Exhibit 2.1
                                                                     -----------







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

                            STOCK PURCHASE AGREEMENT

-------------------------------------------------------------------------------
                                   Dated as of

                                 August 6, 1999

                                      Among

                           SI HANDLING SYSTEMS, INC.,


                              ERMANCO INCORPORATED,

                                       and

                    THE STOCKHOLDERS OF ERMANCO INCORPORATED
















<PAGE>



                                TABLE OF CONTENTS
                                -----------------


ARTICLE 1 - TERMS OF THE TRANSACTION..........................................1
            Section 1.1.  Sale and Purchase...................................1
            Section 1.2.  Purchase Price; Adjustments.........................1
                   (a)     Purchase Price.....................................1
                   (b)     Promissory Notes...................................2
                   (c)     Adjustments on Closing Date........................2
                   (d)     Post-Closing Adjustments...........................3
            Section 1.3.  Certain Expenses and Liabilities....................4
            Section 1.4.  The Closing.........................................5
            Section 1.5.  Escrow..............................................5
            Section 1.6.  Retained Assets and Retained Liabilities............5
                   (a)     Retained Assets....................................5
                   (b)     Retained Liabilities...............................6
            Section 1.7.  Preliminary Closing Balance Sheet...................6
            Section 1.8.  Employment Agreements...............................6

ARTICLE 2 - REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE
            COMPANY...........................................................7
            Section 2.1.  Power; Capacity and Authority.......................7
            Section 2.2.  The Shares..........................................8
            Section 2.3.  Transfer of the Shares..............................8
            Section 2.4.  Conflicting Instruments; Consents...................8
            Section 2.5.  Organization and Authority..........................9
            Section 2.6.  Subsidiaries and Affiliates........................10
            Section 2.7.  Capitalization.....................................10
            Section 2.8.  Financial Statements...............................10
            Section 2.9.  Retained Assets and Liabilities....................11
            Section 2.10.  Real Property.....................................11
            Section 2.11.  Inventories and Other Tangible Personal Property..13
                   (a)     Inventories.......................................13
                   (b)     Other Tangible Personal Property..................13
            Section 2.12.  Receivables.......................................14
            Section 2.13.  Personnel.........................................14
            Section 2.14.  Labor Matters.....................................15
            Section 2.15.  Environmental Matters.............................16
            Section 2.16.  Non-ERISA Plans...................................19
            Section 2.17.  ERISA Plans.......................................20
            Section 2.18.  Compliance with Law...............................23
            Section 2.19.  Product Warranties and Product Claims.............23
            Section 2.20.  Litigation........................................24




<PAGE>



            Section 2.21.  Intellectual Property.............................24
            Section 2.22.  Material Contracts................................25
            Section 2.23.  Conduct of Business...............................27
            Section 2.24.  Tax Matters.......................................30
            Section 2.25.  Absence of Undisclosed Liabilities................33
            Section 2.26.  Insurance.........................................33
            Section 2.27.  Customers.........................................34
            Section 2.28.  Corporate Name....................................34
            Section 2.29.  Transactions with Related Parties.................34
            Section 2.30.  Permits...........................................35
            Section 2.31.  Finders or Brokers................................35
            Section 2.32.  Disclosure........................................35
            Section 2.33.  Bank Accounts.....................................36
            Section 2.34.  Material Adverse Change...........................36
            Section 2.35.  Year 2000 Compliance..............................36
            Section 2.36.  Investment Representations........................36

ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF THE BUYER......................37
            Section 3.1.  Organization; Authority............................37
            Section 3.2.  Conflicting Instruments; Consents..................38
            Section 3.3.  Acquisition of the Shares..........................38
            Section 3.4.  Litigation.........................................39
            Section 3.5.  Finders or Brokers.................................39
            Section 3.6.  Financial Ability of the Buyer.....................39
            Section 3.7.  Capitalization of the Buyer........................39
            Section 3.8.  Valid Issuance of Shares...........................40
            Section 3.9.  Financial Statements...............................40
            Section 3.10. Lease or Purchase of Premises......................40
            Section 3.11. Maintenance of Insurance...........................41
            Section 3.12. Disclosure.........................................41
            Section 3.13. Accuracy of Public Filings.........................41
            Section 3.14. Material Adverse Change............................42
            Section 3.15. Absence of Undisclosed Liabilities.................42
            Section 3.16. Board Membership...................................42

ARTICLE 4 - INDEMNIFICATION .................................................42
            Section 4.1.  Indemnification Obligation.........................42
            Section 4.2.  Limitations........................................43
                   (a)     Threshold.........................................43
                   (b)     Time Limitations..................................44
                   (c)     Amount Limitations................................44
            Section 4.3.  Claims.............................................44
            Section 4.4.  Defense by the Sellers.............................45




<PAGE>



            Section 4.5.  Notice.............................................46
            Section 4.6.  Materiality........................................46

ARTICLE 5 - CONDUCT PENDING CLOSING..........................................46
            Section 5.1.  Operation of Business..............................46
            Section 5.2.  Access to Information/Employees....................46
            Section 5.3.  Reasonable Efforts.................................47
            Section 5.4.  Required Approvals, Etc............................47
            Section 5.5.  Exclusivity........................................47

ARTICLE 6 - CONDITIONS TO THE BUYER'S OBLIGATIONS............................48
            Section 6.1.  Due Diligence......................................48
            Section 6.2.  Representations....................................48
            Section 6.3.  Covenants..........................................48
            Section 6.4.  Closing Certificate................................48
            Section 6.5.  Ratification of Past Actions of Company............49
            Section 6.6.  Review of Schedules................................49
            Section 6.7.  Required Actions...................................49
            Section 6.8.  Certain Documents..................................49
            Section 6.9.  Opinion of the Sellers' Counsel....................50
            Section 6.10. Legal Matters......................................50
            Section 6.11. Delivery of the Shares.............................50
            Section 6.12. General Release....................................51
            Section 6.13. Material Adverse Change............................51
            Section 6.14. Related Party Advances.............................51
            Section 6.15. Legal Proceedings..................................51
            Section 6.16. Employment Agreements..............................51
            Section 6.17. Lease Agreement....................................52
            Section 6.18. Escrow Agreement...................................52
            Section 6.19. Closing Date.......................................52
            Section 6.20. Buyer Financing....................................52

ARTICLE 7 - CONDITIONS TO THE SELLERS' OBLIGATIONS...........................52
            Section 7.1.  Certain Documents..................................52
            Section 7.2.  Opinion of the Buyer's Counsel.....................53
            Section 7.3.  Legal Matters......................................53
            Section 7.4.  Payment for Shares.................................53
            Section 7.5.  Delivery of Promissory Notes.......................53
            Section 7.6.  Delivery of the Shares.............................53
            Section 7.7.  Legal Proceedings..................................53
            Section 7.8.  Employment Agreements..............................53
            Section 7.9.  Lease Agreement....................................54
            Section 7.10. Escrow Agreement...................................54




<PAGE>



            Section 7.11. Representations and Warranties.....................54
            Section 7.12. Financing Commitment...............................54
            Section 7.13. Approval by Public Body............................54
            Section 7.14. Closing Date.......................................54
            Section 7.15. Required Actions...................................55
            Section 7.16. Representations....................................55
            Section 7.17. Covenants..........................................55
            Section 7.18. Closing Certificate................................55
            Section 7.19. Material Adverse Change............................55

ARTICLE 8 - CERTAIN TAX MATTERS..............................................56
            Section 8.1.  Tax Period Ending On or Before the Closing Date....56
            Section 8.2.   Tax Period Ending After the Closing Date;
              Retained Taxes.................................................56
            Section 8.3.  Section 338(h)(10) Election........................56
            Section 8.4.  Allocation of Purchase Price.......................57
            Section 8.5.  Cooperation on Tax Matters.........................57
            Section 8.6.  Amended Returns....................................58

ARTICLE 9 - POST-CLOSING COVENANTS...........................................59
            Section 9.1.  Further Assurances.................................59
            Section 9.2.  Noncompetition.....................................59
            Section 9.3.  Confidentiality....................................60
            Section 9.4.  Reasonable Restraint...............................60
            Section 9.5.  Damages............................................60
            Section 9.6.  Severability; Reformation..........................61
            Section 9.7.  Registration Rights................................61
                   (a)     Demand Rights.....................................61
                   (b)     Piggyback Rights..................................62
                   (c)     Expenses..........................................63

ARTICLE 10 - MISCELLANEOUS...................................................63
            Section 10.1.  Survival of Representations, Warranties and
              Covenants......................................................63
            Section 10.2.  Expenses..........................................64
            Section 10.3.  Governing Law.....................................64
            Section 10.4.  Notices...........................................64
            Section 10.5.  Jurisdiction; Agent for Service...................65
            Section 10.6.  Entire Agreement..................................65
            Section 10.7.  Binding Effect....................................66
            Section 10.8.  Amendments, Waivers...............................66
            Section 10.9.  Third Party Beneficiaries.........................66
            Section 10.10. Severability......................................66




<PAGE>



            Section 10.11.  Counterparts.....................................66
            Section 10.12.  Confidentiality/Maintenance of Operations........67
            Section 10.13.  Termination......................................67
            Section 10.14.  Headings, Etc....................................67
            Section 10.15.  Schedules, Etc...................................67
            Section 10.16.  Construction of the Agreement....................68
            Section 10.17.  No Defense.......................................68
            Section 10.18.  Sellers' Representative..........................68
            Section 10.19.  Sales Amongst Sellers............................68

ARTICLE 11 - DEFINITIONS.....................................................68





<PAGE>



                                LIST OF SCHEDULES
                                -----------------

Schedule 1.2(a)   ................................Stockholders / Stock Ownership
Schedule 1.2(b)   ............................................Income Projections
Schedule 1.6(b)  .....................................Retained Trade Liabilities
Schedule 2.4(c)  ...................................Required Consents of Company
Schedule 2.5(b)  .............................Articles of Incorporation / Bylaws
Schedule 2.9   .......................................Retained Lease Liabilities
Schedule 2.10(a)  .................................................Real Property
Schedule 2.10(b)  ...............................................Property Leases
Schedule 2.10(d)  ..................................................Encumbrances
Schedule 2.10(j)  ............................................Assessment Notices
Schedule 2.11(b)  ..............................Other Tangible Personal Property
Schedule 2.13  ................................................List of Personnel
Schedule 2.14  .........................................Labor Matters of Company
Schedule 2.15  ............................................Environmental Matters
Schedule 2.16  ..................................................Non-ERISA Plans
Schedule 2.17  ......................................................ERISA Plans
Schedule 2.19(a)  ............................................Product Warranties
Schedule 2.19(b)  ................................................Product Claims
Schedule 2.20  ............................................Litigation of Company
Schedule 2.21  ............................................Intellectual Property
Schedule 2.22  ...............................................Material Contracts
Schedule 2.23  ..............................................Conduct of Business
Schedule 2.24(a)  ............................................Income Tax Returns
Schedule 2.26  ........................................................Insurance
Schedule 2.27  ........................................................Customers
Schedule 2.28  ...................................................Corporate Name
Schedule 2.29  ........................................................Dividends
Schedule 2.31  ....................................Finders or Brokers of Company
Schedule 2.33  ....................................................Bank Accounts
Schedule 3.2(c)  .....................................Required Consents of Buyer
Schedule 3.4  ...............................................Litigation of Buyer
Schedule 3.5  .......................................Finders or Brokers of Buyer
Schedule 3.7  ..................................Options, Warrants, Etc. of Buyer
Schedule 8.4  ......................................Allocation of Purchase Price

    A copy of any schedule will be furnished to the Commission upon request.




<PAGE>




                                    EXHIBITS
                                    --------

Exhibit A  .......................................Kirschner Employment Agreement

Exhibit B  .........................................Hubbell Employment Agreement

Exhibit C  .......................................Schomberg Employment Agreement

Exhibit D  ........................................Hellberg Employment Agreement

Exhibit E  ......................................................Lease Agreement




<PAGE>



                            STOCK PURCHASE AGREEMENT
                            ------------------------


                  This STOCK PURCHASE  AGREEMENT (this  "Agreement") is dated as
of August 6, 1999, among SI HANDLING  SYSTEMS,  INC, a Pennsylvania  corporation
(the "Buyer"), ERMANCO INCORPORATED,  a Michigan corporation (the "Company") and
the holders of all of the issued and  outstanding  capital  stock of the Company
(individually, a "Seller" and together "Sellers").

                                   WITNESSETH
                                   ----------

                  WHEREAS,  the Buyer wishes to purchase  from the Sellers,  and
the  Sellers  wish to sell to the  Buyer,  shares of Company  Common  Stock (the
"Shares"),  of the Company,  which  constitute all of the issued and outstanding
capital stock of the Company.

                  WHEREAS,  the Buyer,  the Company and the Sellers are entering
into this  Agreement  to provide  for such  purchase  and sale and to  establish
various rights and obligations in connection  therewith,  all upon the terms and
subject to the conditions set forth in this Agreement.

                  NOW, THEREFORE, in consideration of the foregoing recitals and
the   mutual   covenants   hereinafter   contained,   and  for  other   valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Buyer, the Company and the Sellers hereby agree as follows:

                                    ARTICLE 1
                            TERMS OF THE TRANSACTION
                  Section 1.1.  Sale and Purchase.

                  The Sellers,  on the Closing  Date,  shall sell,  transfer and
assign to the Buyer by  delivering,  against  payment  therefor  as  provided in
Section 1.2(a),  the Shares,  free and clear of all  Encumbrances,  evidenced by
certificates for the Shares in proper form for transfer by delivery or with duly
executed stock powers attached  thereto,  together with funds for payment of all
transfer Taxes imposed by Federal law or by the laws of the State of Michigan.

                  Section 1.2.  Purchase Price; Adjustments.

                                (a)     Purchase Price.  The purchase price for
the  Shares  shall be  Twenty-two  Million  Dollars  ($22,000,000),  subject  to
adjustment as set forth in this Section 1.2 (the "Purchase Price"), which amount
shall  be  paid to the  Sellers  against  delivery  on the  Closing  Date of the
certificates  representing the Shares as provided in Section 1.1, (i) in cash in
the amount of Fourteen Million Five Hundred  Thousand  Dollars  ($14,500,000) in
immediately  available  funds  by  wire  transfer  to an  account  with  a  bank
designated  by each Seller prior to the Closing;  (ii) by delivery of Promissory
Notes (as described in Section 1.2(b) below,  the "Promissory  Notes") issued by
the



GV: #115336 v7 (2gzs07!.WPD)

<PAGE>



Buyer in the aggregate  principal amount of Three Million Dollars  ($3,000,000);
and (iii) by delivery of Buyer Common  Stock  having an aggregate  value of Four
Million Five Hundred Thousand Dollars  ($4,500,000) based on the average closing
price as reported in the Wall Street  Journal of Buyer Common Stock for the five
trading days  immediately  preceding  the date of this  Agreement.  The Purchase
Price,  as adjusted,  will be paid to the Sellers in  proportion  to their stock
ownership as set forth in Schedule 1.2(a).

                                    (b)     Promissory Notes.  The Promissory
Notes  shall have a term of seven (7) years and bear  interest at an annual rate
of (i) ten percent (10%) in years one through  three,  (ii) twelve percent (12%)
in years four and five, and (iii) fourteen percent (14%) in years six and seven.
Interest on the Promissory Notes shall be payable quarterly,  in cash unless (A)
by making such  payment the Buyer will breach a covenant or  otherwise go out of
formula with one of its financial lending institutions, (B) extraordinary events
render  the  Buyer  unable to make such cash  payment,  or (C) the  Company  has
generated  less than  eighty-five  percent (85%) of the  projected  cash, as set
forth in Schedule 1.2(b), in the fiscal quarter  immediately  preceding the date
on which  interest is due, in which event,  payment of such  quarterly  interest
payment  may be made in  stock  of the  Buyer  upon  approval  of the  Board  of
Directors  of the  Buyer  and  based  upon  the  determination  of the  Board of
Directors that the requirements for the payment of interest in cash set forth in
this  sentence have not been met. Any stock issued in payment of interest on the
Promissory Notes shall be subject to a shelf  registration  statement filed with
the Securities and Exchange  Commission.  The Promissory Notes may be prepaid at
any time  without  penalty or premium.  The Buyer shall have the right to reduce
its obligations under the Promissory Notes by the amount of any liability of the
Sellers to the Buyer under this Agreement or any of the Ancillary Documents. Any
such reductions in the Buyer's  obligations  under the Promissory Notes shall be
applied first to reduce the outstanding  principal  balance under the Promissory
Notes.  This right will in no way limit the Buyer's right to seek  compensation,
satisfaction,  restitution, remuneration, and reparation from the Sellers in any
other manner whatsoever.

                                    (c)     Adjustments on Closing Date.  On the
Closing  Date,  the Purchase  Price shall be (i)  increased or  decreased,  on a
dollar for dollar basis, by the amount that the projected Net Working Capital as
of the Effective Time on the  Preliminary  Closing Balance Sheet is greater than
or less than Two Million Seven Hundred  Thousand  Dollars  ($2,700,000) and (ii)
decreased,  on a dollar for dollar basis,  in an amount equal to the amount,  if
any, by which the cash on the  Preliminary  Closing  Balance  Sheet is less than
Three Hundred Thousand Dollars ($300,000). Any net upward adjustment pursuant to
this Section  shall be added to the Escrow Amount and held pursuant to the terms
of the Escrow  Agreement  pending  the  determination  of the actual Net Working
Capital as of the Effective  Time pursuant to Section  1.2(d);  any net downward
adjustment  pursuant  to this  Section  shall  reduce  the cash  portion  of the
Purchase  Price  paid at  Closing,  subject to further  adjustment  pursuant  to
Section  1.2(d)  based on the  definitive  Closing  Balance  Sheet  prepared  in
accordance with Section 1.2(d)(iii).

GV: #115336 v7 (2gzs07!.WPD)
                                       2

<PAGE>



                                    (d)     Post-Closing Adjustments.

                                            (i)      Following the Closing, the
Purchase  Price shall be further (i)  increased  or  decreased,  on a dollar for
dollar basis,  by the amount that the actual Net Working  Capital on the Closing
Balance Sheet, as determined pursuant to this Section 1.2(d), is greater than or
less than Two Million  Seven  Hundred  Thousand  Dollars  ($2,700,000)  and (ii)
decreased,  on a dollar for dollar basis,  in an amount equal to the amount,  if
any, by which the cash on the Closing Balance Sheet,  as determined  pursuant to
this Section 1.2(d),  is less than Three Hundred  Thousand  Dollars  ($300,000);
provided that any adjustments pursuant to this Section 1.2(d)(i) shall be net of
any adjustments made on the Closing Date pursuant to Section 1.2(c).

                                            (ii)     (A)      Within sixty (60)
days  following the Closing  Date,  Sellers shall deliver to Buyer and KPMG Peat
Marwick ("Buyer's Accountant") (x) the audited Closing Balance Sheet prepared by
Ernst & Young ("Sellers'  Accountant") and (y) the information  and/or documents
reasonably  requested  by  either  Buyer  or  Buyers'  Accountant  in  order  to
facilitate the completion of the Post-Closing Audit by Buyer's Accountant within
the  time  period  specified  in  Section   1.2(d)(ii)(B)  hereof.  The  parties
acknowledge  and agree that (x) the value of  inventory  on the Closing  Balance
Sheet  will be based upon the  performance  of a  physical  inventory  as of the
Effective Time to be performed jointly by  representatives  of Buyer and Sellers
to begin within no more than one (1) business day following the Closing Date and
to be completed within no more than five (5) business days following the Closing
Date and (y) the  aggregate  of any tax  liability  of the Company  arising as a
result of the making of an election  under  Section  338(h)(10)  of the Code for
built-in gains tax under Section 1374 of the Code, the Michigan  single business
tax,  and the  California  income tax will be an accrued on the Closing  Balance
Sheet as a current  liability  and the  Company's "S corp  deposit" with the IRS
will be carried on the Closing Balance Sheet as a current asset.

                                                     (B)      Within forty-five
(45) days following  Buyer's receipt of the information  required to be provided
by Sellers pursuant to Section  1.2(d)(ii)(A)  hereof, Buyer shall cause Buyer's
Accountant to complete an audit of the Company's  books and records to determine
the accuracy of the Closing  Balance Sheet prepared by Sellers'  Accountant (the
"Post-Closing Audit"). Sellers shall cooperate with Buyer and Buyer's Accountant
after the Closing Date in furnishing information,  documents, evidence and other
assistance  to  Buyer's   Accountant  to  facilitate   the   completion  of  the
Post-Closing Audit within the aforementioned time.

                                            (iii)   Upon   completion   of   the
Post-Closing  Audit,  Sellers'  Accountant  and  Buyer's  Accountant  shall work
together to prepare a definitive  Closing  Balance Sheet.  In the event Sellers'
Accountant  and Buyer's  Accountant  are unable to agree on the Closing  Balance
Sheet,  then they shall select an independent  "Big 5" accounting  firm that has
not  represented any of the parties within the preceding two (2) years to review
the Company's  books and records and to prepare the definitive  Closing  Balance
Sheet.  Sellers'   Representative  and  Buyer  shall  confirm  such  independent
accounting  firm  within  three (3) days of its  selection,  unless  there is an
actual conflict of interest.  The independent  accounting firm shall be directed
to consider those documents  delivered to the independent  accounting firm by or
on behalf of either Sellers or Buyer. The determination of

GV: #115336 v7 (2gzs07!.WPD)
                                       3
<PAGE>



the Closing  Balance Sheet by the  independent  accounting  firm shall be final,
binding and unappealable.  The costs of the independent accounting firm shall be
borne by the party (either Sellers as a group or Buyer) whose  determination  of
the  Net  Working  Capital  as of  the  Effective  Time,  as  presented  to  the
independent  accounting  firm,  was  furthest  from  the  determination  of  the
independent  accounting  firm, or equally by Sellers as a group and Buyer in the
event that the  determination by the independent  accounting firm is equidistant
between those of Sellers and Buyer.

                                            (iv)     Based on the Closing
Balance Sheet  determined in accordance with Section  1.2(d)(iii),  the Purchase
Price will be further adjusted in accordance with Section 1.2(d)(i).  Any amount
due and payable as a result of this Section  1.2(d) shall be paid  promptly upon
the  determination  of the definitive  Closing  Balance Sheet in accordance with
Section  1.2(d)(iii)  and any amount  held in the Escrow  Account in  connection
therewith shall be released promptly.

                  Section 1.3.  Certain Expenses and Liabilities.

                  After the Closing, neither the Buyer nor the Company shall pay
or be liable  for any  Liabilities  of the  Sellers or the  Company  whatsoever,
whether known or unknown, actual or contingent,  matured or unmatured, presently
existing or arising in the future,  relating to the  following  fees,  expenses,
Taxes or Liabilities  incurred by the Sellers or the Company, all of which shall
be borne and paid by the Sellers:

                                            (i)      any Sellers' Transaction
Fees in excess of the  amount by which  the cash on the  Closing  Balance  Sheet
exceeds Three Hundred Thousand Dollars ($300,000);

                                            (ii)    any Sellers' Brokerage Fees;

                                            (iii)  any   documentary   stamp  or
transfer Taxes,  including  without  limitation real property transfer Taxes, or
other similar charges,  Taxes or expenses incurred by the Sellers or the Company
or  otherwise  arising  in  connection  with the sale of the Shares to the Buyer
arising under Federal law or the laws of the State of Michigan; and

                                            (iv)     any income, capital gains
or  other  tax  incurred  by the  Sellers  or the  Company  as a  result  of the
consummation of the transactions  contemplated  hereby, other than the aggregate
of any tax  liability  in an  amount  less than Five  Hundred  Thousand  Dollars
($500,000)  arising  as a result of the  making  of an  election  under  Section
338(h)(10)  of the Code for built-in  gains tax under  Section 1374 of the Code,
the Michigan single business tax, and the California income tax.


GV: #115336 v7 (2gzs07!.WPD)
                                       4

<PAGE>



                  Section 1.4.  The Closing.

                  The  closing  of the  purchase  and  sale of the  Shares  (the
"Closing") shall be held at the offices of the Buyer, 600 Kuebler Road,  Easton,
Pennsylvania  at 10:00 AM, on September  30, 1999 or such other date and time as
the parties may agree in writing  (the date of the Closing is referred to as the
"Closing  Date").  Time is of the essence with respect to the Closing Date.  The
Closing shall be effective as of 11:59 p.m. on the Closing Date (the  "Effective
Time").

                  Section 1.5.  Escrow.

                  At or prior to the  Closing,  the  Sellers and the Buyer shall
enter into an escrow  agreement  (the  "Escrow  Agreement"),  providing  for the
establishment of an escrow account (the "Escrow  Account") to be administered by
a commercial  bank  mutually  acceptable  to the Buyer and the Sellers as escrow
agent (the "Escrow Agent"). At the Closing, Seven Hundred Fifty Thousand Dollars
($750,000) (the "Escrow  Amount"),  paid out of the cash portion of the Purchase
Price,  shall be  deposited  with the Escrow  Agent.  The Escrow  Amount and any
earnings  thereon  shall  be held by the  Escrow  Agent in the  Escrow  Account,
invested and  distributed by the Escrow Agent in accordance  with the provisions
of the Escrow Agreement.  The Escrow Amount including any earnings thereon shall
be distributed in the following order of priority:

                                            (a)      First, to the Buyer in an
amount equal to any Post Closing  Adjustment  and any Liability of the Buyer for
or against which the Sellers have  indemnified  the Buyer under this  Agreement;
provided  that nothing  contained in this Section 1.5 shall in any way limit the
indemnification  obligations  of the  Sellers  to the  Buyer to the full  extent
provided in this Agreement; and

                                            (b)      Second, upon the date
eighteen (18) months  following the Closing,  any funds  remaining in the Escrow
Account after the  distributions  described in Section  1.5(a) to the Sellers in
accordance  with the  percentage  set forth  opposite the name of each Seller in
Schedule  1.2(a).  Any  costs  incurred  by the  Buyer  or the  Escrow  Agent in
connection with the Escrow Account shall be borne by the Buyer.

