blue sky laws or
   such offer or sale is made pursuant to exemptions from the registration
   requirements of such laws, (b) the Notes may not be converted and the
   Warrants may not be exercised in the United States or by or on behalf of a
   "U.S. person" (as defined in Regulation 5) unless the Conversion Shares,
   the Warrants and the Warrant Shares are registered under the Securities
   Act and any applicable state securities or blue sky laws or exemptions
   from the registration requirements of such laws are available, and (c) the
   Securities are being offered and sold pursuant to the terms of Regulation
   S under the Securities Act, which permits securities to be sold to non-
   "U.S. persons" in "offshore transactions" (as defined in Regulation 5),
   subject to certain terms and conditions.

           4.2  Status of Purchaser.

                (a)  Purchaser is purchasing the Securities for its own
   account or for persons or accounts as to which it exercises investment
   discretion. Neither Purchaser nor such person or account is a "U.S.
   person" (as defined in Regulation 5).  Purchaser has executed this
   Purchase Agreement outside the United States. The offer to Purchaser and
   sale of the Securities has occurred outside the United States.

                (b)  Purchaser (and any person or account on whose behalf
   Purchaser is purchasing) is knowledgeable, sophisticated and experienced
   in making, and is qualified to make, decisions with respect to investments
   in restricted securities such as this Purchase Agreement and the
   Securities) and has requested, received, reviewed and considered all
   information it deems relevant in making a decision to execute this
   Purchase Agreement and to purchase the Securities. Purchaser acknowledges
   that it is capable of evaluating the merits and risks of an investment in
   the Securities.

                (c)  Purchaser acknowledges that the Company has made
   available to Purchaser (i) the latest annual and quarterly reports and
   other public information referred to below filed with the SEC. including
   all of the filings of any nature which the Company has filed and was
   required to file with the SEC from and including January 1, 1997 through
   and including December 31, 1997, (ii) the opportunity to ask questions and
   receive answers concerning the terms and conditions of the offering of the
   Securities, and (iii) the opportunity to obtain any additional information
   that the Company possesses or can acquire without unreasonable effort or
   expense that is necessary to verify the accuracy of the information
   furnished in accordance herewith.

                (d)  Purchaser has agreed to purchase the Securities for
   investment purposes and not with a view to a distribution. To the extent
   that the Shares and the Warrants comprising the Securities are registered
   in the name of Purchaser s nominee, Purchaser confirms that such nominee
   is acting as custodian for Purchaser of such securities.

           4.3  Restrictions on Transfer or Re-Sale.

                (a)  For a period of 40 days following the Closing Date, or
   if the Securities come to be issued on more than one day, the latest




   <PAGE>                             10
<PAGE>




   Closing Date (the "Restricted Period"), Purchaser shall not engage in any
   activity for the purpose of, or which may reasonably be expected to have
   the effect of, conditioning the market in the United States for the
   Securities, or offer, sell, transfer, pledge or otherwise dispose of the
   Securities, or any interest therein in the United States to, or for the
   account or benefit of, a "U.S. person" (as defined in Regulation 5).

                (b)  Purchaser understands that the Conversion Shares or
   Warrant Shares or any interest therein are only transferable on the books
   and records of the Transfer Agent and Registrar of the Common Stock of the
   Company and, with respect to the Notes and the Warrants, on the books and
   records of the Company. Purchaser further understands that the Transfer
   Agent and Registrar and the Company will not register any transfer of the
   Securities or any interest therein which the Company in good faith
   believes violates the restrictions set forth herein.

                (c)  Unless registered under the Securities Act, any proposed
   offer, sale, transfer, pledge or other disposition during the Restricted
   Period of any of the Securities or any interest therein shall be subject
   to the condition that Purchaser must deliver to the Company (i) a written
   certification that neither record nor beneficial ownership of the
   Securities has been offered or sold in the United States or to, or for the
   account or benefit of, any "U.S. person" (as defined in Regulation 5),
   (ii) a written certification of the proposed transferee that such
   transferee (or any account for which such transferee is acquiring such
   Securities is not a "U.S. person (as defined in Regulation 5), that such
   transferee is acquiring such Securities or such interest therein, as the
   case may be, for such transferee s own account (or an account over which
   it has investment discretion) and for investment and not with a view to a
   distribution, and that such transferee is knowledgeable of and agrees to
   be bound by the restrictions on re-sale set forth in this section and
   Regulation S during the Restricted Period, and (iii) a written opinion of
   United States counsel, in form and substance satisfactory to the Company,
   to the effect that the offer, sale, transfer, pledge or other disposition
   of such Securities, or any interest therein, as the case may be, are
   exempt from registration under the Securities Act and any applicable state
   securities or blue sky laws.

