EXHIBIT 4.26



                              EMPLOYMENT AGREEMENT


This Employment Agreement (the "Agreement") dated as of December 20, 2000, is
entered into by and between Burleigh Instruments, Inc., a corporation having its
principal place of business at 7647 Main Street, Fishers, New York 14453-0755,
U.S.A., Fishers, New York, U.S.A. (the "Corporation") and David J. Farrell (the
"Employee").



                               TERMS OF AGREEMENT


In consideration of this Agreement and the continued employment of the Employee
by the Corporation, the parties agree as follows :


1.       EMPLOYMENT
         ----------

         The Corporation hereby agrees to continue to employ Employee, on a
         full-time basis commencing on or about December 20, 2000, to act as
         President of the Corporation and to perform such acts and duties and
         furnish such services to the Corporation in connection with and related
         to that position as is customary for persons with similar positions in
         like companies, as the Board of Directors of the Corporation shall from
         time to time reasonably direct. Employee hereby accepts said
         employment. Employee shall use his best and most diligent efforts to
         promote the interests of the Corporation; shall discharge his duties in
         a highly competent manner; and shall devote his full business time and
         his best business judgement, skill and knowledge to the performance of
         his duties and responsibilities hereunder. This Agreement shall not be
         interpreted to prohibit Employee from making passive personal
         investments or conducting private business affairs if such activities
         do not materially interfere with the services required under this
         Agreement. Employee shall report to the President of EXFO
         Electro-Optical Engineering Inc., the Corporation's holding body
         corporate.

2.       COMPENSATION AND BENEFITS
         -------------------------

         2.1      SALARY

                  During the term of this Agreement, the Corporation shall pay
                  Employee the remuneration indicated in Schedule A. The
                  Employee's remuneration may be adjusted upwards in accordance
                  with the Corporation's policies and procedures.

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         2.2      DISCRETIONARY BONUS

                  During the term of this Agreement, the Employee may
                  participate in such bonus plan or plans of the Corporation as
                  the Board of Directors of the Corporation may approve for the
                  Employee. Nothing contained in this Section 2.2 shall be
                  construed to require the Board of Directors to approve a bonus
                  plan or in any way grant to Employee the right to receive
                  bonuses not otherwise approved.

         2.3      BENEFITS

                  During the term of this Agreement, the Employee shall receive
                  such benefits as customarily provided to other officers and
                  employees of the Corporation. Details of such benefits as of
                  the date hereof are set forth in Schedule B of this Agreement.

         2.4      VACATION

                  Employee may take paid vacation during each year as set forth
                  in Schedule A at such times as shall be consistent with the
                  Corporation's vacation policies and (in the Corporation's
                  judgement) with the Corporation's vacation schedule for
                  officers and other employees.

         2.5      EXPENSES

                  Pursuant to the Corporation's customary policies in force at
                  the time of payment, Employee shall be promptly reimbursed,
                  against presentation of vouchers or receipts therefor, for all
                  authorised expenses properly incurred by him on the
                  Corporation's behalf in the performance of his duties
                  hereunder.

3.       TERMINATION
         -----------

         3.1      UNDERTAKING BY EMPLOYEE

                  The Employee hereby undertakes not to voluntarily terminate
                  his employment with the Corporation for a period of two (2)
                  years from the date hereof and acknowledges that in the event
                  that he does so terminate this Agreement, certain penalties
                  shall be payable by him, as set forth in the Agreement of
                  Merger and Plan of Reorganization, entered into by the
                  Employee, the Corporation and certain other parties on
                  November 4, 2000.

         3.2      DISABILITY

                  If during the term of this Agreement, Employee becomes ill,
                  disabled or otherwise incapacitated so as to be unable to
                  perform his usual duties (a) for a period in excess of one
                  hundred and eighty (180) consecutive days, or (b) for more
                  than one hundred eighty (180) days in any consecutive twelve
                  (12) month period and this incapacity has not been remedied by
                  the end of the twelfth (12th) month of such consecutive

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                  twelve (12) month period, then the Corporation shall have the
                  right to terminate this Agreement, subject only to applicable
                  laws, on thirty (30) day's notice to Employee. Termination
                  pursuant to this Section 3.1 shall not affect any rights
                  Employee may otherwise have under any disability insurance
                  policies in effect at the time of such termination.