                  Section 1.6.  Retained Assets and Retained Liabilities.

                                    (a)     Retained Assets.  Subject to the
terms set forth in this Agreement,  at the Closing, the Company shall retain all
of its assets  (such  assets and  properties  of the  Company  are  collectively
referred to hereinafter as the "Retained Assets").  The Retained Assets include,
without limitation, all parcels of real property (including, without limitation,
all  rights  of way,  easements  and  other  interests)  owned  by the  Company,
Inventories,  Receivables,  Contracts, Intellectual Property, Permits, vehicles,
leases  for  real  and  personal  property,  leasehold  improvements,   security
deposits,  deposits  for  Taxes  (including,  without  limitation,  the "S  corp
deposit" with the IRS), prepaid rent, deferred debits relating to work performed
for the Company on or prior to the Effective  Time by  independent  contractors,
customer lists, business and corporate

GV: #115336 v7 (2gzs07!.WPD)
                                       5
<PAGE>



books, goodwill,  Post-Closing  Receivables,  office and manufacturing equipment
and supplies  (including,  without limitation,  computer equipment and software)
and  other  tangible  and  intangible   personal  property  of  every  kind  and
description  that are used or intended for use in connection  with the operation
of the Company as a going concern.

                                    (b)     Retained Liabilities.  The Company
shall remain  liable for, and shall pay and perform any Liability of the Company
of any nature or type regardless of when accrued, except as set forth in Section
1.3 above,  including,  but not limited to: (i) any tax liability of the Company
incurred through the Effective Time (the "Retained Taxes"),  (ii) those ordinary
course  Liabilities  listed on Schedule  1.6(b)  attached  hereto (the "Retained
Trade  Liabilities");  (iii) Liabilities  incurred in connection with the leases
listed on Schedule 2.9 (the  "Retained  Lease  Liabilities");  (iv)  Liabilities
arising  from  express or implied  product  warranties  applicable  to  products
designed, manufactured or sold by Company (the "Retained Warranty Liabilities");
(v)  Liabilities  arising from the  performance  of any Contracts (the "Retained
Contract Liabilities");  (vi) Liabilities arising from manufacturing operations,
including,  but not limited to, workers'  compensation and environmental  claims
(the "Retained  Operations  Liabilities");  (vii) Liabilities arising from labor
relations or the hiring, discipline,  payment or discharge of hourly or salaried
employees (the "Retained Employment  Liabilities");  (viii) Liabilities incurred
with respect to any pension,  employment severance  agreement,  401(k) or profit
sharing  plan,  including,  but not limited to, those  liabilities  arising as a
result  of this  transaction  or  arising  from  changes  made to such  pension,
employment severance agreement,  401(k) or profit sharing plan after the date of
this transaction ("Retained Pension Liabilities"); and (ix) Liabilities relating
to claims or  product  returns  due to damage  during  shipment,  minor  product
defects or product claims relating to shortages in connection with products sold
by the Company (the "Retained  Delivery  Liabilities")  (all such Liabilities of
the Company collectively referred to herein as the "Retained Liabilities").

                  Section 1.7.  Preliminary Closing Balance Sheet.

                  Not less than  three days prior to the  Closing,  the  Sellers
shall provide the Buyer with a projected  balance sheet of the Company as of the
Effective Time that has been compiled by the Company's  independent auditors and
is in  accordance  with GAAP (the  "Preliminary  Closing  Balance  Sheet").  The
Preliminary  Closing Balance Sheet will include the Retained Assets and Retained
Liabilities,  including a good faith estimate of the aggregate amount of current
and deferred Retained Taxes and Retained Trade Liabilities.

                  Section 1.8.  Employment Agreements.

                                    (a)     On the Closing Date, Leon C.
Kirschner will enter into an Employment  Agreement with the Buyer  substantially
in the form of Exhibit A attached hereto (the "Kirschner Employment Agreement"),
which Employment Agreement shall supercede the Employment Severance Compensation
Agreement, dated January 12, 1999, between Mr. Kirschner and the Company.


GV: #115336 v7 (2gzs07!.WPD)
                                        6

<PAGE>



                                    (b)     On the Closing Date, Thomas C.
Hubbell will enter into an Employment  Agreement with the Buyer substantially in
the form of Exhibit B attached  hereto  (the  "Hubbell  Employment  Agreement"),
which Employment Agreement shall supercede the Employment Severance Compensation
Agreement, dated January 12, 1999, between Mr. Hubbell and the Company.

                                    (c)     On the Closing Date, Lee F.
Schomberg will enter into an Employment  Agreement with the Buyer  substantially
in the form of Exhibit C attached hereto (the "Schomberg Employment Agreement").

                                    (d)     On the Closing Date, Gordon A.
Hellberg will enter into an Employment Agreement with the Buyer substantially in
the form of Exhibit D attached hereto (the "Hellberg Employment Agreement").

                                    (e)     On and after the Closing Date, all
officers, managers and senior technical associates of the Company shall continue
to be  retained  as at will  employees  for a  reasonable  period of time at the
compensation  level and with  benefits  substantially  similar to those shown on
Schedule  2.13,  subject  to the  right of the  Company  to  terminate  any such
employee for cause or in  accordance  with the Company's  past  practices in the
event of a reduction in the Company's workload.

                                    ARTICLE 2
                         REPRESENTATIONS AND WARRANTIES
                         OF THE SELLERS AND THE COMPANY

         The  Sellers and the  Company,  jointly and  severally,  represent  and
warrant to the Buyer as follows:

                  Section 2.1.  Power; Capacity and Authority.

                                    (a)     Each Seller has all requisite power
and legal  capacity to execute and deliver this  Agreement  and all  agreements,
certificates,  instruments  or other  documents to be executed and  delivered in
connection herewith (the "Ancillary Documents") to which such Seller is a party,
to perform his or her obligations hereunder and thereunder and to consummate the
transactions  contemplated hereby and thereby.  This Agreement and the Ancillary
Documents  have been duly executed and delivered by the Sellers,  constitute the
valid and  binding  agreement  of the Sellers  and are  enforceable  against the
Sellers in accordance with their terms.

                                    (b)     The Company has all requisite
corporate  power and  authority  to execute and deliver this  Agreement  and the
Ancillary Documents to which it is a party, to perform its obligations hereunder
and  thereunder  and to  consummate  the  transactions  contemplated  hereby and
thereby.  This Agreement and the Ancillary  Documents have been duly authorized,
executed and
GV: #115336 v7 (2gzs07!.WPD)
                                       7

<PAGE>



delivered  by the  Company,  constitute  the valid and binding  agreement of the
Company and are enforceable against the Company in accordance with their terms.

                  Section 2.2.  The Shares.

                  Each Seller is the  beneficial  and record owner of the number
of Shares set forth  opposite  his or her name in  Schedule  1.2(a).  The Shares
constitute all of the issued and outstanding  capital stock of the Company.  The
Shares are held by the Sellers as record  owner  thereof,  free and clear of all
Encumbrances  whatsoever  (other than  Encumbrances  created by this Agreement).
None of the Sellers is a party to any option, warrant,  purchase right, or other
contract  or  commitment  that could  require him or her to sell,  transfer,  or
otherwise  dispose  of  any  capital  stock  of the  Company  (other  than  this
Agreement).  None of the  Sellers  is a party to any  voting  agreement,  voting
trust,  proxy, or other agreement or understanding with respect to the voting of
any capital  stock of the Company and none of the Shares are subject to any such
restrictions.

                  Section 2.3.  Transfer of the Shares.

                  Upon the delivery of the share  certificates for the Shares to
the Buyer by the Sellers and payment for the Shares by the Buyer as provided for
in Section  1.2(a) hereof,  the Buyer will acquire good and marketable  title to
the Shares, free and clear of all Encumbrances whatsoever.  On the Closing Date,
all stock transfer  (imposed by Federal law or the laws of the  Commonwealth  of
Pennsylvania)  or other  Taxes and charges  (other  than income  Taxes) that are
required to be paid in  connection  with the sale and  transfer of the Shares to
the Buyer will have been paid in full by the Sellers and all laws  imposing such
Taxes or charges will have been complied with by the Sellers.

                  Section 2.4.  Conflicting Instruments; Consents.

                                    (a)     The execution and delivery by the
Sellers and the Company of this  Agreement and the  Ancillary  Documents do not,
and the consummation of the transactions  contemplated hereby and thereby do not
and will not, (i) violate any provision of the Articles of  Incorporation or the
By-laws of the Company,  (ii) result in the creation of any Encumbrance upon the
Shares or any of the properties or assets of the Company, (iii) conflict with or
result in a breach  of,  create an event of  default  (or event  that,  with the
giving of notice or lapse of time or both, would constitute an event of default)
under, or give any third party the right to accelerate any obligation under, any
Contract  or Order  which any  Seller or the  Company is a party or by which any
Seller, the Shares, the Company, or any assets or properties of the Company, are
bound or  affected,  unless  such  default  is waived in  writing  by the entity
declaring the default, or (iv) violate any Law or Permit to which the Company is
subject.

                                    (b)     The execution and delivery by the
Sellers and the Company of this  Agreement and the  Ancillary  Documents do not,
and the consummation of the transactions  contemplated hereby and thereby do not
and will  not,  result  in a  violation  of any Law or Order  applicable  to the
Sellers or the Company or by which any of the  property or assets of the Sellers
or

GV: #115336 v7 (2gzs07!.WPD)
                                       8

<PAGE>



the Company is bound.  There is no pending or threatened Action before or by any
court or other Governmental  Authority,  to restrain or prevent the consummation
of the  transactions  contemplated  by this  Agreement  or that might affect the
right of the Buyer to own the Shares or to operate the  business of the Company.
Neither  the  Sellers  nor the  Company  is  subject  to any known  governmental
oversight which would serve to prevent this transaction.

                                    (c)     Except as set forth on Schedule
2.4(c), no authorization,  approval,  consent,  exemption or other action by, or
registration,  declaration  or  filing  with or  notice  to any  court  or other
Governmental  Authority or any other Person is required in  connection  with the
execution,  delivery,  and  performance  of this  Agreement  and  the  Ancillary
Documents  by the Sellers or the Company or the  consummation  by the Sellers or
the  Company  of  the  transactions  contemplated  hereby,  including,   without
limitation, the transfer of the Shares to the Buyer.

                  Section 2.5.  Organization and Authority.

                                    (a)     The Company is a corporation duly
organized,  validly existing and in good standing under the laws of the State of
Michigan and has full power and authority to own its assets and  properties  and
to carry out its business as presently conducted.  The Company is duly qualified
to do  business  as a  foreign  corporation  and is in good  standing  in  every
jurisdiction  in  which  the  nature  of  the  business  conducted  by it or the
character  or  location  of the  properties  owned or  leased  by it makes  such
qualification necessary.
                                    (b)     The Articles of Incorporation and
By-laws and all  amendments  thereto,  and the minute  books,  stock ledgers and
stock  transfer  records of the  Company  furnished  to the Buyer for review are
accurate and complete and are attached hereto as Schedule 2.5(b).  Such Articles
of  Incorporation  and Bylaws have not been  amended or repealed and are in full
force and  effect on and as of the date of this  Agreement.  Such  minute  books
contain  the  minutes  of all  meetings  of the  shareholders  and the  board of
directors of the Company.  Such stock ledgers and stock transfer records reflect
all  issuances and  registrations  of transfer of all shares of capital stock of
the Company and the  certificates  representing  all canceled  shares of capital
stock have been returned to the stock ledger.

                  Section 2.6.  Subsidiaries and Affiliates.

                  There is no entity  with  respect  to which:  (i) the  Company
beneficially  owns,  directly  or  indirectly,  any  outstanding  stock or other
ownership  interests  of such  entity;  (ii) the  Company may be deemed to be in
control because of factors or relationships  other than the quantity of stock or
other   interests   owned,  or  (iii)  the  Company  may  be  liable  under  any
circumstances  for  the  payment  of  additional  amounts  with  respect  to its
interest,  whether  in the  form  of  assessments,  capital  calls,  installment
payments, general partner liability or otherwise.

                  Section 2.7.  Capitalization.


GV: #115336 v7 (2gzs07!.WPD)
                                       9

<PAGE>



                  The Company has an  authorized  capital  consisting  solely of
200,000  shares of common stock (the "Company  Common  Stock"),  of which 72,350
shares are currently issued and outstanding.  All outstanding  shares of Company
Common Stock have been duly  authorized and validly  issued,  are fully paid and
non-assessable,  were issued by the Company in  compliance  with all  applicable
Federal and state securities and "blue sky" Laws and were not issued and are not
now  in  violation  of  or  subject  to  any  pre-emptive  rights.  There  is no
outstanding or authorized option, subscription, warrant, call, right, commitment
or other  agreement of any character  obligating the Company to sell or transfer
any additional  shares of its capital stock or any other securities  convertible
into or  exercisable  for or evidencing the right to subscribe for any shares of
its capital stock.

                  Section 2.8.  Financial Statements.

                                    (a)     The Sellers (i) have furnished the
Buyer with copies of the financial statements of the Company for the fiscal year
ended  September 30, 1998,  including a balance sheet at September 30, 1998 (the
"Balance Sheet"), a statement of income and expenses,  a statement of cash flow,
and a statement of shareholders equity, and (ii) will furnish to the Buyer prior
to the Closing copies of the Closing  Balance Sheet and a statement of cash flow
for the quarter ending  September 30, 1999 showing all significant  cash outlays
during such quarter prepared by the Company's  independent auditors (clauses (i)
and (ii), collectively, the "Company Financial Statements").

                                    (b)     The Company Financial Statements:
(i) are true,  correct  and  complete  in all  material  respects  and have been
prepared in accordance with the books and records of the Company; (ii) have been
prepared in accordance  with GAAP  consistently  applied  throughout the periods
covered, except as noted in the Company Financial Statements;  and (iii) present
fairly the financial  condition of the Company at such date,  and the results of
its operations for the fiscal period ended September 30, 1998 and as of the date
of the Closing Balance Sheet.
                                    (c)     The Company (i) keeps books, records
and accounts  that are true,  correct and complete  and, in  reasonable  detail,
accurately and fairly reflect (A) the transactions and dispositions of assets of
such entity and (B) the value of  inventory,  if any,  calculated  in accordance
with GAAP and (ii) maintains a system of internal accounting controls sufficient
to provide reasonable assurance that (A) transactions are executed in accordance
with  management's  general or specific  authorizations,  (B)  transactions  are
recorded  as  necessary  to  permit  preparation  of  financial   statements  in
conformity with GAAP and to maintain  accountability  for assets,  (C) access to
assets is permitted  only in accordance  with  management's  general or specific
authorizations  and (D) the recorded  accountability for assets is compared with
existing  assets at reasonable  intervals and  appropriate  action is taken with
respect  to any  differences.  None of the  Company  or any  employee,  agent or
shareholder of the Company  directly or indirectly has made any payment of funds
or commitment of the payment of funds of any such entity or received or retained
any funds in violation of any applicable Law.

                  Section 2.9.  Retained Assets and Liabilities.

GV: #115336 v7 (2gzs07!.WPD)
                                       10

<PAGE>




                  Schedule  2.9  sets  forth a true  and  complete  list of each
Retained  Asset  and  Retained  Liability  and  there  are no  other  assets  or
liabilities  of the Company.  Except with respect to the  Intellectual  Property
which is covered by Section  2.21 below,  the Company has good,  marketable  and
valid title to, or a valid and  enforceable  leasehold  interest in the Retained
Assets,  free and clear of all Encumbrances  (except for liens for Taxes not yet
due and payable).  The Balance Sheet and the Closing Balance Sheet reflects,  as
of their respective dates, all tangible assets and properties, real or personal,
utilized  by the Company in the conduct of its  business.  The Company  does not
hold any assets or liabilities  other than the Retained  Assets and the Retained
Liabilities.  The  Retained  Assets  include all  properties,  assets and rights
necessary  for the conduct of the  business of the Company as now  conducted  or
currently proposed to be conducted by the Board of Directors of the Company.

                  Section 2.10.  Real Property.

                                    (a)     Set forth on Schedule 2.10(a) is (i)
a complete  list of all real property  (the "Owned  Property")  that the Company
owns,  or in  which  the  Company  has  legal  or  equitable  title,  and (ii) a
description  of each lease of real property under which the Company is a lessee,
lessor,  sublessee or sublessor,  including without limitation the Premises (the
"Leased  Property").  The  Owned  Property  and the  Leased  Property  sometimes
collectively are referred to as the "Real Property." True and complete copies of
all leases to which the Company is a party  respecting any real property and all
other instruments  granting such leasehold interests,  rights,  options or other
interests (the "Property  Leases"),  and of all deeds, title insurance policies,
surveys, mortgages, agreements and other documents granting to the Company title
to or an  interest  in or  otherwise  affecting  any Real  Property  (the "Title
Documents"), have been delivered to the Buyer.

                                    (b)     With respect to the Property Leases,
no breach or event of  default  on the part of any party to any of the  Property
Leases and no  condition  or event  that,  with the giving of notice or lapse of
time or both,  would  constitute such breach or event of default,  have occurred
and are  continuing  unremedied.  All the Property  Leases are in full force and
effect and are valid and  enforceable  against the parties thereto in accordance
with their terms.  All rental and other  payments due under each of the Property
Leases have been duly paid in accordance  with the terms of such Property Lease.
Except as set forth in Schedule 2.10(b), the sale of the Shares pursuant to this
Agreement does not require the consent of any party to any Property Lease.

                                    (c)     With respect to the Title Documents,
no breach or event of default on the part of the Company,  no breach or event of
default on the part of any other  party  thereto,  and no event  that,  with the
giving of notice or lapse of time or both, would constitute such breach or event
of default under any term,  covenant or condition of such Title  Documents,  has
occurred and is continuing unremedied that could materially adversely affect the
business,  business  prospects,  financial condition or results of operations of
the Company.


GV: #115336 v7 (2gzs07!.WPD)
                                       11

<PAGE>



                                    (d)     The Company has good, marketable and
indefeasible  title in fee  simple  to the  Owned  Property  and to all  plants,
buildings and improvements thereon,  free and clear of any Encumbrances,  except
for those Encumbrances that are described on Schedule 2.10(d).

                                    (e)     The Owned Property and the buildings
and improvements  thereon,  and the operation or maintenance thereof as operated
and maintained,  do not (i) contravene any zoning or building Law (including but
not limited to those relating to zoning, land division,  building  construction,
parking,  access,  fire,  health and  safety) or (ii)  violate  any  restrictive
covenant or any provision of Federal,  state, local or foreign Law. All building
Permits and certificates of occupancy  required for present and intended uses of
the Owned Property or any part thereof have been obtained, and true and complete
copies of all such building Permits,  to the extent available,  and certificates
of occupancy have been provided to the Buyer.

                                    (f)     The buildings and improvements
constituting part of the Owned Property,  including  fixtures leased or owned by
the Company, are in good operating condition and repair and have been maintained
in a manner consistent with standards generally followed in the industry (giving
due  account  to the age and  length  of use of  same,  ordinary  wear  and tear
excepted),   are  suitable  for  their  present  and  intended   uses,  and  are
structurally sound.

                                    (g)     The buildings and improvements
constituting  part of the Owned  Property  currently  have  access to (i) public
roads or valid easements over private streets or private property for ingress to
and egress from such Owned Property,  and (ii) water supply,  storm and sanitary
sewer facilities,  telephone,  gas and electrical connections,  fire protection,
drainage  and  other  public  utilities,  in each case as is  necessary  for the
present or intended use of such Owned Property.

                                    (h)     There are no easements or
encroachments  or other facts or conditions  affecting any of the Owned Property
that would not be revealed by an accurate survey which would, individually or in
the aggregate, (a) interfere in any respect with the use, occupancy or operation
thereof as currently  used,  occupied and operated or (b) reduce the fair market
value  thereof  below the fair market  value such parcel  would have had but for
such  encroachment  or  other  fact  or  condition.  None of the  buildings  and
structures on the Owned  Property  encroaches  upon the real property of another
Person or upon the area of any easement affecting any of the Owned Property.

                                    (i)     The Company owes no money to any
architect,  contractor,  subcontractor  or  materialman  for labor or  materials
performed,  rendered or supplied to or in  connection  with any Owned  Property.
There is no work being done at or materials  being  supplied to any of the Owned
Property at the date hereof other than routine  maintenance  projects  having an
aggregate cost through completion of not more than $5,000.

                                    (j)     Except as described on Schedule
2.10(j),  since the last tax bill  received  prior to September  30,  1998,  the
Company  has not  received  any  notice,  oral or  written,  of any  increase or
proposed increase in the assessed valuation of any parcel of the Owned Property.

GV: #115336 v7 (2gzs07!.WPD)
                                       12

<PAGE>



                                    (k)     To the best of the Sellers' and the
Company's  information,  knowledge and belief, there is no pending or threatened
condemnation,  eminent domain or other similar  proceedings  with respect to, or
that could affect, any Real Property.

                Section 2.11.  Inventories and Other Tangible Personal Property.

                                    (a)     Inventories.   The Inventories set
forth  in the  Company  Financial  Statements,  if  any,  have  been  valued  in
accordance  with  GAAP  applied  consistently  throughout  the  period  covered.
Physical  adjustments  since  September 30, 1998,  if any,  have been  correctly
recorded in the ordinary course of business. The Inventories of the Company were
acquired and have been  maintained  in the  ordinary  course of business and are
usable or salable in the  ordinary  course of business of the Company at a value
which is no less than the value at which  such  Inventories  are  carried by the
Company. All such Inventories are located on the Real Property.

                                    (b)     Other Tangible Personal Property.
Schedule  2.11(b)  hereto sets forth (i) a description  and the location of each
item of tangible  personal property owned by the Company or in the possession of
the  Company  with a value in excess of $2,000  and (ii) an  identification  and
description of each material lease of personal  property under which the Company
is a lessee or lessor (the  "Personal  Property  Leases"),  copies of which have
been made  available  to the  Buyer.  With  respect  to the  foregoing  personal
property:

                                                     (A)      All such personal
property  is in good  working  order  (ordinary  wear  and  tear  excepted);  is
functioning  in the manner and for the purpose for which it was intended and has
been properly  maintained;  is in compliance with all Laws,  including,  without
limitation,  the rules and regulations promulgated under the Occupational Safety
and  Health  Act of  1970,  as  amended;  and,  except  for  certain  furniture,
telephones,  computers and  miscellaneous  office  equipment having an aggregate
value  not in  excess  of  $27,650  located  in  sales  offices  of the  Company
maintained in the homes of the regional sales  managers,  is located on the Real
Property.

                                                     (B)      With respect to
the Personal  Property Leases,  no breach or event of default on the part of any
party to any of the  Personal  Property  Leases and no  condition or event that,
with the giving of notice or lapse of time or both, would constitute such breach
or event of  default,  have  occurred  and are  continuing  unremedied.  All the
Personal  Property  Leases  are in full  force  and  effect  and are  valid  and
enforceable  against the parties  thereto in  accordance  with their terms.  All
rental and other  payments due under each of the Personal  Property  Leases have
been duly paid in  accordance  with the terms of such Personal  Property  Lease.
Except as set forth in Schedule 2.11(b), the sale of the Shares pursuant to this
Agreement  does not require the  consent of any party to any  Personal  Property
Lease; and

                                                     (C)      The Company has
good and  marketable  title to and is in  possession  of all  items of  tangible
personal  property  owned  or  leased  by the  Company,  free  and  clear of all
Encumbrances whatsoever.


GV: #115336 v7 (2gzs07!.WPD)
                                       13

<PAGE>



                  Section 2.12.  Receivables.

                  The Receivables  constitute  valid accounts  receivable,  have
arisen in the ordinary  course of business,  and are fully  collectible in their
face amount  within no more than ninety (90) days,  are not subject to any valid
set-off, defense or counterclaim, and are not in excess of ninety (90) days past
their  respective  invoice  date.  No  part  of the  Receivables  is or  will be
contingent  upon  performance by the Company of any  obligation or Contract,  no
Person has or will have any Encumbrance on such Receivables or any part thereof,
and no agreements  for  deductions  or discounts  have been made or will be made
with respect to any part of the Receivables.

                  Section 2.13.  Personnel.

                                    (a)     Set forth on Schedule 2.13 is a true
and complete list of:

                                            (i)      the name of each person
employed by the Company, the title or job classification of each such person and
the current  compensation  or hourly  rate of each such  person,  including  all
anticipated  bonus,  deferred  compensation,  commission,  severance  and  other
incentive  payments,  a description of all fringe benefits or prerequisites they
receive or are entitled to receive,  and whether or not such  employee is absent
for any reason such as layoff, leave of absence, or workers' compensation;

                                            (ii)     the name of each person,
if any,  holding tax or other powers of attorney  from the Company and a summary
of the terms thereof; and

                                            (iii)  the  name  and  title  or job
description  of each director and officer,  and each other key employee,  of the
Company.

                                    (b)     Since September 30, 1998 there has
been no material change in the rate of total compensation for services rendered,
including  without  limitation,  bonuses,  deferred  compensation,   commission,
severance and other incentive payments,  for any of the directors,  officers and
employees  listed on Schedule  2.13,  and the  bonuses,  deferred  compensation,
severance and other  incentive  payments  established for the fiscal year ending
September 30, 1999 were consistent with the past practices of the Company.

                                    (c)     No employee or former employee of
the  Company is  receiving  or entitled to any  postretirement  compensation  or
benefits  other than  benefits to which he or she is entitled  under the Pension
Plans.

                                    (d)     The Company has not made any
representations or promises or otherwise created any expectation among employees
respecting any severance benefits or payments from the Buyer or from the Company
as a result of the consummation of transactions contemplated hereby.