                (d)  Purchaser will not, directly or indirectly, voluntarily
   offer, sell, pledge, transfer or otherwise dispose of (or solicit any
   offers to buy, purchase or otherwise acquire or take a pledge oh its
   rights under this Purchase Agreement otherwise than in compliance with the
   Securities Act, any applicable state securities or blue sky laws and any
   applicable securities laws of jurisdictions outside the United States, and
   the rules and regulations promulgated thereunder.

                (e)  The parties acknowledge the contemplated transfer of a
   portion of the principal amount of the Note and agree that a portion of
   the Note may be transferred to a "U.S. person" (as defined in Regulation
   5) on the condition that the transferee agrees to accept the imposition of
   the following legend restricting further transfer of re-sale:

   THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
   SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND




   <PAGE>                             11
<PAGE>




   CANNOT BE SOLD OR TRANSFERRED UNLESS (i) A REGISTRATION STATEMENT UNDER
   THE SECURITIES ACT OF 1933, AS AMENDED, IS THEN IN EFFECT WITH RESPECT TO
   THE SECURITIES REPRESENTED HEREBY; OR (ii) A WRITTEN OPINION FROM LEGAL
   COUNSEL TO THE ISSUER IS OBTAINED TO THE EFFECT THAT AN EXEMPTION FROM
   REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY
   APPLICABLE STATE SECURITIES LAWS IS AVAILABLE WITH RESPECT TO THE PROPOSED
   SALE OR TRANSFER AND THAT NO SUCH REGISTRATION IS REQUIRED; OR (iii) A NO
   ACTION LETTER OR ITS THEN EQUIVALENT WITH RESPECT TO SUCH SALE OR TRANSFER
   HAS BEEN ISSUED BY THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION.

           4.5  Exercise of the Warrants. Purchaser understands that the
   Warrants may not be exercised by or on behalf of any "U.S. person" (as
   defined in Regulation 5) unless the Warrants and the Warrant Shares
   issuable upon exercise thereof are registered under the Securities Act or
   an exemption from such registration is available. Accordingly, Purchaser
   understands that it is a condition to the exercise of the Warrants that
   (a) any shares of Common Stock issuable upon such exercise will not be
   delivered within the United States except in circumstances constituting an
   "offshore transaction" (as defined in Regulation 5) or unless such shares
   of Common Stock have been registered under the Securities Act or an
   exemption from such registration is available, and (b) the holder
   exercising the Warrants must deliver to the Company (i) a written
   certification that such holder is not a "U.S. person" (as defined in
   Regulation 5) and that the Warrants are not being exercised on behalf of,
   or for the account or benefit of, a "U.S. person" (as defined in
   Regulation 5) or (ii) a written opinion of United States counsel, in form
   and substance satisfactory to the Company, to the effect that the Warrants
   and the shares of Common Stock issuable upon exercise of the Warrants have
   been registered under the Securities Act or are exempt from registration
   under the Securities Act.

           4.6  Due Execution. Delivery and Performance of the Purchase
   Agreement and Other Obligations. Purchaser has full right, power,
   authority and capacity to enter into this Purchase Agreement and to
   consummate the transactions contemplated hereby; if Purchaser is a company
   or corporation, the execution, delivery and performance of this Purchase
   Agreement by Purchaser have been duly authorized by all requisite
   corporate action of Purchaser. Upon the execution and delivery of this
   Purchase Agreement by Purchaser, this Purchase Agreement shall constitute
   the legal, valid and binding obligations of Purchaser, except as the
   enforceability thereof may be limited by any applicable bankruptcy,
   insolvency, reorganization or other similar laws relating to or affecting
   the enforcement of creditors rights generally and by general equitable
   principles, regardless of whether such enforceability is considered in a
   proceeding in equity or at law.

   Section 5.  Representations  and Warranties  at the  Closing; Survival  of
   Representations. Warranties and Agreements.

           5.1  Each of the parties hereto acknowledges that each of its
   respective representations and warranties contained in this Purchase
   Agreement is true and correct as of the date of this Purchase Agreement.

           5.2  Notwithstanding any investigation made by either party to




   <PAGE>                             12
<PAGE>




   this Purchase Agreement, all covenants, agreements, representations and
   warranties made by the Company and Purchaser herein and in the Securities
   delivered pursuant hereto shall survive the execution of this Purchase
   Agreement, the delivery to Purchaser of the Securities, and the receipt by
   the Company of payment for the Securities.