         3.3      DISCHARGE FOR CAUSE

                  The Corporation may discharge Employee and terminate his
                  employment under this Agreement for cause without further
                  liability to the Corporation by a majority vote of the Board
                  of Directors of the Corporation except that the Employee, if a
                  Director, shall not be entitled to vote thereon. As used in
                  this Section 3.2, "cause" shall mean any or all of the
                  following;

                  (a)      gross or wilful misconduct of Employee during the
                           course of his employment;

                  (b)      conviction of any criminal offence involving
                           dishonesty, breach of trust or moral turpitude during
                           the term of this Agreement; or

                  (c)      Employee's breach of any of the material terms of
                           this Agreement.

         3.4      TERMINATION WITHOUT CAUSE

                  Upon thirty (30) days prior written notice, the Corporation
                  may terminate this Agreement without cause by a majority vote
                  of the Board of Directors of the Corporation except that the
                  Employee, if a Director, shall not be entitled to vote
                  thereon. The Corporation shall incur no liability in this
                  regard except that it shall continue to pay Employee the
                  remuneration set forth in Schedule A at his then current rate
                  for a six (6) month period after termination if termination
                  shall occur prior to the events mentioned in Section 3.4.

         3.5      TERMINATION FOLLOWING MERGER OR ACQUISITION

                  Notwithstanding Section 3.4, if the Corporation merges or
                  consolidates with another corporation, if substantially all of
                  the assets of the Corporation are sold, if a majority of the
                  outstanding stock of the Corporation is acquired by another
                  person, or if the control of the Corporation's majority
                  shareholder changes (a "Triggering Event") and Employee's
                  employment is subsequently terminated by the Corporation or
                  surviving entity other than for cause as described in 3.2,
                  Employee shall be entitled to severance benefits as described
                  below based on the length of service with the Corporation
                  since the Triggering Event:

                  LENGTH OF SERVICE SINCE THE   SEVERANCE BENEFITS
                  TRIGGERING EVENT

                  0 to 12 months                12 months' remuneration plus
                                                health benefits;

                  more than 12 months           6 months' remuneration plus
                                                health benefits;

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                  For purposes of this Section 3.5, Employee shall be entitled
                  to treat a material demotion in title or function as
                  termination under this Section 3.5, but only if Employee
                  expressly so notifies the Corporation and terminates his
                  employment hereunder within thirty (30) days of such demotion
                  or relocation. If Employee is offered a substantially similar
                  position with the surviving entity, Employee's refusal to
                  accept such position shall not be treated as subject to this
                  Section 3.5, but rather shall be treated as a voluntary
                  termination by Employee under Section 3.6.

         3.6      VOLUNTARY TERMINATION BY EMPLOYEE

                  In the event of voluntary termination by Employee after a
                  period of two (2) years from the date hereof, Employee shall
                  be entitled only to those amounts that have accrued to the
                  date of termination in accordance with the terms hereof or are
                  expressly payable under the terms of the Corporation's
                  applicable benefit plans or are required by applicable law.
                  The Corporation may, in its sole and absolute discretion,
                  confer such other benefits or payments as it determines, but
                  Employee shall have no entitlement thereto

4.       MISCELLANEOUS
         -------------

         4.1      INSURANCE

                  The Corporation hereby represents that it is presently the
                  holder of directors and officers insurance in an amount and
                  having a coverage that is recommended by its legal advisors
                  and insurance broker as adequate taking into account the
                  status of the Corporation, its size and the nature of its
                  activities. The Corporation undertakes to ensure that such
                  insurance shall remain in force throughout the term of this
                  Agreement and in the event such insurance is cancelled, the
                  Corporation shall immediately advise the Employee in writing.

         4.2      ADDITIONAL AGREEMENTS

                  Upon execution of this Agreement, the Employee shall execute
                  and deliver to the Corporation, unless previously delivered,
                  an Exclusivity, Confidentiality, Assignment of Work Product,
                  Non-Competition and Non-Solicitation Agreement.

         4.3      NOTICES

                  Any notice or communication given by any party hereto to the
                  other party shall be in writing and personally delivered or
                  mailed by certified mail, return receipt requested, postage
                  prepaid, to the addresses provided above. All notices shall be
                  deemed given when actually received. Any person entitled to
                  receive notice (or a copy thereof) may designate in writing,
                  by notice to the others, such other address to which notices
                  to such person shall thereafter be sent.

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         4.4      ENTIRE AGREEMENT

                  This Agreement contains the entire understanding of the
                  parties in respect of its subject matter and supersedes all
                  prior agreements and understandings between the parties with
                  respect to such subject matter, provided, however that nothing
                  in this Agreement shall affect the Employee's obligations
                  under the Exclusivity, Confidentiality, Assignment Of Work
                  Product, Non-Competition And Non-Solicitation Agreement signed
                  by the Employee.