GV: #115336 v7 (2gzs07!.WPD)
                                       14

<PAGE>



                  Section 2.14.  Labor Matters.

                                    (a)     Except as described on Schedule
2.14, the Company is not a party to a collective  bargaining  agreement with any
labor  organization,  or any other  labor  contracts  or  employment  agreements
applicable to its employees.

                                    (b)     Except as disclosed in Schedule
2.14, there is no Action
pending or, to the knowledge of the Company,  threatened between the Company and
any  of  its  employees;  there  is no  basis  for  any  Action,  grievance,  or
negotiation, of or by any employee of the Company, and no complaint or charge is
pending or, to the  knowledge  of the  Company,  threatened  against the Company
before the National Labor Relations Board or any state or local agency;  and the
Company has complied, in respect of its employees, in all material respects with
all  applicable  Laws  of  all  Governmental   Authorities,   including  without
limitation  workers'  compensation laws, the Fair Labor Standards Act, Title VII
of the  Civil  Rights  Act of 1964  ("Title  VII"),  the Age  Discrimination  in
Employment Act of 1967, the Equal Pay Act of 1963, the National Labor  Relations
Act of 1935 ("NLRA"),  the Occupational  Safety and Health Act of 1970 ("OSHA"),
the Vocational  Rehabilitation  Act of 1973 and the  Immigration Act of 1986, as
amended;  during the previous five years there have been no strikes, slow downs,
work  stoppages,  lockouts,  union  organizational  campaigns or other  employee
relations disputes of any nature.

                                    (c)     The Sellers have furnished the Buyer
with copies of all claims,
complaints,  reports or other documents  concerning the Company or its employees
made by or against  the  Company  during the past five years  including  without
limitation pursuant to workers' compensation laws, the Fair Labor Standards Act,
Title VII, the Age  Discrimination  in Employment Act of 1967, the Equal Pay Act
of  1963,  OSHA,  NLRA,  the  Vocational  Rehabilitation  Act  of  1973  or  the
Immigration  Act of 1986, as amended;  all  amendments,  supplements and written
understandings  relating  to any  collective  bargaining  agreement  between the
Company and any labor organization or other representative of its employees, and
all employment, consulting, bonus, severance, or other compensation agreement of
the Company which are attached hereto as Schedule 2.14.

                  Section 2.15.  Environmental Matters.

                                    (a)     Except as set forth in Schedule
2.15, neither the Sellers, the
Company,  nor, to the best information,  knowledge and belief of the Sellers and
the  Company,  any current or prior owner or occupant of any Real  Property  has
received any notice or other  communication  concerning  or has any knowledge of
(A) any  violation  of  Environmental  Laws,  or (B) any alleged  Liability  for
environmental  damages in connection with any Real Property.  No Action or Order
relating to the  foregoing  is  outstanding.  There is no pending or  threatened
Action,  of which the  Sellers or the  Company  has  knowledge,  relating to the
ownership,  use,  maintenance  or operation of any Real Property by the Sellers,
the  Company,  or any of their or its  Affiliates,  or  relating  to any alleged
violation of any applicable  Environmental Laws or the presence of any Hazardous
Materials thereon.

GV: #115336 v7 (2gzs07!.WPD)
                                       15

<PAGE>




                                    (b)     For the purposes of this Agreement:

                                            (i)      "Hazardous Materials" means
any substance: (A) the
presence of which requires  investigation or remediation under any Environmental
Law;  (B) that is or  becomes  defined  as a  "hazardous  waste"  or  "hazardous
substance" under any Environmental Law; (C) that is toxic, explosive, corrosive,
reactive, ignitable, flammable, infectious, radioactive, carcinogenic, mutagenic
or  otherwise  hazardous  and  is  or  becomes  regulated  by  any  Governmental
Authority; (D) the presence of which on any Real Property causes or threatens to
cause a nuisance  upon any Real  Property or to adjacent  properties or poses or
threatens  to pose a hazard to the  health or safety of  persons on or about any
Real Property; (E) the presence of which on adjacent properties could constitute
a trespass by the Company or the Sellers;  (F) that  contains  gasoline,  diesel
fuel or other  petroleum  hydrocarbons;  or (G) that contains PCBs,  asbestos or
urea formaldehyde foam insulation.

                                            (ii)     "Environmental Laws" means
all applicable Laws,
Permits,   Orders  and  similar  items,  now  in  effect,  of  all  Governmental
Authorities  having  jurisdiction  and all covenants  running with the land that
relate  to  the  existence,  handling,  manufacture,  treatment,  storage,  use,
generation,  Release, discharge, refining or disposal of Hazardous Materials on,
under,  in or about the Real  Property  ,  including,  without  limitation,  the
Resource Conservation and Recovery Act, 42 U.S.C. ss.ss. 6901, et seq. ("RCRA"),
the Oil Pollution Act of 1990, 33 U.S.C.  ss.ss. 2701 et seq., the Comprehensive
Environmental Response,  Compensation,  and Liability Act of 1980, as amended by
the Superfund  Amendments and Reauthorization Act of 1986, 42 U.S.C. ss.ss. 9601
et seq.  ("CERCLA"),  the Federal Water Pollution Control Act, as amended by the
Clean Water Act of 1977,  33 U.S.C.  ss.ss.  1251 et seq.,  the Clean Air Act of
1970, as amended,  42 U.S.C.  ss.ss. 7401 et seq., the Toxic Substances  Control
Act of 1976, 15 U.S.C.  ss.ss. 2601 et seq., the Occupational  Safety and Health
Act of 1970, as amended,  29 U.S.C.  ss.ss. 651 et seq., the Emergency  Planning
and Community  Right-to-Know  Act of 1986, 42 U.S.C.  ss.ss.  11001 et seq., the
Safe Drinking Water Act of 1974, as amended,  42 U.S.C.  ss.ss.  300(f) et seq.,
the Hazardous  Materials  Transportation Act, 49 U.S.C. ss.ss. 1801 et seq., and
any similar or implementing state or local law.

                                            (iii)  "Release" means any spilling,
emitting,  leaking, pumping, pouring, emptying,  injecting,  escaping,  dumping,
depositing, disposing, discharging, dispersing, leaching, emanating or migrating
of any Hazardous  Materials  (including the abandoning or discarding of barrels,
containers and other closed receptacles  containing any Hazardous  Material) in,
into,  onto, or through the environment  (including  ambient air, surface water,
groundwater, soils, land surface, subsurface strata, workplace or structure).

                                    (c)     To the best of their information,
knowledge and belief, the
Sellers and the Company  have  complied in all respects  with all  Environmental
Laws.  Sellers are not aware,  with respect to any Real Property,  or properties
adjacent  to the  Real  Property,  of any  audit,  inspection  or  investigation
conducted  by or on behalf of any third  party or  Governmental  Authority  with
respect to: (a) any media,  including  groundwater,  surface water,  wastewater,
soil, or air; or (b)

GV: #115336 v7 (2gzs07!.WPD)
                                       16

<PAGE>



the storage,  burial, Release,  transportation,  or disposal of any solid waste,
special  waste or  Hazardous  Substances.  The Company has no formal or informal
agreement of any kind with any third party or  Governmental  Authority,  nor are
the  Sellers or the  Company  subject to any  Actions or Orders  relating to any
environmental cleanup, investigation, audit, study or Liability.

                                    (d)     To the best information, knowledge
and belief of the Sellers and
the  Company,  the Real  Property  is in full  compliance  with  all  applicable
Environmental Laws. To the best information, knowledge and belief of the Sellers
and the Company,  neither the Company,  nor any third party,  has engaged in the
generation, use, manufacture,  treatment,  transportation,  storage, disposal or
Release of any Hazardous  Substances  on, in, under or around the Real Property,
or on  properties  adjacent to the Real  Property,  in violation  of  applicable
Environmental  Laws and/or that could reasonably be expected to result in Losses
to the Buyer.

                                    (e)     To the best information, knowledge
and belief of the Sellers and
the Company, the Company has secured and maintained  compliance with all Permits
required for the conduct of its business under Environmental Laws.

                                    (f)     Neither the Sellers nor the Company
is aware of any condition
or impending events that will substantially affect the Buyer's ability to comply
with  Environmental  Laws  following  the  Closing  hereunder  or to obtain  and
maintain  in effect the Permits  from any  Governmental  Authority  which may be
necessary  to  permit  construction,  modification  or  operation  of  the  Real
Property.

                                    (g)     The Company has not received any
written notice of and does
not have any  knowledge of any soon to be issued notice of  non-compliance  with
any  applicable  Environmental  Laws or any other Laws relating to  occupational
health and safety.

                                    (h)     No site investigation or clean-up of
 any Real Property, nor any
consent of any Governmental  Authority or other Person will be required pursuant
to any  Environmental  Laws  in  connection  with  the  execution,  delivery  or
performance of this Agreement and the transactions contemplated hereby.

                                    (i)     No written notice, citation,
summons, complaint, Order or
written  request for  information  pursuant to any Law has been  received by the
Company (including,  without limitation,  a CERCLA ss.104(e) Information Request
or state equivalent,  requesting  information  regarding the Company's potential
involvement in a waste disposal facility),  and no penalty has been assessed and
no  investigation  or  review  is  pending  or  threatened  by any  Governmental
Authority  or other  Person  with  respect to the  Company,  its  business,  the
Retained  Assets or the Real Property  (other than those  relating to any matter
which has been fully and finally  resolved  by such  Governmental  Authority  or
other Person and the Company,  and for which all appeals have been  exhausted or
are  expired)  regarding  (i)  any  alleged  violation  by  the  Company  of any
Environmental  Law,  (ii) any  alleged  failure by the Company to have or comply
with any  Permit  required  under  any  Environmental  Law,  or  (iii)  any use,
possession, Release, threatened Release,

GV: #115336 v7 (2gzs07!.WPD)
                                       17

<PAGE>



storage,  generation,  manufacture,  treatment,   transportation,   disposal  or
recycling by or on behalf of the Company of any Hazardous  Material,  including,
without  limitation,  a written request for information or notification that the
Company  is  a  potentially   responsible   party  under  CERCLA  or  any  other
Environmental Law.

                                    (j)     There are no, and have not been
during the Company's
ownership or use of the Real Property any,  aboveground or  underground  storage
tanks on the Real Property.

                                    (k)     To the best information, knowledge
and belief of the Sellers and
the Company, there are no environmental, health or safety hazards present on the
Real Property,  including, without limitation, those relating to PCBs, asbestos,
radon  gas,  harmful  radioactive  material  or other  Hazardous  Materials.  No
Hazardous Materials have migrated, traveled or otherwise moved via the soil, air
or  groundwater  from the  Real  Property  to  properties  adjacent  to the Real
Property.

                                    (l)     The Sellers have furnished the Buyer
 with true and complete
copies of all claims, complaints, reports or other documents in the files of the
Sellers or the Company  concerning the Sellers or the Company made by or against
the Sellers or the Company during the past five years pursuant to  Environmental
Laws, which are attached hereto as Schedule 2.15.

                  Section 2.16.  Non-ERISA Plans.

                                    (a)     Set forth on Schedule 2.16 is a
complete list of each current
employment contract and consulting  agreement entered into by the Company, or by
which the Company is bound,  and each deferred  compensation,  bonus,  incentive
compensation,  restricted stock, stock option, employee stock purchase, savings,
severance or termination  pay agreement or plan and any other  employee  benefit
plan,  agreement,  arrangement  or commitment,  whether formal or informal,  not
required to be listed on Schedule 2.16, maintained,  entered into or contributed
to by the Company for the benefit of any current or former director,  officer or
employee of the Company (the "Non-ERISA  Plans").  The Sellers have delivered to
the Buyer true and  correct  copies of each  Non-ERISA  Plan  listed on Schedule
2.16, which are attached hereto as part of Schedule 2.16.

                                    (b)     Each Non-ERISA Plan is legally valid
 and binding and in full
force and effect,  and benefits under the Non-ERISA  Plans are as represented in
such plan  documents.  The following  information  is set forth on Schedule 2.16
with respect to each Non-ERISA  Plan: (i) the amount of the  contribution by the
Company to such  Non-ERISA  Plan for each of the past three fiscal years and the
plan year in which the Closing Date occurs;  (ii) the amount of any liability of
the  Company  for  payments  or  contributions  past  due with  respect  to such
Non-ERISA Plan as of the last day of its most recent plan year and as of the end
of any subsequent  month ending prior to the Closing Date, and the date any such
amounts were paid; (iii) any contribution to such Non-ERISA Plan in a form other
than cash; and (iv) whether such Non-ERISA Plan has been  terminated.  Except as
set forth on Schedule  2.16,  the Company has no  obligation  or liability  with
respect to any Non-ERISA

GV: #115336 v7 (2gzs07!.WPD)
                                       18

<PAGE>



Plan, including without limitation under any collective  bargaining agreement to
which the Company is a party or by which it is bound.

                                    (c)     The Company is not in default under
any Non-ERISA Plan
listed on Schedule  2.16; no benefit under any Non-ERISA Plan has been increased
subsequent  to the date as of which  documents  have been provided to the Buyer;
and the Company has no plan, arrangement or commitment,  whether legally binding
or not,  to create any  additional  ERISA Plan (as  defined in Section  2.17) or
Non-ERISA Plan that would affect any current or former  employee of the Company.
There is no action,  suit or claim,  other  than  routine  claims for  benefits,
pending or  threatened  with respect to any  Non-ERISA  Plan or the  fiduciaries
thereof, or against the assets of any Non-ERISA Plan or the Company.

                                    (d)     Neither Company nor any related
employer has contributed to
a  non-conforming  group health plan (as that term is defined in Section 5000(c)
of the Code) or incurred any tax liability under Section 5000(a) of the Code.

                  Section 2.17.  ERISA Plans.

                                    (a)     Set forth on Schedule 2.17 is a
complete list of each employee
pension  benefit  plan (the  "Pension  Plans") as defined in Section 3(2) of the
Employee  Retirement  Income  Security Act of 1974  ("ERISA")  and each employee
welfare benefit plan (the "Welfare Plans" and,  together with the Pension Plans,
collectively  referred  to as the "ERISA  Plans") as defined in Section  3(l) of
ERISA  established,  maintained  or  contributed  to by the Company or any ERISA
Affiliate.  As used herein, the term "ERISA Affiliate" means a corporation which
is a member of a controlled  group of  corporations  with the Company within the
meaning of Section  4.14(b) of the Code,  a trade or business  (including a sole
proprietorship, partnership, trust, estate or corporation) which is under common
control with the Company  within the meaning of Section 414(c) of the Code, or a
member of an  affiliated  service  group with the Company  within the meaning of
Section 414(m) or Section 414(o) of the Code. Each ERISA Plan listed on Schedule
2.17 is correctly categorized as either a Pension Plan or a Welfare Plan.

                                    (b)     The Sellers have delivered to the
Buyer true and correct copies
of the following, each of which is attached hereto as part of Schedule 2.17:

                                            (i)      each ERISA Plan listed on
Schedule 2.17 and all
amendments thereto;

                                            (ii)     each trust agreement and
annuity  contract (or any other  funding  instrument)  pertaining  to any of the
ERISA Plans, including all amendments to such documents;


GV: #115336 v7 (2gzs07!.WPD)
                                       19

<PAGE>



                                            (iii) the most recent  determination
letter issued by the IRS
with respect to each of the Pension  Plans and  recognition  of  exemption  from
Federal income taxation under Section 501 (a) of the Code of each funded Welfare
Plan and, to the extent that an application  is pending with the IRS,  copies of
such applications have been provided to the Buyer;

                                            (iv)     the three most recent
actuarial valuation reports for each ERISA Plan for which an actuarial valuation
report is required to be prepared; and

                                            (v)      the two most recent Annual
Reports (IRS Forms 5500
series), including Schedules A and B and plan audits, if applicable, required to
be filed with respect to each ERISA Plan.

                                    (c)     No reportable event as defined in
Section 4043(c) of ERISA,
whether or not the reporting requirement with respect thereto has been waived by
the Pension  Benefit  Guaranty  Corporation  (the  "PBGC"),  has  occurred or is
continuing  with respect to any Pension Plan. No prohibited  transaction  within
the  meaning of Section  406 of ERISA or Section  4975 of the Code has  occurred
with respect to any Pension Plan.

                                    (d)     None of the Company or any ERISA
Affiliate is now, or ever has been, a contributing  employer to a  Multiemployer
Plan (as defined in Section 3(37) of ERISA).

                                    (e)     None of the Company or any ERISA
Affiliate has: (i) ceased
operations  at a facility so as to become  subject to the  provisions of Section
4062(e) of ERISA;  (ii)  withdrawn  as a  substantial  employer  so as to become
subject  to the  provisions  of  Section  4063 of  ERISA;  (iii)  ceased  making
contributions  to any Pension Plan subject to the provisions of Section  4064(a)
of ERISA to which such entity  made (or was  obligated  to make)  contributions;
(iv)  incurred or caused to occur a complete  withdrawal  (within the meaning of
Section  4203 of ERISA) or a partial  withdrawal  (within the meaning of Section
4205 of ERISA) from a  Multiemployer  Plan so as to incur  withdrawal  liability
under Section 4201 of ERISA (without regard to subsequent reduction or waiver of
such liability under Section 4207 or Section 4208 of ERISA); or (v) been a party
to any  transaction  or agreement  under which the provisions of Section 4204 of
ERISA were applicable.

                                    (f)     No notice of intent to terminate a
Pension  Plan has  been  distributed  or filed  nor has any  Pension  Plan  been
terminated pursuant to the provisions of Section 4041 of ERISA.

                                    (g)     The PBGC has not instituted
proceedings to terminate (or
appoint a trustee to  administer)  a Pension  Plan and no event has  occurred or
condition exists that might  constitute  grounds under the provisions of Section
4042 of  ERISA  for the  termination  of (or the  appointment  of a  trustee  to
administer) any Pension Plan.

                                    (h)     There is no action, suit or claim
pending  (other than routine  claims for benefits) or that  reasonably  could be
expected to be asserted against any ERISA Plan or

GV: #115336 v7 (2gzs07!.WPD)
                                       20

<PAGE>



the assets of any ERISA Plan. No civil or criminal  action  brought  pursuant to
the  provisions of Title 1, Subtitle B, Part 5 of ERISA is pending or threatened
against  any  fiduciary  of any  ERISA  Plan.  None of the  ERISA  Plans  or any
fiduciary  thereof  has  been  the  direct  or  indirect  subject  of  an  audit
investigation or examination by any governmental or quasigovernmental agency.

                                    (i)     To the best information, knowledge
and belief of the Sellers and
the Company,  all of the ERISA Plans currently comply,  and have complied in the
past, both as to form and operation, with the terms of such ERISA Plans and with
the applicable  provisions of ERISA, the Code and other applicable Federal laws.
All necessary  governmental approvals for the ERISA Plans have been obtained and
a favorable  determination as to the  qualification  under Section 401(a) of the
Code of each of the Pension Plans and of each amendment thereto has been made by
the IRS and a  recognition  of exemption  from  Federal  income  taxation  under
Section 501 (a) of the Code of each of the funded  Welfare  Plans,  if any,  has
been  made by the  IRS.  Nothing  has  occurred  since  the  date  of each  such
determination   or  recognition   letter  that  would   adversely   affect  such
qualification or exemption.

                                    (j)     Each party in interest described in
section 3(14)(A) and (B) of
ERISA  has  complied,  and the  Company  will not  knowingly  permit at any time
through the  Effective  Time any such party in interest to fail to comply,  with
all material requirements of ERISA.

                                    (k)     The Company has caused to be filed
on a timely basis each and
every  return,  report and notice  required to be furnished to any  governmental
agency or to any plan  participant or beneficiary  with respect to each employee
benefit plan  sponsored or maintained by the Company.  The Company shall deliver
to Buyer at closing all records as are requested by Buyer.

                                    (l)     The Company is neither a "Signatory
Operator" (as that term
is defined in Code section  9701(c)(1))  or a "Related  Person" (as that term is
used in Code section Code 9701(c)(2)) with respect to any Signatory Operator.

                                    (m)     To the best information, knowledge
and belief of the Sellers and
the Company,  each Welfare  Plan,  each Pension Plan and each  employee  benefit
arrangement  which otherwise  provides  benefits or compensation for services to
any  employee,   his  dependents  or  beneficiaries   has  been  maintained  and
administered at all times in full  compliance with applicable  state and federal
law,  including without  limitation the Age  Discrimination in Employment Act of
1967,  Title VII of the Civil  Rights Act of 1964,  Title X of the  Consolidated
Omnibus Budget  Reconciliation Act of 1986, and the Health Insurance Portability
and Accountability Act of 1996.

                                    (n)     There does not exist any lien under
Section 412(n) of the Code
upon any property belonging to Company,  any subsidiary or any entity which is a
member of a  controlled  group  (within the meaning of Section  412(n)(6) of the
Code) of which the Company is a member.


GV: #115336 v7 (2gzs07!.WPD)
                                       21

<PAGE>



                                    (o)     With respect to each Pension Plan,
including any Plan that is frozen, terminated or partially terminated:

                                            (i)      there is no accumulated
funding  deficiency,  as defined in section 302(a)(2) of ERISA or section 412 of
the Code;

                                            (ii)     there has not been issued
a waiver of the minimum funding standard under section 412 of the Code;

                                            (iii) there is no liability  for tax
imposed by section 4971 of the Code;

                                            (iv)     the contribution and
benefit limitations of section 415 of the Code have not been exceeded;

                                            (v)      there is no unfulfilled
obligation to contribute;

                                            (vi)     there has been received a
favorable determination from
the IRS issued under Rev Proc 93-39 which considered the amendments  required by
the Tax Reform  Act of 1986 with  respect  to the  qualified  status of the Plan
under section 401(a) of the Code;

                                            (vii)  the  IRS has  not  revoked  a
prior favorable determination of the Plan's qualified status or issued technical
advice regarding the Plan's qualified status; and

                                            (viii)   to the best information,
knowledge  and belief of the Sellers and the  Company,  no event has occurred in
the  operation  or  administration  of the Plan  which  could  form a basis  for
revocation of the Plan's qualified status by the IRS.

                  Section 2.18.  Compliance with Law.

                  The Company has  complied in all  material  respects  with all
applicable   Laws  of  all   Governmental   Authorities  and  all  national  and
international   self-regulatory   bodies  and  authorities  in  respect  of  its
shareholders  or  employees  or in respect of the  conduct of its  business  and
ownership  of its  properties.  Neither the Sellers nor the Company has received
any  notification  of any  asserted  present or past  failure by the  Company to
comply  with any such Law.  None of the  products  of the  Company as  currently
produced,  including those that are part of the Inventories, are in violation of
any Law as of the Closing Date.

                  Section 2.19.  Product Warranties and Product Claims.

                                    (a)     Except as described on Schedule
2.19(a), the Company has not
made any oral or written warranties in connection with the sale of the products,
and there is no Action  pending,  threatened or, to the best of the Sellers' and
the Company's knowledge, anticipated

GV: #115336 v7 (2gzs07!.WPD)
                                       22

<PAGE>



against the Company that relate to any products sold by the Company,  including,
without  limitation,  claims in  respect  of the  quality  of or defects in such
products, and the Company is not aware of any grounds therefor.

                                    (b)     Schedule 2.19(b) sets forth an
accurate summary of all returns
of  defective  products  from  and  after  January  1,  1994,  and all  credits,
allowances  and payments  made under any  applicable  warranty to customers  for
defective products during such period. The Sellers have not been required to pay
direct,  incidental  or  consequential  damages  to  any  person  or  entity  in
connection with any of such products.

                  Section 2.20.  Litigation.

                                    (a)     Except as set forth in Schedule
2.20, there is no Action pending
or  threatened  against or  affecting  the Company,  or the assets,  properties,
business or business prospects of the Company, at law or in equity, or before or
by any arbitrator or any Court or other Governmental Authority,  and neither any
Seller  nor  any  officer  of the  Company  knows  of any  basis  for any of the
foregoing.  Except as set forth in Schedule  2.20,  the Company has not received
any opinion or  memorandum  or legal advice or notice from legal  counsel to the
effect  that  it is  exposed,  from a  legal  standpoint,  to any  liability  or
disadvantage  that  may be  material  to its  assets,  properties,  business  or
business  prospects.  No Seller has received any opinion or  memorandum or legal
advice or notice  from legal  counsel to the effect  that he or she is  exposed,
from a legal  standpoint,  to any liability or disadvantage that may be material
in respect of the  Shares.  The  Company is not in default  with  respect to any
Order known to or served upon the Company of or by any  arbitrator  or any court
or other  Governmental  Authority.  There is no  pending  Action  brought by the
Company against others.

                                    (b)     There is no Action pending or
threatened, at law or in equity,
or before or by any  arbitrator  or any  court or other  Governmental  Authority
relating to or involving  the  transactions  contemplated  by this  Agreement or
which would or may affect the transactions contemplated by this Agreement.

                  Section 2.21.  Intellectual Property.