   Section 6.  Certain Agreements of the Company.

        The Company hereby covenants and agrees with Purchaser as follows:

           6.1  The Company shall cause MIC to preserve and maintain its
   corporate existence and all of its right, privileges and franchises in
   every jurisdiction in which the character of the property owned or the
   nature of the business transacted makes licensing of qualification
   necessary relative to the conduct of MIC s business.

           6.2  The Company shall not permit MIC to encumber, mortgage,
   pledge, assign or grant any security in MIC s assets to anyone other than
   Purchaser. The shall cause MIC to place notations on MIC s books of
   account and financial statements to disclose Purchaser s interest in MIC 
   assets.

           6.3  The Company shall cause MIC to keep and maintain MIC s assets
   in good operating condition, reasonable wear and tear excepted.

           6.4  The Company shall not permit MIC to make any capital
   expenditures in any fiscal year in excess of $100,000 without the consent
   of Purchaser.

           6.5  The Company shall promptly notify Purchaser of the imposition
   at any time of any lien or encumbrance upon any of the Collateral and the
   Company shall defend MIC s assets against all claims and demands of all
   persons at any time claiming the same or any interest therein adverse to
   Purchaser.

           6.6  Without the prior written consent of Purchaser, the Company
   shall not sell, assign, transfer, mortgage, pledge, or otherwise dispose
   of MIC s assets, other than in the ordinary course of business.

           6.7  The Company shall promptly give to Purchaser notice in
   writing of any proceeding before any governmental agency or court against
   MIC which might, if determined adversely to MIC, materially and adversely
   affect MIC s financial condition, affairs or operations.

           6.8  The Company shall cause MIC to pay all taxes, assessments,
   governmental charges or levies imposed upon it or upon its income or
   profits, or upon any property belonging to it, prior to the date penalties
   attach thereto; provided, however, that MIC shall not be required to pay
   any such all taxes, assessments, governmental charges or levies being
   contested in good faith and by appropriate proceedings, but only so long
   as such proceedings do not involve any material danger or material adverse
   impact on the business of MIC.

           6.9  The Company shall not permit MIC to merge or consolidate with




   <PAGE>                             13
<PAGE>




   or into any other corporation or entity (except to the extent that MIC is
   the successor, survivor or parent and, in such event, only if (i) the
   tangible net worth of MIC is in the Company s reasonable judgment equal to
   or greater than the tangible net worth of MIC prior to such merger or
   consolidation, and (ii) MIC remains a wholly-owned subsidiary of the
   Company.

           6.10  The Company shall cause MIC to defend MIC s assets against
   the claims and demands of all parties.

           6.11  The Company shall not permit MIC to make a loan, pay a
   dividend, or otherwise transfer any of MIC s assets to the Company.

           6.12  The Company shall not permit MIC to make any loans to any
   officers, directors, employees, or affiliates of the Company or MIC.

           6.13  The Company shall cause MIC to provide Purchaser with
   unaudited financial statements of MIC, including a balance sheet, profit
   and loss statement, statement of equity, and cash flow statement, within
   45 days of the end of each fiscal quarter and 90 days after the end of the
   fiscal year. All financial statements required hereunder shall be prepared
   in accordance with GAAP, subject to year-end adjustments in the case of
   quarterly statements. In addition, the Company shall cause MIC to furnish
   Purchaser with a month-by-month operating budget and cash flow for each
   fiscal year, including a balance sheet and income statement) no later than
   30 days prior to the end of the previous fiscal year.

           6.14  The Company shall cause MIC to maintain insurance as on its
   assets in a commercially reasonable manner.

           6.15  The Company shall cause MIC to remain in material compliance
   with all applicable provisions of the Occupational Safety and Health Act
   ("OSHA") and the Environmental Protection Act.

           6.16  The Company shall not permit MIC to materially change the
   nature of its business.

           6.17  The Company shall not permit MIC to purchase or acquire
   obligations or stock of, or any interest in, or make any investment in any
   entity other than (i) obligations issued or guaranteed by the United
   States of America or any agency thereof, (ii) commercial paper with
   maturities of not more than 180 days and a published rating of not less
   than A-1 or P-1 or equivalent rating, or (iii) certificates of deposit
   having maturities of not more than 180 days issued by FDIC-insured
   commercial banks with combined capital and surplus of at least $500
   million, (iv) U.S. money market funds that invest solely in obligations
   issued by the United States of America or any agency thereof, and (v)
   Eurodollar time deposits with financial institutions with a published
   rating of not less than A-I or P-I or equivalent rating.