         4.5      AMENDMENT WAIVER

                  This Agreement may not be amended, supplemented, cancelled or
                  discharged, except by written instrument executed by the party
                  affected thereby. No failure to exercise, and no delay in
                  exercising, any right, power or privilege hereunder shall
                  operate as a waiver thereof. No waiver of any breach of any
                  provision of this Agreement shall be deemed to be a waiver of
                  any preceding or succeeding breach of the same or any other
                  provision.

         4.6      BINDING EFFECT, ASSIGNMENT

                  Employee's rights or obligations under this Agreement may not
                  be assigned by Employee. The rights and obligations set forth
                  in this Agreement shall bind and inure to the benefit of the
                  Corporation and its successors and assigns. The Corporation
                  will use its best efforts to require any successor (whether
                  direct or indirect, by purchase, merger, consolidation or
                  otherwise) to all or substantially all of the business and/or
                  assets of the Corporation to assume expressly and agree to
                  perform this Agreement in the same manner and to the same
                  extent that the Corporation would be required to perform it as
                  if no such event had taken place. As used in this Agreement,
                  "Corporation" shall mean the Corporation as herein before
                  defined any successor to its business and/or assets as
                  aforesaid which assumes and agrees to perform this Agreement
                  by operation of law, or otherwise.

         4.7      HEADINGS

                  The headings contained in this Agreement are for reference
                  purposes only and shall not affect the meaning or
                  interpretation of this Agreement.

         4.8      GOVERNING LAW, INTERPRETATION

                  This Agreement shall be construed in accordance with and
                  governed for all purposes by the laws applicable in the State
                  of New York. Service of process in any dispute shall be
                  effective (a) upon the Corporation, if service is made on any
                  officer of the Corporation other than the Employee; (b) upon
                  the Employee, if served at Employee's residence last known to
                  the Corporation with an information copy to the Employee at
                  any other residence, or care of a subsequent employer, of
                  which the Corporation may be aware.

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         4.9      FURTHER ASSURANCES

                  Each of the parties agrees to execute, acknowledge, deliver
                  and perform, or cause to be executed, acknowledged, delivered
                  and performed at any time, or from time to time, as the case
                  may be, all such further acts, deeds, assignments, transfers,
                  conveyances, powers of attorney and assurances as may be
                  necessary or proper to carry out the provisions or intent of
                  this Agreement.

         4.10     SEVERABILITY

                  If any one or more of the terms, provisions, covenants or
                  restrictions of this Agreement shall be determined by a court
                  of competent jurisdiction to be invalid, void or
                  unenforceable, 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.


IN WITNESS WHEREOF, the parties hereto have executed this Agreement



BURLEIGH INSTRUMENTS, INC.



BY:  /s/ Germain Lamonde                        /s/ David J. Farrell
     -------------------                        --------------------
     GERMAIN LAMONDE,                           DAVID J. FARRELL
     CHAIRMAN OF THE BOARD

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                                   SCHEDULE A
                                       TO
                      DAVID J. FARRELL EMPLOYMENT AGREEMENT

                            REMUNERATION AND VACATION
                            -------------------------



1.       REMUNERATION

         Base Salary: US$184,500 annually.

         Variable Remuneration: The parties will agree on a plan for variable
         remuneration on or before February 1, 2001 that is reasonably
         consistent with plans utilized for employees of the Corporation's
         parent company with similar positions or responsibilities.

         On the date of this Agreement, Employee will be granted 40,000 stock
         options under the Stock Option Plan of EXFO Electro-Optical Engineering
         Inc.


2.       VACATION

         Five (5) weeks of paid vacation annually.





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                                   SCHEDULE B
                                       TO
                      DAVID J. FARRELL EMPLOYMENT AGREEMENT

                                    BENEFITS
                                    --------



         The Employee shall be entitled to the following benefits, in addition
         to those that the Corporation presently offers to all of its employees.


         o        A monthly allocation of $US650.00for automobile expenses.

         o        Reimbursement of legal expenses incurred for tax returns, tax
                  planning, wills, house closings, etc. related to the
                  Corporation's status as an "S" corporation.

         o        Payment of the premiums of an executive life insurance policy
                  in the amount of US$511,000.

         o        Medical reimbursement in accordance with the same terms that
                  applied prior to the acquisition by EXFO Electro-Optical
                  Engineering Inc.

         o        Reimbursement of the cost of a yearly physical examination.

         o        Disability insurance in amounts presently maintained by the
                  Corporation for the Employee.

         o        Sick pay benefits in accordance with the Corporation's
                  procedures for a term of up to one (1) year.

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