                                    (a)     Set forth on Schedule 2.21 is a list
and brief  description  or  identification  of (i) all patents,  patent  rights,
patent applications,  trademarks, trademark applications, service marks, service
mark  applications,  trade  names  (including  all  rights  in and  to the  name
"Ermanco"  and any names similar  thereto or variations or deviations  thereof),
copyrights,  licenses,  designs,  art work,  designs-in-progress,  formulations,
prototypes,  inventions  and trade  styles  licensed  to,  used by,  owned by or
registered  in the name of the Company,  or in which the Company has any rights,
and  (ii)  all  technical  proprietary  and  business  confidential  information
including,  without  limitation,  research data,  market  reports,  distribution
methods,  customer lists, trade secrets,  and other proprietary and intellectual
property  owned,  controlled,  created,  used or licensed by or on behalf of the
Company that are not within the general  knowledge of the industry.  The Company
does not

GV: #115336 v7 (2gzs07!.WPD)
                                       23

<PAGE>



license any of the  Intellectual  Property to any  Person.  The Company  owns or
possesses  adequate  licenses or other rights to use all  Intellectual  Property
free and clear of all  Encumbrances,  and, except as set forth on Schedule 2.21,
no  royalties,  fees or other  payments are payable by the Company to anyone for
use of the Intellectual  Property.  All Contracts  pursuant to which the Company
has any license or right to use any  Intellectual  Property  are  identified  on
Schedule 2.21. No use by the Company of any Intellectual Property licensed to it
violates the terms of any Contract pursuant to which it is licensed. No claim is
pending or threatened  to the effect that (i) the present or past  operations of
the Company or the manufacture,  use, or sale by the Company of its products, or
any  component  or part  thereof  violate,  infringe  upon or conflict  with the
asserted  rights of any other  person in respect of any  Intellectual  Property,
including without  limitation,  claims under any United States or foreign patent
or patent application owned or held by any third party, or (ii) any Intellectual
Property is invalid or unenforceable,  nor is the Company or any Seller aware of
any  unasserted  claim the assertion of which is probable.  No Contract with any
party  exists that would  impede or prevent the  assignment  to the Buyer of the
entire  right,  title and  interest  of the  Company in and to any  Intellectual
Property.  The Company requires no additional  Intellectual Property in order to
conduct its business in the manner presently conducted.

                                    (b)     Set forth on Schedule 2.21 is a
list and  description of all computer  software,  source code and magnetic media
licensed to, used by or owned by the  Company,  including a list of the computer
systems on which such software may be used without  modification or translation.
The use by the Company of all such  computer  software is in  compliance  in all
material respects with the applicable license agreements  covering such computer
software  and does not  violate  the  proprietary  rights of any  person in such
computer software.

                  Section 2.22.  Material Contracts.

                                    (a)     Except as set forth on Schedule
2.22, the Company is not a party to any written or oral:

                                            (i)      Contract not made in the
ordinary course of business, other than this Agreement;

                                            (ii)     consulting Contract or
Contract for the employment of
any officer,  employee or other person on a full-time,  part-time or  consulting
basis except for accrued  vacation  pay, in each case not to exceed the value of
vacation pay accrued in one year;

                                            (iii) collective bargaining or labor
agreement with any labor
union or similar Contract;

                                            (iv)     bonus, pension, profit-
sharing,  retirement,  stock  purchase,  stock  option,  deferred  compensation,
incentive compensation,  hospitalization,  insurance or similar plan or Contract
providing for employee benefits;


GV: #115336 v7 (2gzs07!.WPD)
                                       24

<PAGE>



                                            (v)      Contract relating to the
lease of any property, real or personal, whether as lessor or lessee;

                                            (vi)     Contract for the purchase
or sale of real property or capital or fixed assets;

                                            (vii)  Contract  for the purchase of
materials,  supplies,  goods,  services,  equipment or other assets,  other than
Inventories in the ordinary course of business;

                                            (viii)  Contract  not  made  in  the
ordinary course of business for the sale of goods or the performance of services
for or by the Company;

                                            (ix)     insurance Contract;

                                            (x)      Contract continuing for a
period of more than  three  months  from its date  that is not  terminable  upon
notice  of 30 days or less  without  cost or  Liability  to the  Company  or any
successor thereof;

                                            (xi)     manufacturers' or sales
representative,  distributorship,  agency,  dealer,  marketing,  advertising  or
similar Contract;
                                            (xii)      agreement,      mortgage,
indenture,  loan or credit  agreement,  security  agreement or similar  Contract
relating  to the  borrowing  or  lending  of money or  extension  of  credit  or
providing  for the deferred  purchase of property or the  mortgaging or pledging
of, or otherwise  placing an  Encumbrance  on, any assets or  properties  of the
Company;

                                            (xiii)  option,  warrant  or similar
Contract for the purchase of any debt or equity  security of any Person,  or for
the  issuance  of  any  debt  or  equity  security,  or  the  conversion  of any
obligation,  instrument  or  security  into  debt or equity  securities,  of the
Company;

                                            (xiv)    guaranty or indemnity of or
with  respect to any  obligation  for  borrowed  money or  otherwise,  excluding
endorsements made for collection;

                                            (xv)     settlement agreement of any
administrative or judicial proceedings within the past five years;

                                            (xvi) option, license,  franchise or
similar Contract;


                                            (xvii)  Contract  for   partnership,
joint  venture,   strategic   alliance,   joint  development  or  other  similar
arrangements;

GV: #115336 v7 (2gzs07!.WPD)
                                       25

<PAGE>



                                            (xviii)  Contract  that  limits  the
freedom of the Company to (A) compete in any hire of business or with any Person
or in any geographic territory or (B) own, operate,  sell,  transfer,  pledge or
otherwise  dispose of or encumber any Retained  Asset,  or which would limit the
freedom of the Buyer to do so after the Closing; or

                                            (xix)    secrecy, confidentiality,
non-disclosure or similar Contract.

                                    (b)     The Sellers have furnished the Buyer
 with a true and complete
copy of all written contracts,  obligations or commitments set forth on Schedule
2.22,  and with accurate  descriptions  of all oral  contracts,  obligations  or
commitments set forth on Schedule 2.22.

                                    (c)     With respect to the Contracts, no
breach or event of default on
the part of any party to any of the  Contracts  and no  condition or event that,
with the giving of notice or lapse of time or both, would constitute such breach
or event of  default,  have  occurred  and are  continuing  unremedied.  All the
Contracts are in full force and effect and are valid and enforceable against the
parties thereto in accordance  with their terms.  All payments due under each of
the Contracts have been duly paid in accordance with the terms of such Contract.
Except as set forth in Schedule  2.22,  the sale of the Shares  pursuant to this
Agreement does not require the consent of any party to any Contract.

                  Section 2.23.  Conduct of Business.

                  Except as set forth on  Schedule  2.23,  since the date of the
Balance Sheet, the Sellers have preserved and caused the Company to preserve the
business  organization of the Company intact, has kept and caused the Company to
keep available to the Company the services of all current officers and employees
and has  preserved  and  caused the  Company to  preserve  the  goodwill  of the
suppliers,  customers,  employees and others having business  relations with the
Company.  Since the date of the  Balance  Sheet the Company  has  conducted  its
business in the ordinary course,  has maintained its assets and properties in at
least as good order and  condition  as existed on the date of the Balance  Sheet
and as is necessary to continue to conduct its business and has not:

                                    (a)     incurred or discharged, in whole or
in part,  any  Liability  or entered into any other  transaction,  except in the
ordinary  course of  business  or in  connection  with the  performance  of this
Agreement;

                                    (b)     discharged or satisfied any
Encumbrance,  or  paid  or  satisfied  any  Liability,  other  than  Liabilities
reflected on the Balance  Sheet or incurred  since the date of the Balance Sheet
in the ordinary course of business;

                                    (c)     created or permitted to arise any
Encumbrance  upon any  assets of the  Company  or  increased  the  amount of any
Liability  outstanding under any loan agreement,  mortgage,  equipment lease, or
similar borrowing arrangement or Contract;

GV: #115336 v7 (2gzs07!.WPD)
                                       26

<PAGE>




                                    (d)     increased or established any reserve
for Taxes or other
Liabilities  on its books or otherwise  provided  therefor,  except for Taxes or
other  Liabilities  relating to the  operations of the Company since the date of
the Balance Sheet;

                                    (e)     mortgaged, pledged or subjected to
any Encumbrance any of the assets or properties of the Company;

                                    (f)     sold, leased, encumbered, assigned,
transferred or otherwise
disposed of any asset, property or business or canceled, released,  compromised,
modified or waived any debt,  claim or right,  except in the ordinary  course of
business;

                                    (g)     sold, assigned, transferred,
permitted  to lapse or  granted  any  license  or  sublicense  of any right with
respect to  Intellectual  Property or permitted the use of its corporate name by
any person;

                                    (h)     granted any increase in the
compensation (including pursuant to any bonus, pension or other employee benefit
plan)  payable  or to become  payable  to, or made any  advance  or loan to, any
officer,  director,  consultant,  employee  or agent of the  Company  other than
increases  granted in annual  reviews,  or advances or loans made, in accordance
with past  practice and other than entry into  employment  severance  agreements
with Leon Kirschner and Thomas Hubell as set forth in Schedule 2.23;

                                    (i)     purchased or leased any assets
(other than Inventories in the
ordinary course of business) made or authorized any capital expenditure or lease
for additions or improvements to plant and equipment of the Company in excess of
$5,000 in the aggregate  except as may have been necessary for ordinary  repair,
maintenance and replacement;

                                    (j)     made any loan to any shareholder or
any relative or affiliate of
any shareholder,  or declared, set aside or paid to any shareholder any dividend
or other  distribution in respect of its capital stock, or redeemed or purchased
any of its capital stock, or agreed to take any such action;

                                    (k)     transferred any asset or paid any
commission, salary or bonus
to any  shareholder or any relative or Affiliate of any  shareholder  other than
the payment of wages or salaries to employees in the ordinary course of business
and as disclosed  on Schedule  2.23 or paid any rent,  commission  or fee to any
shareholder  or any  relative  or  affiliate  of any  shareholder  other than as
disclosed on Schedule 2.23 in the amounts shown thereon;

                                    (l)     entered into or agreed to enter into
 any transaction with or for
the benefit of any  shareholder or any relative or Affiliate of any  shareholder
other than the  transactions  contemplated  by this Agreement or as disclosed in
Schedule 2.23;


GV: #115336 v7 (2gzs07!.WPD)
                                       27

<PAGE>



                                    (m)     issued, sold or transferred, or
agreed to issue, sell or transfer,
any  capital  stock,  bond,  debenture  or other debt or equity  security of the
Company or granted any Options,  warrants, or other rights to purchase or obtain
(including upon conversion, exchange or exercise) of any of its capital stock;

                                    (n)     experienced any damage, destruction
or loss  (whether or not covered by insurance)  adversely  affecting the assets,
properties, business or business prospects of the Company;

                                    (o)     experienced any material adverse
change in the assets,  properties,  business,  business  prospects,  operations,
condition (financial or otherwise), Liabilities of the Company;

                                    (p)     altered the manner of keeping the
Company's  books,  accounts  or records or the  accounting  practices  reflected
therein;

                                    (q)     changed the nature of customer
contacts,  licensing  arrangements or billing practices,  except in the ordinary
course of business or failed to pay or discharge when due any liability of which
the failure to pay or discharge has caused or will cause any material  damage or
risk of loss to the Company or any of its assets or properties;

                                    (r)     revalued, upward or downward, the
value of any Inventories
(including,  without limitation,  downward revaluation by reason of shrinkage or
markdowns or revaluation resulting from the application of the "lower of cost or
market" methodology);

                                    (s)     made or authorized any amendment to
its Articles of Incorporation or By-laws except as may be necessary to carry out
this Agreement or as required by Law;

                                    (t)     made any changes in its senior
management;

                                    (u)     made any capital investment in,
made any  acquisition  of  securities  or assets of, made any loan to, merged or
consolidated with, or acquired or agreed to acquire or be acquired by, any other
Person;

                                    (v)     adopted, terminated, amended,
modified, extended, or
otherwise  changed any Non-ERISA Plan or ERISA Plan, or made, caused to be made,
or agreed to make any contribution, award or payment under any Non-ERISA Plan or
ERISA Plan,  except at the time and to the extent  required by the written terms
thereof and except for the  elective  profit  sharing  contributions  and 401(k)
payments as disclosed in the Schedules;

                                    (w)     ceased doing business with or
modified, amended, altered or otherwise changed any credit arrangement,  payment
terms, or discount programs with any supplier

GV: #115336 v7 (2gzs07!.WPD)
                                       28

<PAGE>



or with any  customer  that  represented  more  than  five  percent  (5%) of the
Company's sales in any of the last three (3) fiscal years;

                                    (x)     made or pledged to make any
political or charitable contribution;

                                    (y)     made any payments to its Affiliates,
or received any advances from its  Affiliates,  except to the extent of payments
or advances  made in the  ordinary  course of Sellers'  business and on terms no
less  favorable  to  Sellers  than those that  would  result  from arm's  length
negotiations with unrelated third parties;

                                    (z)     agreed, so as to be legally bound,
whether in writing or  otherwise,  to take any of the  actions set forth in this
Section 2.23, and not otherwise permitted by this Agreement; or

                                    (aa)    entered into or engaged in any other
material course of conduct, occurrence, event, incident, action, failure to act,
or transaction other than in the ordinary course of business.

                  Section 2.24.  Tax Matters.

                                    (a)     The Company in a timely manner has
filed all returns and other
reports required of it under all Federal,  state,  local and foreign tax Laws to
which it is subject. All such returns and reports are true, correct and complete
in all  material  respects  and  accurately  set forth  all items to the  extent
required to be  reflected  or included in such  returns by  applicable  Federal,
state,  local or foreign  tax Laws.  The  Company  has paid in full or set up an
adequate  reserve  in  respect  of all Taxes  for the  periods  covered  by such
returns, as well as all other Taxes, penalties,  interest, fines,  deficiencies,
assessments and governmental charges that have become due or payable,  including
without  limitation  all Taxes that the Company is  obligated  to withhold  from
amounts paid or payable to or benefits  conferred upon employees,  creditors and
third  parties.  The Company  has no tax  Liability  for which an  adequate  tax
reserve has not been  established on the Balance Sheet and, when  prepared,  the
Closing  Balance  Sheet,  whether or not  disputed,  including  any interest and
penalty in connection therewith,  for all periods ending on or prior to the date
of the Balance Sheet and the Closing Balance Sheet, respectively.

                                    (b)     Set forth on Schedule 2.24(b), and
attached thereto as part
thereof, is a complete list of income and other Tax Returns filed by the Company
pursuant to the Laws of any Federal,  state, local or foreign tax authority that
have been examined or audited by the IRS or other  appropriate  authority during
the preceding ten years, and a list of all adjustments  resulting from each such
examination or audit. All deficiencies proposed as a result of such examinations
or audits have been paid or finally  settled and no issue has been raised in any
such examination or audit that, by application of similar principles, reasonably
can be expected to result in the  assertion of a  deficiency  for any other year
not so examined or audited. The results of any

GV: #115336 v7 (2gzs07!.WPD)
                                       29

<PAGE>



settlement  and the  necessary  adjustments  resulting  therefrom  properly  are
reflected in the Balance Sheet and, when prepared, the Closing Balance Sheet. To
the best of the Sellers' and Company's information,  knowledge and belief, there
are no grounds for any further tax Liability with respect to the years that have
not been examined or audited.  There is no outstanding  agreement or waiver made
by or on behalf of the  Company  for the  extension  of time for any  applicable
statute of limitations,  and the Company has not requested any extension of time
in which to file any Tax Return.

                                    (c)     Except for Taxes for the payment of
which an adequate reserve
has been  established  on the  Balance  Sheet and,  when  prepared,  the Closing
Balance Sheet, and for property Taxes that are not delinquent,  there is no lien
for  Taxes,  whether  imposed by any  Federal,  state,  local or foreign  taxing
authority, outstanding against any of the assets or properties of the Company.

                                    (d)     None of the Sellers is a "foreign
person" as that term is used
in ss.1.1445-2 of the United States Treasury  Regulations  promulgated under the
Code.  The Company is not a United States Real Property  Holding  Corporation (a
"USRPHC")  within the meaning of Section 897 of the Code and was not a USRPHC on
any  "determination  date"  (as  defined  in  ss.1.897-  2(c)  of  the  Treasury
Regulations) that occurred in the five-year period preceding the Closing Date.

                                    (e)     The Company has not executed any
closing agreement pursuant
to  Section  7121 of the Code,  or any  predecessor  provision  thereof,  or any
similar provision of state or local law.

                                    (f)     None of the assets owned by the
Company is property that is
required  to be  treated  as owned  by any  other  person  pursuant  to  Section
168(f)(8) of the Code, as in effect  immediately  prior to the Tax Reform Act of
1986 or is "tax exempt use property" within the meaning of Section 168(h) of the
Code.

                                    (g)     The Company is not a party to a tax
sharing agreement or similar arrangement.

                                    (h)     The Company has not filed a consent
pursuant to Section 341(f)
of the  Code or  agreed  to have  Section  341(f)(2)  of the  Code  apply to any
disposition  of a  subsection  (f)  asset (as such term is  defined  in  Section
341(f)(4) of the Code) owned by the Company.

                                    (i)     The Company has not agreed and is
not required to make any
adjustments  pursuant to Section 481(a) of the Code or any similar  provision of
state or local law by reason of a change in  accounting  method  initiated by it
and it has no knowledge  that the IRS has proposed any  adjustment  or change in
accounting  method,  or has any  application  pending with any taxing  authority
requesting  permission for any changes in accounting  methods that relate to the
business or the assets of the Company.


GV: #115336 v7 (2gzs07!.WPD)
                                       30

<PAGE>



                                    (j)     The Company has been a validly
electing "S corporation" within
the meaning of Section 1361 of the Code at all times since October 1, 1994,  and
the Company  will be an S  corporation  up to and  including  the Closing  Date,
except as the Company's S corporation  status is affected by the consummation of
the transactions contemplated herein.

                                    (k)     The Company will not be subject to
any aggregate tax liability
in excess of Five Hundred Thousand Dollars  ($500,000) as a result of the making
of an election  under Section  338(h)(10) of the Code for the built-in gains tax
under  Section  1374 of the Code,  the  Michigan  single  business  tax, and the
California income tax.

                                    (l)     Except prior to its S corporation
election on October 1, 1994,
when the Company was consolidated with CFI, an Ermanco Company,  the Company has
never been a member of a "consolidated  group" as defined in Section 1.1502-1(h)
of the Treasury Regulations.

                                    (m)     The execution of and performance of
the transactions
contemplated  by this Agreement will not (either alone or upon the occurrence of
any  additional  or  subsequent  events)  result in any  payment,  acceleration,
vesting or increase in benefits with respect to any employee or former  employee
of the Company.  Moreover,  the execution of and performance of the transactions
contemplated  by this Agreement will not (either alone or upon the occurrence of
any  additional  or  subsequent  events)  cause  the  Company  to make or become
obligated  to make any "excess  parachute  payment"  (as that term is defined in
under Section 280G(b)(1) of the Code).

                  As used in this Agreement,  the term "Tax Return" includes any
material  report  statement,  form,  return  or other  document  or  information
required to be supplied to a taxing  authority in connection with Taxes. As used
in this Agreement,  the term "Taxes" means any Federal, state, local and foreign
income or gross  receipts tax,  alternative or add-on minimum tax, sales and use
tax,  customs  duty and any other tax,  charge,  fee,  levy or other  assessment
including without limitation capital stock, capital gains, net worth,  property,
transfer, occupation, service, license, payroll, franchise, excise, withholding,
ad valorem, severance, stamp, premium, windfall profit, value added, disability,
social security,  unemployment,  employment, rent or other tax, governmental fee
or like assessment or charge of any kind whatsoever, together with any interest,
fine or  penalty  thereon,  addition  to  tax,  additional  amount,  deficiency,
assessment  or  governmental  charge  imposed by any  Federal,  state,  local or
foreign taxing authority.

                  Section 2.25.  Absence of Undisclosed Liabilities.

                  Except as  disclosed  in this  Agreement  and in the  attached
Schedules, the Company has no Liabilities,  other than (a) Liabilities reflected
in the Balance Sheet and (b) Liabilities,  none of which  individually or in the
aggregate is material to the assets, properties,  business or business prospects
of the  Company,  incurred  in the  ordinary  course of  business of the Company
subsequent to the date of the Balance Sheet (none of which results from,  arises
out of,  relates  to,  is in the  nature  of,  or was  caused  by any  breach of
contract, breach of warranty, tort, infringement, or violation of Law).

GV: #115336 v7 (2gzs07!.WPD)
                                       31

<PAGE>



                  Section 2.26.  Insurance.

                  Set forth on Schedule 2.26 is a complete list and  description
of all policies of  insurance,  disclosing  in each case the risk  covered,  the
effective date, the policy number,  the insurer,  whether the insurance is based
on claims or  occurrences,  the  dollar  amount of  coverage,  the amount of the
deductible,  and the  premiums  currently  payable  thereon,  providing  for the
following  coverages:  (i) for damage to goods being shipped,  held or otherwise
processed  by  the  Company,  (ii)  for  fire,  property,   casualty,   business
interruption,  personal or product liability, workers' compensation,  commercial
general  liability  and other forms of insurance  coverage  for the Company,  or
(iii) for fire, property, casualty and other forms of insurance coverage for the
Real Property.  All such policies are  outstanding and in full force and effect,
and, except as otherwise  specifically  provided herein, the consummation of the
transactions  contemplated  hereby will not cause a cancellation or reduction in
the  coverage  of  such  policies.  There  was  no  material  inaccuracy  in any
application for any such insurance  coverage.  There is no Action arising out of
or based  upon any of such  policies  of  insurance,  and no basis  for any such
Action exists.  There is no notice of any pending or threatened  cancellation or
termination  or premium  increase with respect to any of such  policies,  except
that Blue Cross/Blue Shield has advised of a premium increase effective with the
next policy  renewal.  All premiums with respect to such policies are paid up in
full, and the Company is in compliance  with all conditions  contained  therein.
Neither the Company, nor any party acting on behalf of the Company, has ever had
any  insurance  policy or coverage  canceled,  nor has the Company (or any party
acting on behalf of the Company) had an application  for any insurance  rejected
or declined.  The Company now has, and after the Closing will have, the benefits
as an insured under all  occurrence-based  insurance with respect to occurrences
prior to the Closing. The Company has provided to the Buyer a true, complete and
accurate  history of all claims  under  such  policies  during the past five (5)
years. The Company has supplied to the Buyer true,  complete and accurate copies
of all current and historical insurance policies for the past five (5) years, or
if such is not available,  summaries of all such insurance  coverage  specifying
the risk covered,  effective dates, the policy number, the insurer,  whether the
insurance is based on claims or occurrences,  the dollar amount of coverage, the
amount of the deductible, the premium rate and amount.

                  Section 2.27.  Customers.

                  Set forth on  Schedule  2.27 is a complete  list of the thirty
(30) largest (in terms of dollar volume) customers  (including  distributors) of
the Company for each of the fiscal years ended  September 30, 1997 and 1998, and
the six (6) month period ended June 30, 1999,  indicating the amount of revenues
paid to the Company by each  customer for each such fiscal year and the names of
the employees of the Company who are primarily  responsible  for servicing  each
such customer as of the date hereof.  None of such  customers has  terminated or
indicated  an  intention  or plan to  terminate  all or a  material  part of the
services  performed for or orders  historically  placed by such  customers,  and
neither  the  Sellers  nor any  officer of the Company has any reason to believe
that any of such customers may terminate all or a material part of such services
or orders,  whether by reason of the  acquisition  of the Shares by the Buyer or
for any other  reason.  The Company  has  received no notice of, and neither the
Sellers nor any officer of the Company knows of any basis for, any material

GV: #115336 v7 (2gzs07!.WPD)
                                       32

<PAGE>



complaint by any customer,  whether or not listed on Schedule 2.20, with respect
to services  provided or products  delivered  by the Company nor has the Company
had any of its  products  returned  by a  purchaser  thereof  except  for normal
warranty returns consistent with past history.  None of the employees  primarily
responsible  for  servicing  customers  listed on Schedule 2.27 has indicated an
intention or plan to terminate his or her employment with the Company.

                  Section 2.28.  Corporate Name.

                  Set forth on Schedule 2.28 is a list of all jurisdictions, and
the  locations  in such  jurisdictions,  in which the  corporate  name  "ERMANCO
INCORPORATED" or any variations thereof are used by the Company. The Company has
the  full  legal  right  to use  such  name in each  of such  jurisdictions  and
locations.  There is no  actual or  threatened  claim by any  third  party  with
respect  to the use of such name or of any  actual or  proposed  use of the name
"ERMANCO  INCORPORATED" or any variations thereof by any third party in conflict
with the use thereof by the Company. The use by the Company of the name "ERMANCO
INCORPORATED" or any variations thereof does not infringe upon the rights of any
third  party and the  Company  has not  granted any third party any right to use
such name or any variations thereof.

                  Section 2.29.  Transactions with Related Parties.

                                    (a)     The Company has no Contract,
dealings, or commercial
relationship  of any kind with any of its  Affiliates,  except for such dealings
relating  to the  lease of the  Leased  Property  as  specifically  set forth in
Schedule 2.10(b). There are no outstanding notes payable to, accounts receivable
from or advances by the Company to, and the Company is not  otherwise a creditor
of, any  shareholder  or former  shareholder  of the Company or any  relative or
Affiliate of any  shareholder or former  shareholder of the Company,  except for
obligations  under the lease of the Leased Property as specifically set forth in
Schedule  2.10(b).  Except as set forth on Schedule  2.23,  since  September 30,
1998,  the Company has not incurred any  Liability  to, or become a creditor of,
any  shareholder  or  former  shareholder  of the  Company  or any  relative  or
Affiliate of any shareholder or former shareholder of the Company.

                                    (b)     Except as set forth on Schedule
2.29, since September 30,
1998,  the Company has neither  declared any dividends nor paid any dividends to
any  shareholder  or former  shareholder  of the Company or any  relative of any
shareholder or former shareholder of the Company.

                  Section 2.30.  Permits.

                  The Company has all Permits from Governmental Authorities that
are required by  applicable  Laws or otherwise  necessary for the conduct of its
business or to own or lease any of its  properties  or assets.  All such Permits
are valid,  effective and in good standing.  Neither the Sellers nor any officer
of the Company has knowledge of any fact, error or omission relevant to any such
Permit  that  would  permit  or  cause  the  revocation  or  withdrawal,  or the
threatened revocation or

GV: #115336 v7 (2gzs07!.WPD)
                                       33

<PAGE>



withdrawal,  thereof.  The  Company  will  continue  to have the use and benefit
thereof  and the rights  granted  thereby  after the  transactions  contemplated
hereby have  occurred.  All such Permits are  renewable by their terms or in the
ordinary  course  of  business  without  the need to  comply  with  any  special
qualification procedure or to pay amounts other than routine filing fees.