   Section 7.   Events of Default

           7.1  The Company shall be deemed to be in default of this Purchase
   Agreement and the Note if any of the following events ("Events of




   <PAGE>                             14
<PAGE>




   Default") shall occur and be continuing:

                (a)  The Company shall fail to pay any principal of any Note
   when due in accordance with the terms thereof or hereof; or the Company
   shall fail to pay any interest on any Note or any other amount payable
   hereunder, within five Business Days after any such interest or other
   amount becomes due in accordance with the terms thereof or hereof; or

                (b)  Any representation or warranty made or deemed made by
   the Company or MIC or in any other transaction document or which is
   contained in any certificate, document or financial or other statement
   furnished by it at any time under or in connection with this Purchase
   Agreement or any such other transaction document shall prove to have been
   incorrect in any material respect on or as of the date made or deemed
   made; or

                (c)  The Company shall default in the observance or
   performance of any agreement contained in Section o or any covenant
   contained in any other transaction document; or

                (d)  The Company or MIC shall default in the observance or
   performance of any agreement contained in this Purchase Agreement or any
   other transaction document and such default shall continue unremedied for
   a period of 30 days after the earlier of (i) the date upon which an
   executive officer of the Company has actual knowledge thereof and (ii) the
   date upon which the Agent or any Noteholder gives notice to the Company
   thereof; or

                (e)  (i) the Company or MIC shall commence any case,
   proceeding or other action (A) under any existing or future law of any
   jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
   reorganization or relief of debtors, seeking to have any order for relief
   entered with respect to it, or seeking to adjudicate it a bankrupt or
   insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
   liquidation, dissolution, composition or other relief with respect to it
   or its debts, or (B) seeking appointment of a receiver, trustee,
   custodian, conservator or other similar official for it or for all or any
   substantial part of its assets, or the Company or MIC shall make a general
   assignment for the benefit of its creditors; or (ii) there shall be
   commenced against the Company or MIC any case, proceeding or other action
   of a nature referred to in clause (i) above which (A) results in the entry
   of an order for relief or any such adjudication or appointment or (B)
   remains undismissed, undischarged or unbonded for a period of 60 days; or
   (iii) there shall, be commenced against the Company or MIC any case,
   proceeding or other action seeking issuance of a warrant of attachment,
   execution, distraint or similar process against all or any substantial
   part of its assets which results in the entry of an order for any such
   relief which shall not have been vacated, discharged, or stayed or bonded
   pending appeal within 60 days from the entry thereof; or (iv) the Company
   or MIC shall take any action in furtherance of, or indicating its consent
   to, approval of, or acquiescence in, any of the acts set forth in clause
   (i), (ii), or (iii) above; or (v) the Company or MIC shall generally not,
   or shall be unable to, or shall admit in writing its inability to, pay its
   debts as they become due.




   <PAGE>                             15
<PAGE>




           7.2  In any such Event of Default, as defined in Section 7.1, (A)
   if such Event of Default specified in clause (i) or (iv) of paragraph (e)
   of Section 7.1 with respect to the Company, automatically the Notes
   hereunder (with accrued interest on) and all other amounts owing under
   this Purchase Agreement (including, without limitation, all Obligations
   shall immediately become due and payable, and (B) if such event is any
   other Event of Default, any Noteholder may declare the Notes (and accrued
   interest thereon) and all other amounts owing under this Purchase
   Agreement without limitation, all Obligations, to be due and payable
   forthwith, whereupon the same shall immediately become due and payable.

           7.3  Except as expressly provided above in this Section 7, demand,
   protest and all other notices of any kind are hereby expressly waived.

   Section 8.   Notices.

           Notices and other communications provided for herein shall be in
   writing and shall be delivered by hand or shall be sent by telecopy (and
   if sent by telecopy, shall be confirmed by registered mail, return receipt
   requested, or by overnight mail or courier, postage and delivery charges
   prepaid), to the following addresses:

      if to the Company:   Metalclad Corporation
                           Attention: Grant Kesler, President
                           2 Corporate Plaza, Suite 125
                           Newport Beach, California 92660
                           Phone:  (714) 719-1234
                           Fax:  (714) 719-1240

         with a copy to:   Gibson, Haglund & Johnson
                           Attention: Bruce H. Haglund, Esq.
                           Koll Center Irvine
                           2010 Main Street, Suite 400
                           Irvine, California 92614
                           Phone: (714) 752-1100
                           Fax: (714) 752-7144 or (714) 752-1188

    if to the Purchaser:   Sundial International Fund Limited
                           Attention: Mr. J.C.M. Robertson, Director
                           Les Bruyeres, Les Grande Mielle
                           Fauvic, Grouville
                           Jersey, Channel Islands JE3 9BN
                           Phone: 011-44-1534-851-294
                           Fax: 011-44-1534-857-228