                  Section 2.31.  Finders or Brokers.

                  Except as  described  on  Schedule  2.31,  the Company has not
employed an investment banker, broker, finder or intermediary in connection with
the transactions  contemplated  hereby who is entitled to a fee or commission in
connection with this Agreement and the transactions contemplated hereby.

                  Section 2.32.  Disclosure.

                  The Sellers and the Company have made full,  true and complete
responses to all the Buyer's requests for information,  documents, contracts and
records of the  Sellers  and the  Company,  and has  furnished  to the Buyer all
information  and  documents  that are  material to a decision  to  purchase  the
Shares.  All  documents  furnished by the Sellers or the Company to the Buyer or
its agents or representatives,  including,  without limitation,  those documents
listed on any  Schedule  hereto,  are true and  correct  originals  or copies of
originals  and are complete in all material  respects,  any  amendments  thereto
having been identified and furnished to the Buyer by the Sellers or the Company.
This Agreement (including Schedules and Exhibits) and the Ancillary Documents do
not contain any untrue  statement of a material fact or omit to state a material
fact  necessary  to  make  the  statements  contained  herein  and  therein  not
misleading.  There is no fact or circumstance  known to any of the Sellers or to
the Company  which  materially  and  adversely  affects the assets,  properties,
business, business prospects or financial condition of the Company.

                  Section 2.33.  Bank Accounts.

                  Schedule 2.33 attached hereto contains an accurate and
complete list of

                                    (a)     the names and addresses of each bank
in which the Company has an account;

                                    (b)     the account numbers of such
accounts; and

                                    (c) the authorized  signatories  and amounts
for such accounts.

                  Section 2.34.  Material Adverse Change.

                  Since September 30, 1998,  there has been no material  adverse
change in the business,  business  prospects,  financial condition or results of
operations of the Company taken as a whole.


GV: #115336 v7 (2gzs07!.WPD)
                                       34

<PAGE>



                  Section 2.35.  Year 2000 Compliance.

                  All products, devices and programs developed by or for or used
by the Company, and any software  incorporated into the Company's products,  are
designed to be used prior to,  during and for the years  following  the calendar
year 2000, and such products, devices and programs will operate during each such
time period without errors,  aborts or invalid results relating to date data and
date-dependent  data,  including  without  limitation errors relating to, or the
program of, date data which represents or references different centuries or more
than one century.

                  Section 2.36.  Investment Representations.

                  In connection with the offer,  purchase and sale of the shares
of Buyer  Common  Stock to be issued to the  Sellers  hereunder,  subject to the
registration rights being granted to the Sellers hereunder, the Sellers make the
following representations and warranties:

                                    (a)     each Seller is acquiring such shares
for its own account, not as
nominee  or  agent,  for  investment  and not with a view to,  or for  resale in
connection  with, any distribution or public offering thereof within the meaning
of the Securities Act;

                                    (b)     each Seller understands that:

                                            (i)      such shares have not been
registered under the
Securities  Act  in  reliance  on a  specific  exemption  therefrom,  that  such
securities must be held by it indefinitely,  and that it must,  therefore,  bear
the  economic  risk  of  such  investment  indefinitely,   unless  a  subsequent
disposition  thereof is registered  under the  Securities  Act or is exempt from
such registration;

                                            (ii)     each certificate
representing such shares will be endorsed with the following legend:

                  THE  SECURITIES  REPRESENTED  HEREBY HAVE NOT BEEN  REGISTERED
                  UNDER THE SECURITIES  ACT OF 1933, AS AMENDED (THE "ACT"),  OR
                  UNDER THE SECURITIES LAWS OF CERTAIN STATES.  THESE SECURITIES
                  ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY  AND RESALE AND
                  MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
                  ACT AND THE  APPLICABLE  STATE  SECURITIES  LAWS,  PURSUANT TO
                  REGISTRATION OR EXEMPTION THEREFROM; and

                                            (iii) the Buyer  will  instruct  its
transfer  agent not to  register  the  transfer  of the shares  (or any  portion
thereof) unless the conditions specified in the foregoing legend are satisfied;


GV: #115336 v7 (2gzs07!.WPD)
                                       35

<PAGE>



                                    (c)     each Seller has had an opportunity
to discuss with
representatives  of the Buyer the plans,  operations and financial  condition of
the  Buyer  and has  received  all  such  information  as he or she  has  deemed
necessary and  appropriate  to enable him or her to evaluate the financial  risk
inherent in making an investment in Buyer Common Stock;

                                    (d)     each Seller has such knowledge and
experience in financial or
business  matters that it is capable of  evaluating  the merits and risks of the
investment  in such shares to be  purchased  hereunder,  and each Seller has had
access to all of the information regarding the Buyer it has considered necessary
to evaluate such investment; and

                                    (e)     each Seller is an "accredited
investor" as such term is defined
in Rule 501(a) of the rules and regulations promulgated under the Securities
Act.

                                    ARTICLE 3
                   REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents, warrants and covenants to the Sellers that:

                  Section 3.1.  Organization; Authority.

                  The Buyer is a corporation duly organized and validly existing
and in good standing under the laws of the  Commonwealth  of  Pennsylvania.  The
Buyer has all  requisite  corporate  power and  authority to execute and deliver
this  Agreement and the Ancillary  Documents to which it is a party,  to perform
its  obligations  hereunder and thereunder  and to consummate  the  transactions
contemplated hereby and thereby. This Agreement and the Ancillary Documents have
been duly authorized,  executed and delivered by the Buyer, constitute the valid
and  binding  agreement  of the Buyer and are  enforceable  against the Buyer in
accordance with their terms.

                  Section 3.2.  Conflicting Instruments; Consents.

                                    (a)     The execution and delivery by the
Buyer of this Agreement and
the  Ancillary  Documents to which it is a party,  and the  consummation  of the
transactions  contemplated  hereby and thereby do not and will not,  violate any
provision  of the  Articles of  Incorporation  or the  By-laws of the Buyer,  or
conflict  with or result in a breach of, or create an event of default (or event
that,  with the giving of notice or lapse of time or both,  would  constitute an
event of default) under, any agreement,  mortgage,  license,  lease,  indenture,
instrument, Order, arbitration award, judgment or decree to which the Buyer is a
party.

                                    (b)     The execution by the Buyer of this
Agreement and the Ancillary
Documents do not, and the consummation of the transactions  contemplated  hereby
and  thereby do not,  result in a violation  of, or require  any  authorization,
approval, consent, exemption or other action by, or registration, declaration or
filing  with or notice  to, any court or  administrative  or  governmental  body
pursuant to, any statute,  law, rule,  regulation or ordinance applicable to the
Buyer or by which

GV: #115336 v7 (2gzs07!.WPD)
                                       36

<PAGE>



any of the  property  of the Buyer is bound.  There is no pending or  threatened
action, suit, proceeding or investigation before or by any court or governmental
body or agency,  to  restrain or prevent the  consummation  of the  transactions
contemplated  by this  Agreement  or that might affect the right of the Buyer to
own the Shares or to operate the business of the  Company.  The Buyer is subject
to  no  known   governmental   oversight  which  would  serve  to  prevent  this
transaction.

                                    (c)     Except as set forth on Schedule
3.2(c), no authorization,
approval, consent, exemption or other action by, or registration, declaration or
filing with or notice to any court or other Governmental  Authority or any other
Person is required in connection with the execution,  delivery,  and performance
of this Agreement and the Ancillary  Documents by the Buyer or the  consummation
by the  Buyer  of  the  transactions  contemplated  hereby,  including,  without
limitation,  assuming  the  accuracy  of the  representations  of the Sellers in
Section 2.36, the transfer of the shares of Buyer Common Stock to the Sellers.

                  Section 3.3.  Acquisition of the Shares.

                  The Buyer is  purchasing  the Shares for its own  account  for
investment  and  not  with a view  to,  or for  sale  in  connection  with,  any
distribution of the Shares.

                  Section 3.4.  Litigation.

                                    (a)     Except as set forth in Schedule 3.4,
there is no Action pending
or  threatened  against or  affecting  the  Buyer,  or the  assets,  properties,
business or business  prospects of the Buyer, at law or in equity,  or before or
by any arbitrator or any Court or other Governmental Authority,  and neither the
Buyer nor any officer of the Buyer knows of any basis for any of the  foregoing.
Except as set forth in Schedule  3.4,  the Buyer has not received any opinion or
memorandum or legal advice or notice from legal counsel to the effect that it is
exposed,  from a legal standpoint,  to any liability or disadvantage that may be
material to its assets,  properties,  business or business prospects.  The Buyer
has not received any opinion or  memorandum or legal advice or notice from legal
counsel  to the  effect  that it is  exposed,  from a legal  standpoint,  to any
liability  or  disadvantage  that may be material in respect of the Buyer Common
Stock.  The Buyer is not in default with respect to any Order known to or served
upon the  Company  of or by any  arbitrator  or any court or other  Governmental
Authority. There is no pending Action brought by the Buyer against others.

                                    (b)     There is no Action pending or
threatened, at law or in equity,
or before or by any  arbitrator  or any  court or other  Governmental  Authority
relating  to or  involving  the  consummation  by the Buyer of the  transactions
contemplated by this Agreement or which would or may affect the  consummation by
the Buyer of the transactions contemplated by this Agreement.

GV: #115336 v7 (2gzs07!.WPD)
                                       37

<PAGE>




                  Section 3.5.  Finders or Brokers.

                  Except  as  described  on  Schedule  3.5,  the  Buyer  has not
employed any investment  banker,  broker,  finder or  intermediary in connection
with the  transactions  contemplated  hereby who might be  entitled  to a fee or
commission  in  connection  with  this  Agreement  or upon  consummation  of the
transactions contemplated hereby.

                  Section 3.6.  Financial Ability of the Buyer.

                  The  Buyer  has  sufficient  financial  resources  to meet its
financial obligations under the terms of this Agreement.

                  Section 3.7.  Capitalization of the Buyer.

                  The  Buyer  has an  authorized  capital  consisting  solely of
20,000,000 shares of common stock (the "Buyer Common Stock"), of which 3,708,412
shares  are  issued  and  outstanding  as of the  date  of this  Agreement.  All
outstanding  shares of Buyer Common Stock have been duly  authorized and validly
issued,  are  fully  paid  and  non-assessable,  were  issued  by the  Buyer  in
compliance  with all applicable  Federal and state  securities  laws,  rules and
regulations  and were not issued and are not now in  violation  of or subject to
any  pre-emptive  rights.  Except as  described  on  Schedule  3.7,  there is no
outstanding or authorized option, subscription, warrant, call, right, commitment
or other agreement of any character obligating the Buyer to sell or transfer any
additional shares of its capital stock or any other securities  convertible into
or  exercisable  for or evidencing  the right to subscribe for any shares of its
capital stock which, when executed, would have any impact on this transaction.

                  Section 3.8.  Valid Issuance of Shares.

                  The shares of Buyer  Common  Stock which will be issued to the
Sellers hereunder,  when issued, sold and delivered in accordance with the terms
hereof  for  the  consideration  expressed  herein,  will be  duly  and  validly
authorized and issued,  fully paid and nonassessable and, based in part upon the
representations of the Sellers in Section 2.36 of this Agreement, will be issued
in compliance with all applicable Federal and state securities Laws

                  Section 3.9.  Financial Statements.

                                    (a)     The Buyer has furnished the Seller
with copies of: (i) the
financial  statements of the Buyer for the fiscal year ended  February 28, 1999,
including  a balance  sheet at  February  28,  1999  (collectively,  the  "Buyer
Financial Statements").

                                    (b)     The Buyer Financial Statements: (i)
are correct and complete
in all material respects and have been prepared in accordance with the books and
records  of  the  Buyer;  (ii)  have  been  prepared  in  accordance  with  GAAP
consistently applied throughout the periods

GV: #115336 v7 (2gzs07!.WPD)
                                       38

<PAGE>



covered,  except as noted in the Buyer Financial  Statements;  and (iii) present
fairly the financial condition of the Buyer at such date, and the results of its
operations for the fiscal period ended February 28, 1999.

                                    (c)     The Buyer (i) keeps books, records
and accounts that, in
reasonable  detail,  accurately  and fairly  reflect  (A) the  transactions  and
dispositions  of assets of such entity and (B) the value of  inventory,  if any,
calculated  in  accordance  with GAAP and (ii)  maintains  a system of  internal
accounting  controls  sufficient  to  provide  reasonable   assurance  that  (A)
transactions  are executed in accordance with  management's  general or specific
authorizations, (B) transactions are recorded as necessary to permit preparation
of financial  statements in conformity with GAAP and to maintain  accountability
for  assets,  (C)  access  to  assets  is  permitted  only  in  accordance  with
management's   general  or  specific   authorizations   and  (D)  the   recorded
accountability  for  assets is  compared  with  existing  assets  at  reasonable
intervals and appropriate action is taken with respect to any differences.  None
of the Buyer or any  employee,  agent or  shareholder  of the Buyer  directly or
indirectly  has made any  payment  of funds of any such  entity or  received  or
retained any funds in violation of any applicable Law.

                  Section 3.10.  Lease or Purchase of Premises.

                  Contemporaneous  with the  Closing,  Buyer  shall enter into a
Lease Agreement  substantially in the form of Exhibit E (the "Lease  Agreement")
for the Premises for a term of not less than five (5) years with a five (5) year
renewal,  which Lease Agreement  shall be a fair market rates  prevailing in the
area and shall contain customary terms and provisions mutually acceptable to the
Buyer and the owner of the Premises.

                  Section 3.11.  Maintenance of Insurance.

                  Buyer  agrees to  maintain  in place  insurance  covering  (i)
damage to goods being shipped,  held or otherwise processed by the Company, (ii)
providing  for fire,  property,  casualty,  business  interruption,  personal or
product liability,  workers'  compensation and other forms of insurance coverage
for the Company and (iii) providing for fire, property, casualty and other forms
of insurance  coverage for the Real  Property  with  coverage and policy  limits
under all such policies  consistent  with the practice of the Company in the one
year preceding closing.

                  Section 3.12.  Disclosure.

                  To the best of Buyer's information,  knowledge and belief, the
Buyer has made full, true and complete  responses to all the Company's  requests
for  information,  documents,  contracts  and  records  of the  Buyer,  and  has
furnished to the Company all information  that is material to a decision to sell
the Shares and to receive in partial consideration therefor the Promissory Notes
and shares of Buyer Common Stock as described in Section  1.2(a).  This provided
information  (including  Schedules and Exhibits) and the Ancillary  Documents do
not contain any untrue  statement of a material fact or omit to state a material
fact necessary to make the statements contained therein not misleading.

GV: #115336 v7 (2gzs07!.WPD)
                                       39

<PAGE>



There is no fact or circumstance  known to any of the Buyer which materially and
adversely  affects the  assets,  properties,  business,  business  prospects  or
financial condition of the Buyer.

                  Section 3.13.  Accuracy of Public Filings.

                  All  filings  by  Buyer  with  any  local,  state  or  Federal
regulatory body,  including  without  limitation,  Buyer's Annual Report on Form
10-K for the fiscal year ended  February 28, 1999,  Notice of Annual  Meeting of
Stockholders and Proxy Statement for its Annual Meeting of Stockholders  held on
July 21, 1999, and Form 10-Q for the fiscal  quarter ended May 30, 1999,  copies
of which have been made available to the Sellers, when filed with the applicable
Federal  regulatory  body, (a) did not contain any untrue  statement of material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements contained therein, in light of the circumstances
under which they were made,  not  misleading,  and (b)  complied in all material
respects with all applicable  requirements of the Securities Act or the Exchange
Act, as the case may be, and the applicable  rules and  regulations  promulgated
thereunder.  Since  March 1,  1996 the  Buyer  has  filed  with the SEC true and
complete copies of each form, registration statement,  report, schedule,  proxy,
information  statement and other  documents  (including  exhibits and amendments
thereto),  required  to be filed by the Buyer  under the  Securities  Act or the
Exchange Act.

                  Section 3.14.  Material Adverse Change.

                  Since May 30, 1999,  there has been no material adverse change
in  the  business,  business  prospects,   financial  condition  or  results  of
operations  of the Buyer  taken as a whole,  including  any  changes  that would
require modification of any public filings made by the Buyer.

                  Section 3.15.  Absence of Undisclosed Liabilities.

                  Except as  disclosed  in this  Agreement  and in the  attached
Schedules, the Buyer has no Liabilities, other than (a) Liabilities reflected in
the Buyer Financial  Statements or in the Buyer's Annual Report on Form 10-K for
the  fiscal  year  ended  February  28,  1999,   Notice  of  Annual  Meeting  of
Stockholders and Proxy Statement for its Annual Meeting of Stockholders  held on
July 21, 1999,  and Form 10-Q for the fiscal  quarter ended May 30, 1999 and (b)
Liabilities,  none of which  individually or in the aggregate is material to the
assets,  properties,  business or business prospects of the Company, incurred in
the ordinary course of business of the Company  subsequent to May 30, 1999 (none
of which  results from,  arises out of,  relates to, is in the nature of, or was
caused by any breach of contract,  breach of warranty,  tort,  infringement,  or
violation of Law).

                  Section 3.16.  Board Membership.

                  Upon consummation of the Closing, Mr. Leon Kirschner and Mr.
Steven Shulman shall be appointed to the Board of Directors of the Buyer.

                                    ARTICLE 4

GV: #115336 v7 (2gzs07!.WPD)
                                       40

<PAGE>



                                 INDEMNIFICATION

                  Section 4.1.  Indemnification Obligation.

                  Subject to the  limitations  set forth in Section  4.2 hereof,
each of the Sellers hereby jointly and severally agrees to indemnify, defend and
hold harmless the Company, the Buyer and their respective  affiliates including,
without  limitation their directors,  officers,  shareholders,  employees (other
than the Sellers),  agents and representatives (for the purposes of this Article
Four, each an "Indemnified Party" and, collectively,  the "Indemnified Parties")
in respect of any and all Losses  (including  those arising under  Environmental
Laws or in connection with Hazardous Materials),  including, without limitation,
settlement costs,  attorneys' fees at such attorneys' customary hourly rates and
any other  expenses of  investigating  or  defending  any Actions or  threatened
Actions, incurred by the Indemnified Parties in connection with, relating to, or
arising out of each and all of the  following,  together  with  interest on cash
disbursements  from the  date of  disbursement  by the  Indemnified  Parties  in
connection therewith until payment at a fluctuating interest rate that is at all
times equal to the prime rate in effect from time to time of the First  Chicago,
NBD Bank, NA:

                                    (a)     Any breach or inaccuracy of any
representation  or warranty of the Sellers or the Company contained herein or in
any Ancillary Document or instrument  delivered at the Closing by the Sellers or
the Company,  including,  any breach or  inaccuracy of the  representations  and
warranties set forth in Sections 2.15(c),  2.15(d),  2.15(e),  2.15(k), 2.17(i),
2.17(m)  and  2.17(o)(viii)  when read  without  reference  to the  information,
knowledge or belief of the Sellers or the Company;

                                    (b)     The breach of or failure to perform
any  provision of any  covenant,  agreement or  obligation of the Sellers or the
Company contained in this Agreement or in any Ancillary Document;

                                    (c)     Any misrepresentation contained in
any written document furnished to the Buyer by the Company or the Sellers;

                                    (d)     Any claim by any former shareholder
of the Company relating
to or arising out of his or her  ownership  of shares of the  Company's  capital
stock, or the purchase or sale thereof by such  shareholder  including,  without
limitation,  any claim alleging fraud,  misrepresentation or breach of fiduciary
duty or arising under state or Federal securities laws;

                                    (e)     Any Sellers' Transaction Fees in
excess of the amount, if any,
by which the cash on the Closing  Balance Sheet  exceeds Three Hundred  Thousand
Dollars ($300,000) and any Sellers' Brokerage Fees; and

                                    (f)     Any product sold by the Company
prior to the Closing, other
than Retained Warranty Liabilities and Retained Delivery Liabilities.


GV: #115336 v7 (2gzs07!.WPD)
                                       41

<PAGE>



                  Section 4.2.  Limitations.

                                    (a)     Threshold.  The Indemnified Parties
shall not be permitted to
enforce any claim for indemnification pursuant to this Agreement, other than (i)
any claim for breach of the Sellers'  obligation to consummate the  transactions
contemplated hereby or any covenant,  agreement or obligation to be performed by
the  Sellers  after the Closing and (ii)  Unlimited  Claims (as defined  below),
until the aggregate of all claims for  indemnification,  other than as aforesaid
in clauses (i) and (ii) above, exceeds, in the aggregate, the amount of $100,000
(the  "Threshold  Amount").  Once such claims in excess of the Threshold  Amount
have been asserted by the Indemnified Parties, all claims, including those below
the  Threshold  Amount,  may be  pursued  except as  otherwise  limited  by this
Agreement. As used herein, "Unlimited Claims" means all (a) claims in respect of
Taxes  that are made with  respect  to the  representations  and  warranties  in
Section 2.24 or are governed by Article 8 of this Agreement ("Tax Claims");  (b)
claims  based upon a  willful,  grossly  negligent,  fraudulent  or  intentional
misrepresentation  of the Sellers or the Company  contained in this Agreement or
any other document, list, exhibit or instrument furnished in connection herewith
("Fraud  Claims");  (c)  claims  made with  respect to the  representations  and
warranties in Sections 2.1 through 2.5 ("Corporate Matters Claims");  (d) claims
made under Section 4.1(d)  relating to the former  shareholders  of the Company;
(e) claims made with respect to representations  and warranties in Sections 2.13
and 2.14 ("Employee  Claims");  (f) claims made with respect to  representations
and warranties in Sections 2.16 and 2.17  ("Benefits  Claims");  (g) claims made
with respect to the Sellers' duties pursuant to Section 1.3 ("Expense  Claims");
(h) claims  made under  Section  4.1(f)  with  respect to  products  sold by the
Company  prior to the  Closing  ("Product  Claims");  and (i)  claims  made with
respect  to  representations  and  warranties  in Section  2.9  ("Title to Asset
Claims").  The term  "Unlimited  Claims"  shall not be  construed  to serve as a
waiver of the amount limitations set forth in Section 4.2(c) below.

                                    (b)     Time Limitations.  Subject to
Section 4.2(a), claims for
indemnification made under this Article Four may not be made unless the claim is
asserted  in writing by the  Indemnified  Party prior to the  expiration  of the
applicable survival period set forth in Section 10.1.; provided,  however, that,
notwithstanding  any shorter  period set forth in Section 10.1: (a) Fraud Claims
and claims for breach of the Sellers'  obligation to consummate the transactions
contemplated hereby or any covenant,  agreement or obligation to be performed by
the Sellers after the Closing may be made until barred by applicable statutes of
limitation;  (b)  Corporate  Matters  Claims may be made until  thirty (30) days
after any claims by a third party giving rise to any Corporate Matters Claim are
barred by the applicable statutes of limitations, if any; (c) Expense Claims may
be made until  thirty (30) days after any claims by a third party giving rise to
any Expense Claim are barred by the applicable  statute of limitations,  if any;
(d)  Employee  Claims may be made until  thirty  (30) days after any claims by a
third  party  giving  rise to any  Employee  Claim are barred by the  applicable
statute of  limitations,  if any; (e)  Benefits  Claims may be made until thirty
(30) days after any claims by a third party  giving rise to any  Benefits  Claim
are barred by the applicable statute of limitations,  if any; (f) Product Claims
may be made until thirty (30) days after any claims by a third party giving rise
to any Products Claim are barred by the applicable  statute of  limitations,  if
any;  and (g) claims  made with  respect  to  representations  in  Section  2.15
("Environmental Claims") may be made until thirty (30)

GV: #115336 v7 (2gzs07!.WPD)
                                       42

<PAGE>



days after any claims by a third party,  including any  Governmental  Authority,
giving rise to any Environmental  Claim are barred by the applicable  statute of
limitations, if any.

                                    (c)     Amount Limitations.  Notwithstanding
any other  provision  in this  Agreement,  the  Sellers  total  obligations  for
indemnification shall be limited to an amount equal to twenty-five percent (25%)
of the Purchase Price,  which shall be allocated among the Sellers in accordance
with their percentage of stock ownership as set forth in Schedule 1.2(a).  In no
event shall any Seller be required to pay more than his or her pro rata share of
the total indemnity obligation.

                  Section 4.3.  Claims.

                  Whenever  any  claim  shall  arise  for  indemnification,  the
Indemnified Party shall notify the Sellers' Representative of the claim pursuant
to Section 4.5 hereunder and, when known,  the facts  constituting the basis for
such claim and the amount or  estimate  of the amount of the  liability  arising
from such claim.  If any claim is covered by insurance,  the Buyer,  the Company
and the Sellers'  Representative  shall use their reasonable  commercial efforts
(including the commencement of legal proceedings) first to recover the amount of
such  claim  from the  issuer of such  insurance,  except  that,  subject to the
limitations  contained  in this  Agreement,  the  Sellers  shall  indemnify  the
indemnified  party for any  deductible  amount in such  policy  or  policies  of
insurance.  The Buyer shall not settle or compromise  any claim by a third party
which is entitled to indemnification hereunder without the prior written consent
of the  Sellers'  Representative  (which shall not be  unreasonably  withheld or
delayed) unless (i) suit shall have been  instituted  against the Buyer and (ii)
the Sellers'  Representative shall not have taken control of such suit within 20
days after notification thereof as provided in Section 4.5.

                  Section 4.4.  Defense by the Sellers.

                  In  connection   with  any  claim  giving  rise  to  indemnity
hereunder resulting from or arising out of any Action by a person other than the
Buyer or its Affiliates, the Sellers' Representative,  at Sellers' sole cost and
expense,  may, upon written notice to the Buyer,  assume the defense of any such
Action provided that the Sellers  acknowledge  their obligation to indemnify the
Buyer in respect of the claims asserted therein. If the Sellers'  Representative
assumes the defense of any such Action, the Sellers' Representative shall select
counsel  reasonably  acceptable  to the Buyer to  conduct  the  defense  of such
Action,  and, at Sellers' sole cost and expense,  shall take all steps necessary
in the defense or  settlement  thereof.  The Sellers'  Representative  shall not
consent to a settlement of, or the entry of any judgment  arising from, any such
Action,  without the prior written  consent of the Buyer,  unless  settlement or
judgment  is limited to money  damages and the  Sellers  admit in writing  their
liability to hold the Buyer  harmless from and against any Losses arising out of
such settlement and concurrently with such settlement the Sellers pay into court
the full amount of all Losses to be paid by the Sellers in connection  with such
settlement.  The Buyer shall be entitled to participate in (but not control) the
defense of any such  Action,  with its own counsel and at its own  expense.  The
Sellers'  Representative  shall be entitled to participate in the defense of any
Action by the Buyer, at the Sellers' own expense,  which  participation shall be
limited to contributing information to the defense and being

GV: #115336 v7 (2gzs07!.WPD)
                                       43

<PAGE>



advised  of its  status.  If the  Sellers'  Representative  does not  assume the
defense of any such Action  resulting  therefrom  in  accordance  with the terms
hereof,  the Buyer may defend  against such Action in such manner as it may deem
appropriate,  including,  but not limited to, settling such Action, after giving
notice of the same to the  Sellers'  Representative,  on such terms as the Buyer
may deem  appropriate,  and the Buyer  shall be  entitled  to  recover  from the
Sellers any legal fees incurred in  connection  with such defense in addition to
any  other  relief  which may be  awarded.  In any  action by the Buyer  seeking
indemnification  from the  Sellers in  accordance  with the  provisions  of this
Section 4.4,  the Sellers  shall not be entitled to question the manner in which
the  Buyer  defended  such  Action  or the  amount  of or  nature  of  any  such
settlement.

                  Section 4.5.  Notice.

                  The Buyer agrees that in the event of any occurrence which may
give rise to a claim by an Indemnified Party against the Sellers hereunder,  the
Buyer  will  give  notice  thereof  to the  Sellers'  Representative;  provided,
however,  that  failure of the Buyer to timely give the notice  provided in this
Section  4.5 shall not be a defense to the  liability  of the  Sellers  for such
claim,  but the Sellers may recover  from the Buyer any actual  damages  arising
from the Buyer's failure to give such timely notice.

                  Section 4.6.  Materiality.

                  The parties  agree that for all  purposes  of this  Agreement,
unless  specifically  stated to the  contrary,  the dollar  amounts set forth in
various  provisions hereof,  other than the purchase price hereunder,  shall not
affect or  determine  the  meaning of the term  "material"  or have any  bearing
thereon.

                                    ARTICLE 5
                             CONDUCT PENDING CLOSING

                  Section 5.1.  Operation of Business.

                  Pending the Closing,  the Company will conduct its  operations
only in the ordinary course of business consistent with past practices;  make no
leasehold  improvement;  maintain  the  Retained  Assets in good  condition  and
repair,  subject to normal wear and tear; and use reasonable efforts to preserve
its  business  organization  intact in order to preserve for the benefit for the
Buyer the goodwill of the Company's suppliers,  customers,  employees and others
having business  relations with the Company.  In addition,  the Company (a) will
make all reasonable effort to ensure that the Closing Balance Sheet will include
no less than Three Hundred Thousand Dollars ($300,000) in cash; (b) prior to the
Closing,  will pay all  anticipated  employee  bonuses,  deferred  compensation,
commissions  and other  incentive  payments  applicable to the fiscal year ended
September 30, 1999 or any other period up to and including Closing, such that no
such bonuses,  deferred  compensation,  commissions and other incentive payments
are payable  after the Closing or are subject to accrual on the Closing  Balance
Sheet;  (c) will not make any tax  distribution  to any Seller in a manner or in
amount  (relative to the applicable  taxable  income) not  consistent  with past
practices of the Company;

GV: #115336 v7 (2gzs07!.WPD)
                                       44

<PAGE>



and (d) will  maintain  an "S corp  deposit"  with the IRS in an amount not less
than Three Hundred Fifty Thousand Dollars ($350,000).

                  Section 5.2.  Access to Information/Employees.

                  The Company and the Sellers will  cooperate with the Buyer and
provide the Buyer and its agents,  advisors and  representatives,  during normal
business hours and upon  reasonable  notice,  access to the Company's  books and
records, Real Property,  personal property,  Contracts,  financial and technical
information  and other  assets used by the Company in the conduct of each of its
business  and the  opportunity  to discuss the  Company's  business  affairs and
assets  with the  Company's  officers,  and furnish to the Buyer and its agents,
advisors and representatives  copies of such documents,  records and information
with respect to the Retained Assets, the Retained Liabilities and the affairs of
the Company as the Buyer or any of its agents,  advisors or representatives  may
reasonably  request;   provided,  that  in  connection  with  any  such  access,
discussion or the  furnishing of such  documents,  records or  information,  the
Buyer will not interfere  unreasonably  with the  operation of the Company.  The
Buyer  shall have the  right,  with the prior  approval  of the  Company,  which
approval  shall  not  be  unreasonably  withheld,  to  discuss  with  customers,
suppliers and employees of the Company identified by the Buyer, matters relating
to (i) the  relationship  between the Company and such customers,  suppliers and
employees  and (ii) the  Buyer's  interest in and the terms and  conditions  for
maintaining such relationship following the Closing.

                  Section 5.3.  Reasonable Efforts.

                  Subject to the other provisions of this Agreement,  the Buyer,
the Company  and the Sellers  will use their  reasonable  commercial  efforts to
cause the conditions listed in Articles 6 and 7 hereof to be satisfied as of the
Closing Date.

                  Section 5.4.  Required Approvals, Etc.

                  The Sellers and the Company  shall use  reasonable  commercial
efforts  to obtain  on behalf of  themselves,  prior to the  Closing  Date,  any
approvals, consents, assignments,  authorizations and waivers as may be required
from  any  Governmental  Authority  or  other  Person  in  connection  with  the
consummation of the transactions contemplated hereby.

                  Section 5.5.  Exclusivity.

                  None of the  Sellers or the  Company,  or any agent,  officer,
director or any  representative  of the Company or any Seller  will,  during the
period  commencing on the date of this  Agreement and ending with the earlier to
occur of the Closing or the termination of this Agreement in accordance with its
terms, directly or indirectly: (a) solicit, encourage or initiate the submission
of proposals or offers from any Person for, (b)  participate in any  discussions
pertaining to, or (c) furnish any information to any Person other than the Buyer
and its Affiliates relating to, any acquisition or purchase of all or a material
amount of the assets of, or any equity interest in, the Company or a

GV: #115336 v7 (2gzs07!.WPD)
                                       45

<PAGE>



merger, consolidation or business combination of the Company. In addition to the
foregoing,  if the  Company  or any Seller  receives  any  unsolicited  offer or
proposal, or has actual knowledge of any unsolicited offer or proposal, relating
to any of the above,  the Company shall  immediately  notify the Buyer  thereof,
including  the  identity  of the party  making  such offer or  proposal  and the
specific terms of such offer or proposal.

                                    ARTICLE 6
                      CONDITIONS TO THE BUYER'S OBLIGATIONS

                  The obligations of the Buyer hereunder shall be subject to the
satisfaction,  at or prior to the Closing Date, of the following conditions (any
of which may be waived, in whole or in part, by the Buyer):

                  Section 6.1.  Due Diligence.

                  The  Buyer  shall  have  completed  its due  diligence  of the
assets, properties,  business, business prospects,  conditions and operations of
the Company and shall be satisfied in its sole and absolute  discretion that the
business,  financial  and other  conditions  of the  Company are  sufficient  to
warrant the Buyer's acquisition of the Shares.

                  Section 6.2.  Representations.

                  The  representations  and  warranties  of the  Company and the
Sellers set forth in this Agreement and any Ancillary Document shall be true and
correct as of the date of this  Agreement  and as of the Closing  Date as though
made on and as of the Closing Date and in the event that the  representation and
warranties set forth in Sections 2.15(c), 2.15(d), 2.15(e) and 2.15(k) would not
be  true  and  correct  at  such  times  when  read  without  reference  to  the
information, knowledge or belief of the Sellers or the Company, the consequences
of the failure of such  representations  and  warranties  to be true and correct
would not result in Losses in excess of One Million  Dollars  ($1,000,000),  and
the Company shall have delivered to the Buyer a certificate to such effect dated
the Closing Date and signed by the President of the Company,  which  certificate
shall be in form and substance reasonably satisfactory to the Buyer's counsel.

                  Section 6.3.  Covenants.

                  The Company and the Sellers shall have performed all covenants
and  agreements  to be performed by them under this  Agreement and any Ancillary
Documents on or prior to the Closing Date,  and the Company shall have delivered
to the Buyer a  certificate  to such effect dated the Closing Date and signed by
the President of the Company,  which  certificate shall be in form and substance
reasonably satisfactory to the Buyer's counsel.

                  Section 6.4.  Closing Certificate.


GV: #115336 v7 (2gzs07!.WPD)
                                       46

<PAGE>



                  The Company and the Sellers shall have  delivered to the Buyer
complete  and  correct  copies  of the  resolutions  approved  by the  Board  of
Directors of the Company  authorizing this Agreement and the Ancillary Documents
and the consummation of the transactions contemplated hereby and thereby.

                  Section 6.5.  Ratification of Past Actions of Company.

                  On or before the Closing  Date,  the Board of Directors of the
Company and the  Sellers  shall have  adopted  resolutions,  ratifying  all past
actions  taken by the Company  and the Board of  Directors  of the Company  with
respect to the Company,  and the Secretary of the Company shall have delivered a
certified  copy of such  resolutions,  which  certificate  shall  be in form and
substance reasonably satisfactory to the Buyer's counsel.

                  Section 6.6.  Review of Schedules.

                  The Buyer shall be fully satisfied in its sole discretion with
the results of their review of all of the schedules, whether delivered before or
after the execution hereof.

                  Section 6.7.  Required Actions.

                  All action  required by Law and  otherwise  to be taken by the
Company and the Sellers to authorize the execution,  delivery and performance of
this  Agreement  and  the  Ancillary  Documents  and  the  consummation  of  the
transactions contemplated hereby shall have been duly and validly taken.

                  Section 6.8.  Certain Documents.

                  The  Company and the Sellers  shall have  furnished  the Buyer
with the following  documents,  satisfactory  in all reasonable  respects to the
Buyer and its counsel:

                                    (a)     the Articles of Incorporation of the
Company and all amendments  thereto,  duly certified by the proper  officials of
the State of Michigan;

                                    (b)     certificates as to the good standing
of the Company and payment of all applicable  state Taxes  thereby,  executed by
the  appropriate  officials  of the State of Michigan and of each other state in
which the Company is qualified as a foreign corporation;

                                    (c)     the By-laws of the Company and all
amendments  thereto,  duly certified by the Secretary of the Company as being in
full force and effect on the Closing Date;

                                    (d)     resignations from their positions as
officers and  directors,  effective on the Closing Date,  of those  officers and
directors of the Company as the Buyer shall  designate in writing to the Sellers
prior to the Closing Date; provided, however, that such individuals shall remain
as employees of the Company as set forth in Section 1.8(c).

GV: #115336 v7 (2gzs07!.WPD)
                                       47

<PAGE>




                                    (e)     the complete and correct corporate
minute books,  stock ledgers,  stock transfer records and corporate seals of the
Company;

                                    (f)     a certification of non-foreign
status   executed  by  the   Company  and   satisfying   the   requirements   of
ss.1.1445-2(b)(2)(i) of the United States Treasury Regulations promulgated under
the Code;

                                    (g)     the originals, or copies certified
to the  satisfaction of the Buyer, of all Property  Leases,  Sellers' Leases and
Title Documents relating to the Real Property and the Retained Assets;

                                    (h)     executed originals of all consents,
waivers, approvals and
authorizations  set forth in Schedule  2.4(c) or required by Law or any Contract
to be obtained by the Sellers or the Company in connection with the consummation
of the transactions contemplated hereby;

                                    (i)     originals, or copies certified to
the  satisfaction of the Buyer, of all the Intellectual  Property  identified on
Schedule 2.21;

                                    (j)     all documents required to be
produced by the Sellers or the Company  under this  Agreement  or any  Ancillary
Document;

                                    (k)     the Closing Balance Sheet;

                                    (l)     the Escrow Agreement, duly endorsed
by the Sellers;

and such other  documents  relating to the Company as the Buyer  reasonably  may
request.

                  Section 6.9.  Opinion of the Sellers' Counsel.

                  Nantz, Litowich, Smith & Girard, counsel to the Sellers, shall
have  delivered  to the  Buyer an  opinion,  dated  the  Closing  Date,  in form
reasonably acceptable to the Buyer.

                  Section 6.10.  Legal Matters.

                  All legal matters, and the form and substance of all documents
to be delivered by the Sellers or the Company to the Buyer at the Closing, shall
be satisfactory to counsel for the Buyer.

                  Section 6.11.  Delivery of the Shares.

                  The Sellers shall have delivered to the Buyer certificates for
the Shares in proper form for transfer by delivery or with duly  executed  stock
powers attached thereto, together with funds for

GV: #115336 v7 (2gzs07!.WPD)
                                       48

<PAGE>



payment  of all  transfer  Taxes  imposed  by  Federal  law or the  laws  of the
Commonwealth  of  Pennsylvania  and evidence of the Company's  possession of the
shares of capital stock or other  securities  owned  beneficially  or of record,
directly or indirectly, by the Company.

                  Section 6.12.  General Release.

                  Each  Seller and all  officers  and  directors  of the Company
shall  have  delivered  to the  Company a general  release,  in form  reasonably
acceptable  to the Buyer,  of all claims they may have  through the Closing Date
against the Company, other than claims for current salary.

                  Section 6.13.  Material Adverse Change.

                  There shall not have been any material  adverse  change in the
business,  business  prospects,  financial condition or results of operations of
the Company taken as a whole at the Closing Date from  September  30, 1998,  and
the Buyer shall have been furnished  with a certificate to that effect  executed
by the Chief Executive Officer of the Company.

                  Section 6.14.  Related Party Advances.

                  On the Closing Date, all notes payable,  accounts  receivable,
advances, loans and other amounts owing to the Company by any officer, employee,
shareholder,  former shareholder or director, or relative or Affiliate of any of
the  foregoing,  shall have been repaid in full to the Company or assumed by the
Sellers.

                  Section 6.15.  Legal Proceedings.

                  No action, suit,  proceeding or investigation shall be pending
or  threatened  before  or by any  court  or  governmental  body or  agency  (i)
challenging the transactions contemplated by this Agreement or otherwise seeking
damages  or  (ii)  seeking  to  restrain  or  prevent  the  carrying  out of the
transactions  contemplated by this Agreement or to prohibit or limit the ability
of the Buyer to exercise full rights of ownership of the Shares or to operate or
control the assets, property and business of the Company after the Closing Date.

                  Section 6.16.  Employment Agreements.

                                    (a)     The Buyer and Leon C. Kirschner
shall have entered into the Kirschner Employment Agreement  substantially in the
form of Exhibit A.

                                    (b) The Buyer and  Thomas C.  Hubbell  shall
have entered into the
Hubbell Employment Agreement substantially in the form of Exhibit B.

                                    (c) The  Buyer  and Lee F.  Schomberg  shall
have entered into the
Schomberg Employment Agreement substantially in the form of Exhibit C.

GV: #115336 v7 (2gzs07!.WPD)
                                       49

<PAGE>




                                    (d) The Buyer and Gordon A.  Hellberg  shall
have entered into the Hellberg Employment Agreement substantially in the form of
Exhibit D.

                  Section 6.17.  Lease Agreement.

                  The  Company  and the  landlord  of the  Premises  shall  have
entered into the Lease Agreement substantially in the form of Exhibit E.

                  Section 6.18.  Escrow Agreement.

                  The Buyer, the Sellers and the Escrow Agent shall have entered
into the Escrow Agreement.

                  Section 6.19.  Closing Date.

                  The  Closing  shall  take  place at the  time,  date and place
specified in Section 1.4 unless extended by mutual agreement, in writing, of the
parties.

                  Section 6.20.  Buyer Financing.

                  The Buyer  shall have  received  financing  from a  commercial
lending institution on commercially  reasonable terms in an amount sufficient to
fund the payment by the Buyer of the cash portion of the Purchase Price.

                                    ARTICLE 7
                     CONDITIONS TO THE SELLERS' OBLIGATIONS

                  The  obligation of the Sellers  hereunder  shall be subject to
the satisfaction,  at or prior to the Closing Date, of the following  conditions
(any of which may be waived, in whole or in part, by the Sellers):

                  Section 7.1.  Certain Documents.

                  The Buyer shall have  furnished the Sellers with the following
documents,  satisfactory  in all  reasonable  respects  to the Sellers and their
counsel:

                                    (a)     the charter documents of the Buyer
and all amendments thereto,  duly certified by the appropriate  officials of the
jurisdiction in which the Buyer was organized;

                                    (b)     the By-laws of the Buyer, duly
certified by the Secretary of the Buyer as being in full force and effect on the
Closing Date; and

GV: #115336 v7 (2gzs07!.WPD)
                                       50

<PAGE>



                                    (c)     the documents identified in Article
3; and such other documents  relating to the Buyer as the Sellers reasonably may
request.

                  Section 7.2.  Opinion of the Buyer's Counsel.

                  Pepper Hamilton LLP, counsel for Buyer shall have delivered to
the Sellers an opinion, dated the Closing Date, in form reasonably acceptable to
the Sellers.

                  Section 7.3.  Legal Matters.

                  All legal matters, and the form and substance of all documents
to be  delivered  by  the  Buyer  to  the  Sellers  at  the  Closing,  shall  be
satisfactory to counsel for the Sellers.

                  Section 7.4.  Payment for Shares.

                  The Buyer shall have paid to the Sellers,  by wire transfer or
delivery of certified or official bank checks,  the cash portion of the Purchase
Price required to be paid to the Sellers pursuant to Section 1.2(a).

                  Section 7.5.  Delivery of Promissory Notes.

                  The Buyer shall have  delivered to the Sellers,  in proportion
to their stock  ownership  as set forth in  Schedule  1.2(a),  Promissory  Notes
representing  the portion of the  Purchase  Price to be paid by delivery of such
Promissory Notes hereunder.

                  Section 7.6.  Delivery of the Shares.

                  The Buyer shall have delivered to the Sellers certificates for
the shares of Buyer Common Stock to be issued to the Sellers hereunder.

                  Section 7.7.  Legal Proceedings.

         No  action,  suit,  proceeding  or  investigation  shall be  pending or
threatened before or by any court or governmental body or agency challenging the
transactions  contemplated  by this  Agreement or otherwise  seeking  damages or
seeking to restrain or prevent the carrying out of the transactions contemplated
by this Agreement.

                  Section 7.8.  Employment Agreements.

                                    (a)     The Buyer and Leon C. Kirschner
shall have entered into the Kirschner Employment Agreement  substantially in the
form of Exhibit A.

GV: #115336 v7 (2gzs07!.WPD)
                                       51

<PAGE>



                                    (b) The Buyer and  Thomas C.  Hubbell  shall
have entered into the
Hubbell Employment Agreement substantially in the form of Exhibit B.

                                    (c) The  Buyer  and Lee F.  Schomberg  shall
have entered into the
Schomberg Employment Agreement substantially in the form of Exhibit C.

                                    (d) The Buyer and Gordon A.  Hellberg  shall
have entered into the
Hellberg Employment Agreement substantially in the form of Exhibit D.

                  Section 7.9.  Lease Agreement.

                  The  Company  and the  landlord  of the  Premises  shall  have
entered into the Lease Agreement substantially in the form of Exhibit E.

                  Section 7.10.  Escrow Agreement.

                  The Buyer, the Sellers and the Escrow Agent shall have entered
into the Escrow Agreement.

                  Section 7.11.  Representations and Warranties.

                  All  representations and warranties made by Buyer are true and
valid,  do not contain any untrue  statement of material fact or omit to state a
material fact necessary to make the statements contained therein not misleading.

                  Section 7.12.  Financing Commitment.

                  Buyer shall pay all  necessary  fees and expenses to obtain an
unconditional  commitment  from any third party  source of  financing to provoke
such funding as is necessary for Buyer to pay to Sellers and Company all amounts
due under this Agreement.  Such commitment  letter(s) is (are) due within thirty
(30) days after Buyer signs this Agreement.

                  Section 7.13.  Approval by Public Body.

                  Buyer shall have  obtained  all  approvals  necessary  for the
transaction from all local, state or Federal regulatory body having jurisdiction
over the transaction.  Buyer shall commence its efforts to obtain such approvals
immediately after signing this Agreement.

                  Section 7.14.  Closing Date.

                  The  Closing  shall  take  place at the  time,  date and place
specified in Section 1.4 unless extended by the mutual agreement of the parties.


GV: #115336 v7 (2gzs07!.WPD)
                                       52

<PAGE>



                  Section 7.15.  Required Actions.

                  All action  required by Law and  otherwise  to be taken by the
Buyer to authorize the execution, delivery and performance of this Agreement and
the Ancillary  Documents and the consummation of the  transactions  contemplated
hereby shall have been duly and validly taken.

                  Section 7.16.  Representations.

                  The  representations  and warranties of the Buyer set forth in
this  Agreement and any Ancillary  Document  shall be true and correct as of the
date of this  Agreement  and as of the Closing  Date as though made on and as of
the  Closing  Date,  and  the  Buyer  shall  have  delivered  to the  Sellers  a
certificate to such effect dated the Closing Date and signed by the President of
the  Buyer,  which  certificate  shall  be  in  form  and  substance  reasonably
satisfactory to the Sellers' counsel.

                  Section 7.17.  Covenants.

                  The Buyer shall have performed all covenants and agreements to
be performed by it under this Agreement and any Ancillary  Documents on or prior
to the  Closing  Date,  and the Buyer  shall  have  delivered  to the  Sellers a
certificate to such effect dated the Closing Date and signed by the President of
the  Buyer,  which  certificate  shall  be  in  form  and  substance  reasonably
satisfactory to the Sellers' counsel.

                  Section 7.18.  Closing Certificate.

                  The Buyer  shall  have  delivered  to the Buyer  complete  and
correct  copies of the  resolutions  approved by the Board of  Directors  of the
Buyer   authorizing   this  Agreement  and  the  Ancillary   Documents  and  the
consummation of the transactions contemplated hereby and thereby,  including the
election of Mr. Leon  Kirschner and Mr. Steven Shulman to the Board of Directors
of the Buyer effective upon the consummation of the Closing.

                  Section 7.19.  Material Adverse Change.

                  There shall not have been any material  adverse  change in the
business,  business  prospects,  financial condition or results of operations of
the  Buyer  taken as a whole at the  Closing  Date  from May 30,  1999,  and the
Sellers shall have been furnished with a certificate to that effect  executed by
the Chief Executive Officer of the Buyer.


GV: #115336 v7 (2gzs07!.WPD)
                                       53

<PAGE>



                                    ARTICLE 8
                               CERTAIN TAX MATTERS

                  Section 8.1.  Tax Period Ending On or Before the Closing Date.

                  The Buyer shall  prepare,  or cause to be prepared,  and shall
file, or cause to be filed, all Tax Returns for the Company required to be filed
for all periods ending on or prior to the Closing Date which are filed after the
Closing  Date.  Such  returns and related tax  payments for which the Company is
liable  shall be filed in a timely  manner so that  neither  the Sellers nor the
Company are subject to penalty based on the date of filing.  Notwithstanding the
preceding  sentence,  final  Schedule  K-1s shall be furnished to the Sellers no
later than March 30,  2000.  Prior to filing,  the Buyer shall  present such Tax
Returns to the Sellers giving them an adequate time to review such returns prior
to the filing date.  The Tax Return  filed by the Company for the period  ending
September  30, 1999 and  reflecting  the built-in gain arising from the election
under Section 338(h)(10) of the Code shall be subject to the Sellers' reasonable
approval and shall use the built-in gain calculations prepared by the Sellers to
the  extent  the Buyer  believes  such  calculations  are  reasonably  accurate;
provided  that the Buyer's  obligation  to use the  built-in  gain  calculations
prepared by the Sellers  shall not  relieve the Sellers of any  obligation  with
respect to the tax on the built-in gain under this Agreement.  The Sellers shall
include any income, gain, loss, deduction or other tax items for such periods on
their Tax Returns in a manner consistent with the Schedule K-1s furnished by the
Company to the Sellers for such periods.  The Sellers shall  reimburse the Buyer
for any Taxes of the Company  with respect to such  periods  within  thirty (30)
days of written  notice from the Buyer or the Company that payment has been made
by the Buyer or the  Company  of such  Taxes to the  extent  such  Taxes are not
reflected in the current  liability  accruals for Taxes (excluding  reserves for
deferred Taxes) as such accruals are reflected on the Closing Balance Sheet.

                  Section 8.2.   Tax Period Ending After the Closing Date;
Retained Taxes.

                  The Buyer shall  prepare,  or cause to be prepared,  and shall
file, or cause to be filed,  all Tax Returns of the Company required to be filed
for all periods  ending after the Closing Date.  The Company shall pay any Taxes
due on such returns and all Retained Taxes.  The Buyer shall  indemnify,  defend
and hold the Sellers  harmless from, and shall be entitled to any refund of, any
and all Taxes that are the Company's  responsibility pursuant to the immediately
preceding  sentence.  Any  indemnity  payment  required  to be made by the Buyer
pursuant to this  Section  8.2 shall be made within  thirty (30) days of written
notice from the Sellers.