                           Ultra Pacific Holdings S.A.
                           Attention: Herr Hans Gassner
                           c/o Dr. Herbert Batliner
                           Post Box 86
                           F.L. 9490
                           Vaduz, Liechtenstein
                           Phone: 011-41-75-236-0404
                           Fax: 011-41-75-236-0405
                         




   <PAGE>                             16
<PAGE>




        with copies to:    Gilmartin, Poster & Shafto
                           Attention: Donald B. Shafto, Esq.  
                           One William Street, 5th Floor
                           New York, New York 10004
                           Phone: (212) 425-3220
                           Fax: (212) 482-0848 or (212) 425-3130

                           Sundt & Co. Ltd.
                           Attention: Nick Murphy
                           11 St. James s Square
                           London SW1Y 4LB United Kingdom
                           Phone: 011-44-171-930-5757
                           Fax: 011-44-171-930-1784

   Whenever any notice is required to be given hereunder, such notice shall
   be deemed given and such requirement satisfied only when such notice is
   delivered or, if sent by telecopy, when received. Addresses may be changed
   upon notice of such change given as provided in this Section 8.

   Section 9.  Amendments.

   No amendment, interpretation or waiver of any of the provisions of this
   Purchase Agreement shall be effective unless made in writing and signed by
   the parties to this Purchase Agreement.

   Section 10.  Headings.

        The headings of the sections and sub-sections of this Purchase
   Agreement are used for convenience only and shall not affect the meaning
   or interpretation of the contents of this Purchase Agreement.

   Section 11.  Enforcement.

       The failure to enforce or to require the performance at any time of
   any of the provisions of this Purchase Agreement shall in no way be
   construed to be a waiver of such provisions, and shall not affect either
   the validity of this Purchase Agreement or any part hereof or the right of
   any party thereafter to enforce each and every provision in accordance
   with the terms of this Purchase Agreement.

   Section 12.  Governing Law.

        This Agreement and the relationships of the parties in connection
   with the subject matter of this Purchase Agreement shall be governed by
   and determined in accordance with the substantive laws of the State of New
   York, in the United States of America, applicable to agreements made and
   to be performed entirely therein.

   Section 13.  Severability.

        In case any one or more of the provisions contained in this Pledge
   Agreement should be invalid, illegal or unenforceable in any respect, the
   validity, legality and enforceability of the remaining provisions
   contained herein shall not in any way be affected or impaired thereby. To




   <PAGE>                             17
<PAGE>




   the extent permitted by applicable law, the parties hereby waive any
   provision of law which may render any provision hereof invalid, illegal or
   unenforceable in any respect.

   Section 14. Counterparts.

   This Purchase Agreement may be executed by the parties hereto in separate
   counterparts, each of which when so executed and delivered shall be an
   original, but all such counterparts shall together constitute one and the
   same instrument, and all signatures need not appear on any one
   counterpart.

        IN WITNESS WHEREOF, the parties hereto have caused this Purchase
   Agreement to be executed by their duly authorized representatives as of
   the day and year first above written.

   The Company:           METALCLAD CORPORATION

                          By:    /s/Grant S. Kesler
                              --------------------------------
                               Grant S. Kesler, President

   Purchasers:            SUNDIAL INTERNATIONAL FUND LIMITED

                          By:    /s/Donald B. Shafto
                              --------------------------------
                               Name:  Donald B. Shafto
                               Title: Assistant Secretary


                          ULTRA PACIFIC HOLDINGS S.A.

                          By:    /s/Donald B. Shafto
                              --------------------------------
                               Name:  Donald B. Shafto
                               Title: President






















   <PAGE>                             18
<PAGE>




                              METALCLAD CORPORATION

                                   SCHEDULE 1

                   PURCHASE AGREEMENT DATED DECEMBER 31, 1997

   Name of Noteholder                     Principal Amount of Notes
   ------------------                     -------------------------

   Sundial International Fund Limited           $1,466,666.67

   Ultra Pacific Holdings, S.A.                    733,333.33
                                                 ------------
        Total                                   $2,200,000.00




































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