                  Section 8.3.  Section 338(h)(10) Election.

                  The  Sellers  will join  with the Buyer in making an  election
under Section  ss.338(h)(10) of the Code (and any  corresponding  election under
state,  local, and foreign Tax Law) with respect to the purchase and sale of the
stock of the Company hereunder (a "Section  338(h)(10)  Election").  The Sellers
will include any income, gain, loss, deduction, or other tax item resulting from
the Section 338(h)(10)  Election on their Tax Returns and shall also pay any tax
imposed on the Company

GV: #115336 v7 (2gzs07!.WPD)
                                       54

<PAGE>



attributable to the making of the Section 338(h)(10)  Election,  including,  but
not limited to, (i) the aggregate of any tax liability in excess of Five Hundred
Thousand Dollars ($500,000) for built-in gains tax imposed under Section 1374 of
the Code, the Michigan single business tax, and the California  income tax, (ii)
any gain arising under Section 1.338(h)(10)-1(e)(1) of the Treasury Regulations,
or (iii) any state,  local or foreign tax imposed on the  Company's  gain (other
than  pursuant to the Michigan  single  business tax, or the  California  income
tax),  and the Sellers  shall  indemnify  the Buyer and the Company  against any
adverse  consequences  (including,  without limitation,  Liabilities,  expenses,
costs,  fees,  Taxes,  liens,  proceedings and  settlements)  arising out of any
failure to pay any such Taxes.

                  Section 8.4.  Allocation of Purchase Price.

                  The Buyer, the Sellers and the Company agree that the Purchase
Price and the  Liabilities  (plus other  relevant  items) of the Company will be
allocated to each of the  Retained  Assets for tax purposes as shown on Schedule
8.4 hereto.  The Buyer,  the  Sellers and the Company  will file all Tax Returns
(including  amended returns and claims for refund) and information  reports in a
manner consistent with such allocation.

                  Section 8.5.  Cooperation on Tax Matters.

                                    (a)     The Buyer, the Sellers and the
Company shall cooperate fully,
as and to the extent reasonably requested by the other party, in connection with
the filing of Tax Returns pursuant to this Section and any audit,  litigation or
other  proceeding  with respect to Taxes.  Such  cooperation  shall  include the
retention  and (upon the other  party's  request)  the  provision of records and
information which are reasonably relevant to any such audit, litigation or other
proceeding  and making  employees  available on a mutually  convenient  basis to
provide  additional   information  and  explanation  of  any  material  provided
hereunder. The Company and the Sellers agree (A) to retain all books and records
with  respect to tax matters  pertinent  to the Company  relating to any taxable
period  beginning before the Closing Date until the expiration of the statute of
limitations  (and,  to the  extent  notified  by the Buyer or the  Sellers,  any
extensions  thereof)  of the  respective  taxable  periods,  and to abide by all
record retention  agreements entered into with any taxing authority,  and (B) to
give the other party reasonable written notice prior to transferring, destroying
or  discarding  any such books and records  and, if the other party so requests,
the Company or the  Sellers,  as the case may be, shall allow the other party to
take possession of such books and records.

                                    (b)     The Sellers and the Buyer further
agree, upon request, to use
their  best  efforts  to  obtain  any  certificate  or other  document  from any
Governmental  Authority  or any other  Person as may be  necessary  to mitigate,
reduce or eliminate  any tax that could be imposed  (including,  but not limited
to, with respect to the transactions contemplated hereby).


GV: #115336 v7 (2gzs07!.WPD)
                                       55

<PAGE>



                  Section 8.6.  Amended Returns.

                                    (a)     In the event the Buyer files an
amended Tax Return with any
Governmental  Authority  for any period up to and including  Closing,  the Buyer
shall pay to the  Sellers  any  refunds  received  as a result  of such  amended
returns to the extent necessary to offset any additional tax liability  incurred
by the Sellers arising from the Buyer's  amendment of prior returns and, without
limiting  any other  obligation  of the Sellers with respect to Taxes under this
Agreement,  the Sellers shall pay to the Buyer any refunds  received as a result
of such amended  returns to the extent  necessary to offset any  additional  tax
liability  incurred  by the  Buyer  or the  Company  arising  from  the  Buyer's
amendment of prior  returns.  In the event that Sellers are assessed  additional
Taxes  independent  of any activity by the Buyer,  the Buyer agrees to file such
returns as reasonably  requested by the Sellers to obtain refunds to offset such
additional Taxes, and the Sellers agree to reimburse the Buyer for any costs and
expenses incurred by the Buyer in connection therewith.

                                    (b)     The Sellers and the Company
recognize the existence of
unquantified  state sales,  income and  franchise  tax  liabilities  and refunds
payable  to or by the  Sellers  and/or  the  Company  for  periods  prior to the
Closing.  The Sellers and the Company are beginning  the process of  quantifying
these liabilities and refunds and will reflect a reasonable estimate of any such
liabilities  and refunds  applicable to the Company on the  Preliminary  Closing
Balance Sheet.

                                    (c)     Before the Sellers pursue settlement
 of any matters described
in Section  8.6(b),  the Sellers shall provide the results of the  investigation
forming the basis of their estimates  (including the  recommendation of Sellers'
tax  advisors  as to how and  whether to  proceed  with the  settlement  of such
matters) to the Buyer and the Buyer's tax advisor for review. To the extent that
Buyer does not reasonably  desire  disclosure to be made in any  jurisdiction in
which  liability  is  questionable,  upon the request of the Buyer,  the Sellers
shall not pursue the matter with respect to any such  jurisdiction and the Buyer
shall assume  responsibility  for such matter;  provided  that in no event other
than in accordance  with this sentence shall the Sellers be relieved,  by virtue
of this  Section  8.6,  of any  obligation  with  respect to such tax  liability
arising pursuant to this Agreement or otherwise.

                                    (d)     With respect to any tax liability or
refund described in the
Section 8.6,  the Sellers and the Buyer agree to  cooperate  with one another in
all reasonable  respects,  including  providing the other party with  reasonable
access to relevant documents,  records and personnel, to settle such matters and
to pay those  liabilities and to recover those refunds that may be due,  subject
to the allocation of such  liabilities and refunds  described in Section 8.6(a).
In the event Sellers  desire to sign and file original or amended Tax Returns in
connection with such tax liabilities and refunds for periods ending prior to the
Closing or to negotiate and enter into closing and/or settlement agreements with
respect thereto with state or local  Governmental  Authorities,  any such action
shall be subject to prior  consultation  with the Buyer and to the Buyer's prior
consent,  which shall not be unreasonably withheld. In the event the Buyer gives
such consent,  the Buyer shall be bound by any such agreements and shall take no
action  or fail to act in any way that  would  result in any  compromise  of the
benefits of those agreements. The Sellers shall provide copies of all

GV: #115336 v7 (2gzs07!.WPD)
                                       56

<PAGE>



agreements and prior year originals  and/or amended  returns to the Buyer.  Upon
receipt by the Sellers, the Buyer or the Company of any correspondence or notice
with respect to any period prior to the Closing from any Governmental Authority,
the notified  party shall inform the other  parties and provide them with copies
thereof within fifteen (15) days after receipt of such notice.


                                    ARTICLE 9
                             POST-CLOSING COVENANTS

                  Section 9.1.  Further Assurances.

                  At any time or from  time to time  after the  Closing,  at the
request of a party  hereto or such party's  counsel,  the other party or parties
shall execute and deliver any further instruments or documents and take all such
further action as such party or such party's  counsel may reasonably  request in
order to evidence or otherwise  facilitate the  consummation of the transactions
contemplated hereby.

                  Section 9.2.  Noncompetition.

                  If Closing occurs,  each of Steven Shulman,  Leon C. Kirschner
and Thomas C.  Hubbell,  for a period of five (5) years  following  the  Closing
Date, and Lee F. Schomberg and Gordon A. Hellberg, for a period of two (2) years
following  the Closing  Date,  will not for any reason  whatsoever,  directly or
indirectly,  for  himself,  or on  behalf  of or in  conjunction  with any other
Person, Persons, or business of whatever nature:

                                    (a)     engage or take concrete steps toward
 engaging, as an officer,
director,   shareholder,  owner,  partner,  member,  joint  venturer,  or  in  a
managerial capacity, whether as an employee, independent contractor,  consultant
or adviser, or as a sales  representative,  in any business competitive with the
business of the  Company,  as  conducted  presently  or in the future,  anywhere
within the United States, Canada, Mexico or Ireland (the "Territory");

                                    (b)     call upon any Person who was within
one (1) year prior to the
Closing Date, within the Territory, an employee of the Company or its Affiliates
for the purpose or with the intent of employing or enticing  such  employee away
from or out of the employ of the Buyer, the Company or their Affiliates; or

                                    (c)     call upon any Person who was or that
was within one (1) year
prior to the Closing  Date, a customer of the Company or its  Affiliates  within
the Territory  for the purpose of soliciting or selling  products or services in
competition with Buyer, the Company or their Affiliates within the Territory.

Notwithstanding  the  above,  the  foregoing  covenant  shall  not be  deemed to
prohibit any of Steven  Shulman,  Leon C. Kirschner,  Thomas C. Hubbell,  Lee F.
Schomberg or Gordon A. Hellberg, from

GV: #115336 v7 (2gzs07!.WPD)
                                       57

<PAGE>



acquiring as an investment  not more than five percent (5%) of the capital stock
of a competing business whose stock is publicly-traded on a national  securities
exchange or over-the-counter.

                  Section 9.3.  Confidentiality.

                  Each  Seller  recognizes  that by  reason  of his,  her or its
ownership of the Company and/or his, her or its  employment by the Company,  he,
she or it has acquired Confidential  Information concerning the operation of the
Company,  the use or disclosure  of which could cause the Buyer,  the Company or
their Affiliates or subsidiaries  substantial loss and damages that could not be
readily   calculated  and  for  which  no  remedy  at  law  would  be  adequate.
Accordingly,  if Closing occurs, each Seller covenants and agrees with the Buyer
that he, she or it will not at any time,  except in performance of such Seller's
obligations to the Buyer or with the prior written consent of the Buyer pursuant
to authority granted by a resolution of the Buyer's board of directors, directly
or  indirectly,  disclose any  Confidential  Information  that he, she or it may
learn or has learned by reason of his,  her or its  ownership  of the Company or
his, her or its  employment  by the Company,  or use any such  information  in a
manner  detrimental  to the  interests  of  the  Buyer,  the  Company  or  their
Affiliates  or  subsidiaries  unless (i) such  information  becomes known to the
public generally through no fault of any Seller,  (ii) disclosure is required by
Law or the Order of any Governmental  Authority under color of law, or (iii) the
disclosing  party  reasonably  believes  that such  disclosure  is  required  in
connection with the defense of a lawsuit against the disclosing party, provided,
that prior to disclosing any information pursuant to clause (ii) or (iii) above,
the  applicable  Seller shall give prior written notice thereof to the Buyer and
provide the Buyer with the  opportunity  to contest  such  disclosure  and shall
cooperate with efforts to prevent such disclosure.

                  Section 9.4.  Reasonable Restraint.

                  Each of the Sellers  acknowledges  that success of the Company
after the Closing Date will depend upon both the absence of competition from the
Sellers  and  the  continued  preservation  of the  confidentiality  of  certain
information  regarding the Company,  that an absence of such competition and the
preservation of the  confidentiality of such information is an essential premise
of the bargain  between and among the Sellers and the Buyer,  and that the Buyer
would be unwilling to enter into this  Agreement in the absence of the covenants
contained in Sections 9.2 and 9.3.

                  Section 9.5.  Damages.

                  Because of the difficulty of measuring  economic losses to the
Buyer and the  Company  as a result of a breach of the  covenants  contained  in
Sections 9.2 and 9.3, and because of the immediate and  irreparable  damage that
could be  caused to the Buyer and the  Company  for which  either of such  party
would have no other adequate  remedy,  each Seller agrees (i) that the covenants
contained  in Sections  9.2 and 9.3 may be enforced by the Buyer and the Company
in the event of breach by such Seller, by injunctions and restraining orders and
(ii) not to assert a defense that an adequate remedy at law exists.


GV: #115336 v7 (2gzs07!.WPD)
                                       58

<PAGE>



                  Section 9.6.  Severability; Reformation.

                  The covenants  contained in Sections 9.2 and 9.3 are severable
and separate, and the unenforceability of any specific covenant shall not affect
the  provisions  of any  other  covenant.  Moreover,  in the  event any court of
competent  jurisdiction  shall  determine  that the scope,  time or  territorial
restrictions contained in Sections 9.2 and 9.3 are unreasonable,  then it is the
intention  of the  parties  that such  restrictions  be  enforced to the fullest
extent which the court deems  reasonable,  and the  Agreement  shall  thereby be
reformed.

                  Section 9.7.  Registration Rights.

                                    (a)     Demand Rights.

                                            (i)      At any time more than one
hundred eighty (180) days
after  the  date  of  the  Closing,   the  Sellers'   Representative  may,  upon
presentation of the written request for registration by Sellers owning more than
fifty  percent  (50%) of the Shares,  request  the Buyer to register  the Shares
under the Securities Act for sale in the manner specified in such notice.

                                            (ii)     Following receipt of any
notice under Section 9.7(a),
the Buyer shall use reasonable  efforts to register under the Securities Act and
register or qualify under all applicable  state securities laws, for public sale
in accordance with the method of disposition  speci fied in such notice,  all of
the  Shares.  If such  method of  disposition  shall be an  underwritten  public
offering,  the Buyer may  designate  the managing  underwriter  of such offering
provided   the   underwriter   is   reasonably   acceptable   to  the   Sellers'
Representative.  The Buyer shall be obligated to register the Shares pursuant to
this Section 9.7 on one occasion only, provided,  however,  that such obligation
shall be deemed satisfied in respect of a registration  only when a registration
statement  covering  the  Shares  for  sale in  accordance  with the  method  of
disposition  specified  by  the  Sellers'  Representative,   shall  have  become
effective.

                                            (iii)    Notwithstanding the
foregoing, the Buyer shall not be
obligated  to register  the Shares  pursuant to this Section 9.7: (i) during the
period  starting  with the date sixty (60) days prior to the Buyer's  good faith
estimate of the date of filing of, and ending on a date one hundred eighty (180)
days after the effective date of, a Buyer-initiated registration,  provided that
(a) the Buyer is making a reasonable effort to cause such registration statement
to become  effective,  (b) the aggregate number of days within such period shall
not exceed two hundred forty (240), and (c) the Buyer has not previously invoked
this  clause (i) to excuse it from the  obligation  it would  otherwise  have to
register  the Shares;  (ii) in the event the Board of  Directors of the Buyer in
good faith  determines  that such  registration  would  have a material  adverse
effect on the market for the Buyer Common Stock and concludes, as a result, that
it is essential to defer the filing of such registration statement at such time,
and the Buyer shall furnish to the Sellers'  Representative a certificate signed
by the  President of the Buyer  stating  that in the good faith  judgment of the
Board of Directors of the Buyer the filing of such registration  statement would
have a material adverse effect on the market for the Buyer Common Stock and that
it is, therefore, essential to defer the filing of

GV: #115336 v7 (2gzs07!.WPD)
                                       59

<PAGE>



such  registration  statement,  in which event the Buyer shall have the right to
defer such  filing for a period of not more than  ninety (90) days after the day
upon which notice was received from the Sellers' Representative; or (iii) if the
Buyer is able to furnish to the Sellers an opinion of counsel to the effect that
the Shares are eligible for sale pursuant to Rule 144 under the  Securities  Act
without regard to the volume limitations thereunder.

                                            (iv)     The registration statement
filed pursuant to the request
of the Sellers'  Representative  may, at the  discretion  of the Buyer,  include
other securities of the Buyer,  with respect to which  registration  rights have
been granted, and may include securities of the Buyer being sold for the account
of the Buyer,  provided,  however, that in the event it is necessary to decrease
the  number of shares to be  registered,  the number of Shares  included  in the
registration statement shall be decreased last.

                                    (b)     Piggyback Rights.  If the Buyer
shall seek to register under the
Securities  Act or qualify  any of the  securities  of the Company or any of its
shareholders  (except in connection  with any stock option plan,  stock purchase
plan, savings or similar plan or an acquisition, merger or exchange of stock, to
be registered on Forms S-4, S-8 or any successor forms under the Securities Act)
and if the form of registration  statement  proposed to be used otherwise may be
used for the registration the Shares,  then, on each such occasion,  the Company
shall  furnish to each  Seller that then holds any Shares (a  "Holder")  with at
least thirty (30) days prior written notice thereof. Upon the written request of
one or more Holders, given within twenty (20) days after receipt of such notice,
the Company  will use  reasonable  efforts to cause the Shares that such Holders
request to be registered to be included in such registration.  In the event that
the  proposed  registration  by  the  Company  is,  in  whole  or  in  part,  an
underwritten  public  offering of  securities  of the Company,  and the managing
underwriter  determines and advises that the inclusion of all Shares proposed to
be included in the underwritten public offering and other issued and outstanding
shares of the Company's capital stock proposed to be included therein by holders
of Common  Stock  (the  "Other  Shares")  would  interfere  with the  successful
marketing  (including  pricing) of the securities,  then the number of shares of
Shares and Other  Shares to be included  in such  underwritten  public  offering
shall be reduced, to a number deemed satisfactory by such managing  underwriter,
pro rata among the  holders of the Shares and the  holders of the Other  Shares,
based on the number of shares  requested by holders  thereof to be registered in
such underwritten public offering.

                                    (c)     Expenses.  All expenses in
connection with the preparation and
filing of any  registration  statement  under this  Section 9.7  (including  all
registration,   filing,  listing,  qualification,   printer's,  accounting,  and
attorneys fees), any registration or qualification  under the securities or Blue
Sky laws of states in which the  offering  will be made under such  registration
statement, and any filing fee of the National Association of Securities Dealers,
Inc. relating to such offering,  shall be borne in full by the Buyer, except for
any  underwriters'  or  brokers'  commissions  and the fees or  expenses  of the
Sellers' counsel.

GV: #115336 v7 (2gzs07!.WPD)
                                       60

<PAGE>




                                   ARTICLE 10
                                  MISCELLANEOUS

                  Section 10.1.  Survival of Representations, Warranties and
Covenants.

                  The representations, warranties, covenants and agreements made
in this  Agreement  (including  the  Schedules  and  Exhibits) or any  Ancillary
Document  delivered in connection  herewith  shall survive the Closing and shall
continue  in full  force and  effect  (a) as to the  covenants  and  agreements,
forever, unless expressly provided otherwise herein or therein or limited by Law
and (b) as to the  representations  and  warranties,  for a period of two years,
except for the  representations  and  warranties,  (i) set forth in Section  2.1
through Section 2.5, Section 2.9 and Section 3.1 through Section 3.3 and Section
3.7  and  in  any  related   Schedule  or   certificate,   which  shall  survive
indefinitely,  (ii) set forth in Section 2.15 (Environmental Matters) and in any
related  Schedule or  certificate,  which shall  survive  until thirty (30) days
after any claims by a third party, including any Governmental Authority,  giving
rise  to any  Environmental  Claim  are  barred  by the  applicable  statute  of
limitations,  if any,  and (iii) set forth in  Section  2.24 (Tax  Matters)  and
Article 8 (Certain  Tax  Matters)  and in any related  Schedule or  certificate,
which shall survive until, but not beyond, thirty (30) days after the expiration
of the period, if any, during which an assessment, reassessment or other form of
recognized  document assessing  Liability of Taxes,  interest or penalties under
applicable tax Law in respect of any taxation year to which such representations
and  warranties  extend could be issued under such tax Law to the Company or any
of the  Sellers,  as  applicable,  subject  to any waiver or  extension  of such
period. Notwithstanding the foregoing, any such representation or warranty shall
survive such termination date (i) if any party,  prior to such termination date,
shall have  advised  the other  party in writing of an alleged  breach  thereof,
specifying in reasonable  detail the  representation or warranty that is alleged
to be inaccurate or that is alleged to have been breached and the basis for such
allegation  or (ii) the party  making such  representation  or  warranty  made a
willful,  fraudulent,  grossly  negligent or  intentional  misrepresentation  in
connection  therewith.  If any of the  foregoing is  inconsistent  with any time
limitation  for  indemnification  claims set forth in Section  4.2(b),  the time
limitation  set  forth  in  Section  4.2(b)  shall  take   precedence  over  the
conflicting  provisions  contained herein.  The covenants of the Sellers and the
Buyer shall continue in full force and effect in accordance with their terms.

                  Section 10.2.  Expenses.

                  The Sellers shall pay all Sellers'  Brokerage  Fees. The Buyer
shall pay all Buyer's  Transaction  Fees.  With respect to Sellers'  Transaction
Fees, (a) prior to Closing, Sellers' Transaction Fees may be paid by the Company
provided that the cash on the Closing  Balance Sheet will not be less than Three
Hundred  Thousand  Dollars  ($300,000)  and (b) following the Closing,  Sellers'
Transaction  Fees shall be paid by the Company up to a maximum  amount  equal to
the amount by which the cash on the Closing  Balance Sheet exceeds Three Hundred
Thousand Dollars ($300,000) and all Sellers'  Transaction Fees in excess of such
maximum amount shall be paid by the Sellers.


GV: #115336 v7 (2gzs07!.WPD)
                                       61

<PAGE>



                  Section 10.3.  Governing Law.

                  This Agreement shall be governed by and construed and enforced
in  accordance  with the  internal,  substantive  laws of the State of Michigan,
without giving effect to the conflict of laws rules thereof.

                  Section 10.4.  Notices.

                  All notices, consents, requests,  instructions,  approvals and
other communications  provided for herein shall be deemed validly given, made or
served if in writing and delivered personally or sent by certified mail, postage
prepaid, or by overnight courier, or by telex, telecopier or telegraph,  charges
prepaid:

                                    (a)     if to the Buyer, addressed to:

                            SI Handling Systems, Inc.
                                600 Kuebler Road
                           Easton, Pennsylvania 18040
                         Telecopier No.: (610) 250-9677
                              Attention: President

                                 with a copy to:

                               Pepper Hamilton LLP
                         1235 Westlakes Drive, Suite 400
                         Berwyn, Pennsylvania 19312-2401
                         Telecopier No.: (610) 640-7835
                       Attention: Jeffrey P. Libson, Esq.

                                   (b)     if to the Sellers, addressed to:

                              c/o Leon C. Kirschner
                              Ermanco Incorporated
                              6870 Grand Haven Road
                        Spring Lake, Michigan 49456-9652
                         Telecopier No.: (231) 798-8322

                                 with a copy to:


GV: #115336 v7 (2gzs07!.WPD)
                                       62

<PAGE>



                         Nantz, Litowich, Smith & Girard
                              600 Weyhill Building
                            2025 East Beltline, S.E.
                        Grand Rapids, Michigan 49546-7671
                         Telecopier No.: (616) 977-0529


or such  other  address  as shall be  furnished  in  writing by any party to the
others in accordance with the notice provisions of this Section 10.4.

                  Section 10.5.  Jurisdiction; Agent for Service.

                  Legal  proceedings  commenced  by the  Sellers  or  the  Buyer
arising  out of any of the  transactions  or  obligations  contemplated  by this
Agreement shall be brought  exclusively in the Federal courts, or in the absence
of Federal  jurisdiction in state courts, in either case in Michigan.  The Buyer
and the Sellers  irrevocably and  unconditionally  submit to the jurisdiction of
such courts and agree to take any and all future  action  necessary to submit to
the jurisdiction of such courts. The Buyer and the Sellers irrevocably waive any
objection that they now have or hereafter may have to the laying of venue of any
suit,  action or  proceeding  brought in any such court and further  irrevocably
waive any claim that any such  suit,  action or  proceeding  brought in any such
court has been brought in an  inconvenient  forum.  Final  judgment  against the
Sellers or the Buyer in any such suit shall be conclusive and may be enforced in
other  jurisdictions by suit on the judgment,  a certified or true copy of which
shall be conclusive  evidence of the fact and the amount of any  indebtedness or
liability  of the  Sellers or the Buyer  therein  described,  or by  appropriate
proceedings under any applicable treaty or otherwise.

                  Section 10.6.  Entire Agreement.

                  This  Agreement  represents the entire  agreement  between the
parties and supersedes and cancels any prior oral or written  agreement,  letter
of intent or understanding related to the subject matter hereof.

                  Section 10.7.  Binding Effect.

                  This  Agreement  shall be binding  upon and shall inure to the
benefit of the parties hereto and their respective  successors and assigns,  and
no other  person  shall  acquire  or have any  right  under or by virtue of this
Agreement.  The Sellers may not assign or transfer any right  hereunder  without
the prior  written  consent of the Buyer.  The Buyer may assign or transfer  its
rights hereunder to another direct or indirect wholly-owned  subsidiary or other
Affiliate of the Buyer.


GV: #115336 v7 (2gzs07!.WPD)
                                       63

<PAGE>



                  Section 10.8.  Amendments, Waivers.

                  No provision of this  Agreement  may be  terminated,  amended,
supplemented,  waived or modified  other than by an instrument in writing signed
by the  party  against  whom  the  enforcement  of the  termination,  amendment,
supplement, waiver or modification is sought. No waiver of any provision of this
Agreement  shall be deemed or shall  constitute a waiver of any other  provision
hereof,  nor shall such waiver  constitute a continuing  waiver unless otherwise
expressly provided.

                  Section 10.9.  Third Party Beneficiaries.

                  Nothing herein expressed or implied is intended to or shall be
construed  to confer  upon or give any person or entity,  other than the parties
hereto, and their respective  successors,  executors,  beneficiaries,  permitted
assigns  and  affiliates,  any  rights  or  remedies  under or by reason of this
Agreement.

                  Section 10.10.  Severability.

                  If any  portion of this  Agreement  is  declared by a court of
competent  jurisdiction  to be invalid or  unenforceable  after all appeals have
either been  exhausted or the time for any appeals to be taken has expired,  the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected,  impaired
or invalidated, and any such invalid or unenforceable portion shall be construed
by  limiting  it so as to  be  valid  and  enforceable  to  the  maximum  extent
compatible with, and possible under, applicable Law.

                  Section 10.11.  Counterparts.

                  This  Agreement  may be executed in one or more  counterparts,
each of which shall be deemed to be an original and all of which  together shall
be deemed to be one and the same instrument, and shall become effective when one
or more counterparts have been signed by each of the parties.

                  Section 10.12.  Confidentiality/Maintenance of Operations.

                  Until  closing  takes  place  all  confidentiality  agreements
signed by the  Company,  Sellers and Buyer shall remain in full force and effect
and Buyer shall not  contact any  director,  officer,  shareholder,  employee or
agent of the Company other than Leon Kirschner or Thomas Hubbell for any purpose
whatsoever without the express written consent of the Company.

                  Section 10.13.  Termination.

                  If Buyer, Sellers or Company is not obligated to complete this
Agreement  because of the other party's inability to perform a provision of this
Agreement,  then  Buyer,  Sellers or Company may  terminate  this  Agreement  by
delivering to the other party written notice of termination. On

GV: #115336 v7 (2gzs07!.WPD)
                                       64

<PAGE>



delivery of the written  notice,  this Agreement  shall  terminate with the same
effect as though the  Agreement  had never been  entered  into  except  that all
Agreements  regarding  confidentiality  and all  representations  and warranties
shall  survive  the  termination,  and  except  that the party who has failed to
perform for reasons  other than the failure of the other party to satisfy one or
more  conditions,  the  fulfillment  of which are  conditions  precedent  to the
performance of the party who failed to perform or for reasons  otherwise excused
under this Agreement shall pay to the party declaring the termination the sum of
Three Hundred Fifty Thousand Dollars ($350,000). Nevertheless, Buyer, Sellers or
Company  may  waive  one or  more  conditions,  the  fulfillment  of  which  are
conditions  precedent  to their  performance,  without  prejudice to their right
subsequently  to assert other  conditions  or to make a claim  against the other
party with respect to any breach of the  representations  or warranties  made by
that party.  This Agreement may also be terminated upon the mutual  agreement of
the parties.  Notwithstanding  the right to terminate the Agreement or the right
to waive  nonperformance of a condition,  a party may seek to enforce its rights
under this Agreement through an action for damages or specific performance.

                  Section 10.14.  Headings, Etc.

                  The Table of Contents and the Article,  Section and subsection
headings are included solely for convenient reference and shall not be deemed to
provide  an  accurate  description  of the  content of any  Article,  Section or
subsection  hereof or otherwise affect the meaning or  interpretation  of any of
the provisions hereof.

                  Section 10.15.  Schedules, Etc.

                  Schedules  and Exhibits  referred to in this  Agreement are an
integral  part of  this  Agreement  and are  expressly  incorporated  herein  by
reference.  No  information  disclosed  in any  Schedule  shall be  deemed to be
disclosed with respect to any other Schedule unless a cross-reference is made to
another specific Schedule. All Schedules, Exhibits and other documents, with the
exception of the  documents to be delivered at the Closing,  referred to in this
Agreement  as having  been  produced  shall be  produced  as soon as  reasonably
practical but in no event later than September 1, 1999.

                  Section 10.16.  Construction of the Agreement.

                  Each of the parties hereto has participated in the drafting of
this Agreement after appropriate consultation with legal counsel. Therefore, the
language of this Agreement  shall not be preemptively  construed  against any of
the parties hereto.

                  Section 10.17.  No Defense.

                  The  Buyer's  opportunity  to conduct  due  diligence  and its
decision to close based thereon shall not limit or diminish any  representation,
warranty,  indemnity obligation or other duty of the Sellers or their respective
Affiliates hereunder. The fact that some or all of the Company's

GV: #115336 v7 (2gzs07!.WPD)
                                       65

<PAGE>



employees  may be  employed  by the Buyer,  directly  or  indirectly,  after the
Closing  shall  not be  deemed  (i) to  constitute  or  impute  to the Buyer any
knowledge  which such employee has; (ii) to relieve or diminish the liability of
the Sellers for any breach of their representations and warranties hereunder; or
(iii) to relieve the Sellers of any of their duties and obligations hereunder.

                  Section 10.18.  Sellers' Representative.

                  Each of the Sellers  hereby  appoint Leon C. Kirschner and, in
the event of his death, incapacity or resignation,  Steven Shulman, as its agent
(the  "Sellers'   Representative")  and  collectively   authorize  the  Sellers'
Representative  to represent and act for each of them in all matters  pertaining
to this  Agreement.  The Buyer shall be entitled to rely upon any  statements or
other  communications  by the Sellers'  Representative  on behalf of the Sellers
without the necessity of determining the validity of the actions taken.  Actions
taken  (or  failures  to act) by the  Sellers'  Representative  shall be  deemed
binding and conclusive on the Sellers.

                  Section 10.19.  Sales Amongst  Sellers.  Prior to the Closing,
any Seller may sell all,  but not less than all, of his or her Shares to any one
or more other  Sellers;  provided that the  acquirer(s)  of such Shares shall be
bound by all of the terms and  conditions of this Agreement with respect to such
Shares as though  such  Shares  had been  owned by the  acquirer(s)  on the date
hereof.  Upon any such  sale,  the  selling  Seller  shall  be  relieved  of the
obligations, representations,  warranties and covenant made by and applicable to
such  Seller  under  this  Agreement,  and the Buyer  shall be  relieved  of all
obligations whatsoever to such Seller.

                                   ARTICLE 11
                                   DEFINITIONS

         "Action"  shall  mean any and all  civil,  criminal  or  administrative
actions,  causes of action,  litigation,  suits,  arbitrations,  investigations,
proceedings,  hearings, charges, complaints,  citations,  directories,  summons,
demands,  information  requests,  assessments,   audits,  judgments  and  claims
(including,  without  limitation,  employment-related  claims  and audits by any
taxing authority) relating to or asserted by a Person.

         "Affiliate" shall mean with respect to any specific Person, as of the
date of determination:

                  (a) any Person directly or indirectly controlling,  controlled
by or under direct or indirect common control with the specified Person;

                  (b) any  Person  who or which is or has been  within  the past
three (3) years an officer,  director,  partner or beneficial holder of at least
5% of any class of the outstanding capital stock of the specified Person;


GV: #115336 v7 (2gzs07!.WPD)
                                       66

<PAGE>



                  (c) any  Person  who or which is or has been  within  the past
three (3) years an officer,  director,  partner or beneficial holder of at least
5% of any class of the outstanding capital stock of a Person covered by clause B
above;

                  (d) any  Person  in which  the  specified  Person  or a Person
covered by clauses A, B and/or C above shall, directly or indirectly and legally
or  beneficially,  own at  least  5% of the  outstanding  equity  securities  or
constitute at least a 5% participant; and

                  (e) any Person who is the spouse,  parent, sibling or child of
any Person covered by clauses A, B, C and/or D above or of the specified Person.

         "Ancillary Documents" shall have the meaning set forth in
Section 2.1(a).

         "Balance Sheet" shall have the meaning set forth in Section 2.8(a).

         "Buyer" shall have the meaning set forth in the initial paragraph
hereof.

         "Buyer Common Stock" shall have the meaning set forth in Section 3.7.

         "Buyer Financial Statements" shall have the meaning set forth in
Section 3.9.

         "Buyer's  Transaction Fees" shall mean any fees and expenses for legal,
accounting,  auditing,  tax, financial  advisory,  finder, or investment banking
services,  or any other  professional  services  rendered in connection with the
preparation  and  performance of this Agreement and the Ancillary  Documents and
the  consummation  of the  transactions  contemplated  hereby and thereby  paid,
accrued or incurred by or on behalf of the Buyer.

         "Closing" shall have the meaning set forth in Section 1.4.

         "Closing  Balance Sheet" shall mean the balance sheet of the Company as
of the Effective Time prepared in accordance with GAAP applied consistently with
prior periods, as definitively determined pursuant to Section 1.2(d).

         "Closing Date" shall have the meaning set forth in Section 1.4.

         "Code"  shall  mean the  Federal  Internal  Revenue  Code of 1986,  any
successor statute of similar import,  and the rules and regulations  thereunder,
collectively and as from time to time amended and in effect.

         "Company" shall have the meaning set forth in the initial paragraph
hereof.

         "Company Common Stock" shall have the meaning set forth in Section 2.7.


GV: #115336 v7 (2gzs07!.WPD)
                                       67

<PAGE>



         "Company Financial Statements" shall have the meaning set forth in
Section 2.8(a)

         "Confidential  Information" shall mean all confidential and proprietary
information with respect to the Company and its business and shall include,  but
shall not be  limited  to,  technical  information,  including  research  and/or
development  design,  results,   techniques  and  processes;   trade  practices;
apparatus   and   equipment   design;   formulae;   software  and  source  code;
manufacturing  and/or  production   processes;   computer  software;   technical
management information,  including project proposals,  research plans, programs,
status reports,  performance  objectives and criteria, and analyses of areas for
business  development;  business  information,   including  project,  financial,
accounting and personnel information (including the revenues,  costs, or profits
associated with any of the Company's  products);  product price lists;  business
studies, strategies,  manuals, reports, plans, systems,  procedures,  forecasts,
prospects and  opportunities;  sales and marketing plans,  programs and efforts,
information  and data;  the  identities  of actual  and  prospective  customers,
contractors and suppliers;  the terms of Contracts with  customers,  contractors
and suppliers;  Seller's  relationship  with actual and  prospective  customers,
contractors and suppliers and the needs and requirements of, and Seller's course
of dealing  with,  any such actual or  prospective  customers,  contractors  and
suppliers;  customer  and vendor  credit  information;  and any other  materials
relating to the Company. In addition,  "Confidential Information" shall include,
without  limitation,  all information and materials  delivered or disclosed to a
Seller  or the  Company  subject  to an  obligation  of  confidentiality  and/or
non-disclosure.  Failure to have marked any of the  Confidential  Information as
confidential  or  proprietary  shall  not  affect  its  status  as  Confidential
Information under the terms of this Agreement.

         "Contracts"  shall mean,  with  respect to any  specified  Person,  all
contracts, agreements, arrangements,  understandings, deeds, mortgages, options,
leases, non-governmental licenses, collective bargaining agreements,  employment
and severance agreements,  franchise sales agreements,  distribution agreements,
joint venture agreements, sales and purchase orders, warranties,  Guarantees and
service  agreements,  confidentiality  agreements,  non-competition  agreements,
insurance   contracts  and  any  other  contracts,   agreements,   arrangements,
understandings or instruments,  written or oral, to which such Person is a party
or otherwise subject,  or by which such Person or any of such Person's assets or
properties are legally bound.

         "Effective Time" shall have the meaning set forth in Section 1.4.

         "Encumbrances"  shall  mean  any  encumbrances,  pledges,  assignments,
conditional  sales,  leases,  charges,  equities,  mortgages,  liens (including,
without  limitation,  Federal,  state and local tax liens),  security interests,
pledges, claims, hypothecations,  deposit arrangements,  preferences, priorities
or other security arrangements,  warrants, attachments, rights of first refusal,
consignments,  bailments,  contingent interests,  options,  puts, calls or other
rights of any Person,  restrictions on transfer (other than restrictions imposed
by Federal and state securities  laws),  imperfections of title,  encroachments,
easements,   rights   of  way,   squatters'   rights,   covenants,   conditions,
restrictions,  preferential  arrangements  of  any  kind  or  nature  whatsoever
(including any restrictions on the transfer of assets,  any conditional sales or
other title retention arrangements, any financing leases involving substantially
the same economic effect as any of the foregoing and the filing of any financing
statements under the

GV: #115336 v7 (2gzs07!.WPD)
                                       68

<PAGE>



Uniform  Commercial  Code  or  comparable  law of any  jurisdiction)  and  other
restrictions of any nature.

         "Environmental Laws" shall have the meaning set forth in Section
2.15(b)(ii).

         "ERISA" shall have the meaning set forth in Section 2.17(a).

         "ERISA Affiliate" shall have the meaning set forth in Section 2.17(a).

         "ERISA Plans" shall have the meaning set forth in Section 2.17(a).

         "Escrow Account" shall have the meaning set forth in Section 1.5.

         "Escrow Agent" shall have the meaning set forth in Section 1.5.

         "Escrow Agreement" shall have the meaning set forth in Section 1.5.

         "Escrow Amount" shall have the meaning set forth in Section 1.5.

         "Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended.

         "GAAP" shall mean generally accepted accounting principles,  applied on
a consistent  basis,  as set forth in the Opinions of the Accounting  Principles
Board of the  American  Institute  of  Certified  Public  Accountants  and/or in
statements of the Financial  Accounting  Standards Board and/or their successors
which are  applicable  as of the date in  question.  Accounting  principles  are
applied on a  "consistent  basis" when the  accounting  principles  applied in a
current  period are  comparable  in all  material  respects to those  accounting
principles applied in a preceding period.

         "Governmental Authority" shall mean any nation or government, any state
or other political subdivision thereof, and any entity, department,  commission,
bureau, agency, authority, board, court, tribunal, official or officer, domestic
or  foreign,  exercising  executive,   judicial,  regulatory  or  administrative
functions of or pertaining to government.

         "Guarantee"  shall mean (A) any guarantee of the payment or performance
of  any  indebtedness  or  other  obligation  of  any  obligor,  (B)  any  other
arrangement  whereby  credit  is  extended  to one  obligor  on the basis of any
promise or undertaking of another Person, whether that promise or undertaking is
expressed in terms of an obligation to pay the indebtedness of such obligor,  or
to purchase any obligation owed by such obligor,  or to purchase or lease assets
under  circumstances  that would enable such obligor to discharge one or more of
its  obligations,  or to maintain  the  capital,  working  capital,  solvency or
general financial condition of such obligor,  whether or not such arrangement is
disclosed  in the  balance  sheet of such other  Person or is  referred  to in a
footnote  thereto,  and (C) any  guarantee  or  other  arrangement  whereby  the
performance of another Person is assumed.

GV: #115336 v7 (2gzs07!.WPD)
                                       69

<PAGE>




         "Hazardous Materials" shall have the meaning set forth in Section
2.15(b)(i).

         "Hellberg Employment Agreement" shall have the meaning set forth in
Section 1.8(d).

         "Hubbell Employment Agreement" shall have the meaning set forth in
Section 1.8(b).

         "Indemnified Party" shall have the meaning set forth in Section 4.1.

         "Intellectual  Property" shall mean all patents,  patent rights, patent
applications,  trademarks,  trademark applications,  service marks, service mark
applications, trade names (including all rights in and to the name "Ermanco" and
any names similar  thereto or variations  or  deviations  thereof),  copyrights,
licenses,  designs,  art  work,  designs-in-progress,   formulations,  know-how,
prototypes,  inventions  and trade  styles  licensed  to,  used by,  owned by or
registered  in the name of the Company,  or in which the Company has any rights,
and  (ii)  all  technical  proprietary  and  business  confidential  information
including,  without  limitation,  research data,  market  reports,  distribution
methods,   customer   lists,   trade  secrets,   technology,   designs,   plans,
specifications,  formulae,  processes, methods, blue prints, drawings, patterns,
shoprights,  know-how and other  proprietary  and  intellectual  property owned,
controlled,  created,  used or licensed by or on behalf of the Company  that are
not within the general knowledge of the industry.

         "Inventories" shall mean all inventory,  including, without limitation,
all raw materials, component parts, work in process and finished goods, wherever
located, owned or used by the Company in the operation of its business.

         "IRS" shall mean the Internal Revenue Service.

         "Kirschner Employment Agreement" shall have the meaning set forth in
Section 1.8(a).

         "Law" shall mean, at the  applicable  time,  each provision of any then
currently  existing Federal,  state,  local or foreign law,  statute,  standard,
ordinance, code, Order, rule, regulation, resolution or promulgation (including,
without  limitation,  Environmental  Laws),  applicable  common law and judicial
decisions,  and each term of any Order then  currently  existing,  of any court,
arbitrator,   tribunal  or  other  Governmental  Authority  (including,  without
limitation,  the  U.S.  Patent  Office),  and  each  provision  of any  license,
franchise,  Permit or similar right or obligation  granted under or set forth in
any of the foregoing.

         "Lease" shall have the meaning set forth in Section 3.10.

         "Leased Property" shall have the meaning set forth in Section 2.10(a).

         "Liability"  shall  mean,  without  limitation,  any direct or indirect
liability, indebtedness, guaranty, endorsement, claim, loss, damage, deficiency,
cost, expense, obligation or responsibility,

GV: #115336 v7 (2gzs07!.WPD)
                                       70

<PAGE>



absolute  or  contingent,  fixed or  unfixed,  matured  or  unmatured,  known or
unknown, asserted or unasserted, choate or inchoate, liquidated or unliquidated,
secured or unsecured and whether or not accrued (including,  without limitation,
attorneys',  accountants',  consultants',  and experts' fees and  disbursements,
interest, penalties, amounts paid in settlement and court costs).

         "Loss"  shall  mean  (A) any  and  all  direct  and  indirect  damages,
deficiencies,  Actions,  demands,  assessments,  judgments,  settlement costs or
payments,  obligations,  Liabilities,  loss of income,  fines, or diminutions in
value  of any  kind or  character  (whether  known or  unknown,  conditional  or
unconditional,  choate or  inchoate,  liquidated  or  unliquidated,  secured  or
unsecured, and whether or not accrued,  absolute,  contingent or otherwise) that
occur,  or that are more likely than not to occur,  and any legal or other costs
and  expenses  (including  costs  of  collection  and  reasonable  experts'  and
attorneys'  fees and  expenses  and costs of court),  as well as interest on any
amount payable to a third party as a result of the foregoing;  and (B) any costs
to remove,  remediate  (including  without limitation any remedy which leaves in
place any Hazardous  Material(s)),  treat,  dispose of, study,  investigate  and
sample any environmental media (soil,  groundwater,  surface water,  wastewater,
drinking water or air) and all Hazardous  Materials and any costs to comply with
all  applicable  Environmental  Laws  including,  but  not  limited  to,  fines,
penalties,  and administrative,  indirect,  direct and overhead costs charged or
imposed by any Governmental Authority.

         "Net Working Capital" shall mean the difference  between (a) the sum of
the cash, receivables,  inventory and other current assets on a balance sheet of
the Company  minus (b) the sum of the  accounts  payable,  accrued  expenses and
other current  liabilities on a balance sheet of the Company,  all calculated in
accordance with GAAP. For purposes of the Closing Balance Sheet, all liabilities
of the Company,  including without limitation,  any tax liability of the Company
arising as a result of the making of an election under Section 338(h)(10) of the
Code for built-in gains tax under Section 1374 of the Code, the Michigan  single
business tax, and the California  income tax, shall be  characterized as current
liabilities,   and  the  Company's  "S  corp  deposit"  with  the  IRS  will  be
characterized as a current asset.

         "Non-ERISA Plans" shall have the meaning set forth in Section 2.16(a).

         "Order"  shall  mean any  order,  restraining  order,  judgment,  writ,
injunction,  decree or award  applicable  to a Person,  whether  or not any such
Order is entered into by consent or otherwise.

         "Owned Property" shall have the meaning set forth in Section 2.10(a).

         "PBGC" shall have the meaning set forth in Section 2.17(c).

         "Pension Plans" shall have the meaning set forth in Section 2.17(a).

         "Permits"   shall   mean   all   permits,   licenses,   certifications,
registrations,  qualifications,  approvals, agency listings,  consents, waivers,
franchises,  titles  (including,  without  limitation,  motor vehicle titles and
current registrations), Orders or other authorizations.

GV: #115336 v7 (2gzs07!.WPD)
                                       71

<PAGE>



         "Person"  shall  mean any  natural  person,  corporation,  partnership,
unincorporated  association,  trust,  Governmental Entity, joint venture,  trade
group, or other entity,  or any entity or group that is a part of, or associated
with, any of the foregoing.

         "Personal Property Leases" shall have the meaning set forth in Section
2.11(b).

         "Post Closing Adjustment" shall have the meaning set forth in
Section 1.2(d).

         "Preliminary Closing Balance Sheet" shall have the meaning set forth in
Section 1.7.

         "Premises" shall mean the  manufacturing  and headquarters  facility of
the Company located at 6870 Grand Haven Road, Spring Lake, Michigan 49456.

         "Promissory Notes" shall have the meaning set forth in Section 1.2(a).

         "Purchase Price" shall have the meaning set forth in Section 1.2(a).

         "Real Property" shall have the meaning set forth in Section 2.10(a).

         "Receivables" shall mean all notes receivable, accounts receivable, and
other  receivables  or amounts of any kind that are payable or due to Sellers by
customers,  employees or others,  and any and all rights of Sellers which secure
or guarantee payment of same.

         "Release" shall have the meaning set forth in Section 2.15(b)(iii).

         "Retained Assets" shall have the meaning set forth in Section 1.6(a).

         "Retained Delivery Liabilities" shall have the meaning set forth in
Section 1.6(b).

         "Retained Liabilities" shall have the meaning set forth in Section
1.6(b).

         "Retained Taxes" shall have the meaning set forth in Section 1.6(b).

         "Retained Warranty Liabilities" shall have the meaning set forth in
Section 1.6(b).

         "Schomberg Employment Agreement" shall have the meaning set forth in
Section 1.8(a).

         "Securities Act" shall mean the Securities Act of 1933, as amended.

         "Sellers" shall have the meaning set forth in the initial paragraph
hereof.

         "Sellers' Representative" shall have the meaning set forth in Section
4.2(a).


GV: #115336 v7 (2gzs07!.WPD)
                                       72

<PAGE>



         "Sellers' Brokerage Fees" shall mean any commissions, fees and expenses
for financial  advisory,  finder,  or investment  banking  services  rendered in
connection  with the  preparation  and  performance  of this  Agreement  and the
Ancillary Documents and the consummation of the transactions contemplated hereby
and  thereby  paid,  accrued or  incurred  by or on behalf of the Company or the
Sellers,  including without  limitation,  any fees and expenses paid, accrued or
incurred with respect to ING Baring, other than the retainer paid by the Company
to ING  Baring  prior  to the  date of this  Agreement  in the  amount  of Fifty
Thousand Dollars ($50,000).

         "Sellers' Transaction Fees" shall mean any fees and expenses for legal,
accounting,  auditing,  tax,  or any other  professional  services  rendered  in
connection  with the  preparation  and  performance  of this  Agreement  and the
Ancillary Documents and the consummation of the transactions contemplated hereby
and  thereby  paid,  accrued or  incurred  by or on behalf of the Company or the
Sellers,  including without limitation,  the retainer paid by the Company to ING
Barings  prior to the date of this  Agreement  in the  amount of Fifty  Thousand
Dollars ($50,000), but excluding the Sellers' Brokerage Fees.

         "Shares" shall have the meaning set forth in the Recitals hereof.

         "Tax Return" shall have the meaning set forth in Section 2.24.

         "Taxes" shall have the meaning set forth in Section 2.24.

         "Territory" shall have the meaning set forth in Section 9.2(a).

         "Threshold Amount" shall have the meaning set forth in Section 4.2(a).

         "Title Documents" shall have the meaning set forth in Section 2.10(a).

         "Welfare Plans" shall have the meaning set forth in Section 2.17(a).


                          [two signature pages follow]


GV: #115336 v7 (2gzs07!.WPD)
                                       73

<PAGE>



                  IN WITNESS  WHEREOF,  this Agreement has been duly executed by
the parties hereto as of the day and year first above written.


                                       SI HANDLING SYSTEMS, INC.


                                       By: /s/ William Johnson
                                           -----------------------------------
                                           William Johnson, President & CEO


                                       ERMANCO INCORPORATED


                                       By: /s/ Leon C. Kirschner
                                           -----------------------------------
                                           Leon C. Kirschner, President


                                       SELLERS:


                                       /s/ Steven Shulman
                                       ---------------------------------------
                                       Steven Shulman


                                       /s/ Leon C. Kirschner
                                       ---------------------------------------
                                       Leon C. Kirschner


                                       /s/ Thomas C. Hubbell
                                       ---------------------------------------
                                       Thomas C. Hubbell


                                       /s/ Lee F. Schomberg
                                       ---------------------------------------
                                       Lee F. Schomberg

                                       /s/ Guy G. Hollister
                                       ---------------------------------------
                                       Guy G. Hollister



                     [signatures continue on following page]

GV: #115336 v7 (2gzs07!.WPD)


<PAGE>





                                       /s/ Wilton W. Wyman, Jr.
                                       ---------------------------------------
                                       Wilton W. Wyman, Jr.


                                       /s/ Gordon A. Hellberg
                                       ---------------------------------------
                                       Gordon A. Hellberg


                                       /s/ Andrew Knaut
                                       ---------------------------------------
                                       Andrew Knaut


                                       /s/ Thomas L. Bergy
                                       ---------------------------------------
                                       Thomas L. Bergy


                                       /s/ Donald H. Kloosterhouse
                                       ---------------------------------------
                                       Donald H. Kloosterhouse


                                       /s/ Robert R. Nezbeth
                                       ---------------------------------------
                                       Robert R. Nezbeth


                                       /s/ James J. Bronsema
                                       ---------------------------------------
                                       James J. Bronsema


                                       /s/ John R. Planteroth
                                       ---------------------------------------
                                       John R. Planteroth


                                       /s/ William C. Pipp
                                       ---------------------------------------
                                       William C. Pipp


GV: #115336 v7 (2gzs07!.WPD)