Purchase Agreement

between

1.        Berges  Antriebstechnik  GmbH & Co. KG (Gummersbach  Local Court,  HRA
          1942),  represented by its general partner Berges Antriebstechnik GmbH
          (Gummersbach Local Court, HRB 1283) which is itself represented by its
          managing  directors  with power to represent the company alone Dietmar
          Sarstedt  and  Herbert   Wolfslast,   all  with  business  address  at
          Industriestr. 13, 51709 Marienheide,

                                                    - hereinafter: the "Seller",

2.        Mrs. Karen Sarstedt,  nee Wolfslast,  Landwehrstra(beta)e  10 a, 51709
          Marienheide,

and

3.        TB    Wood's     (Deutschland)     GmbH,     formerly     JFP    Achte
          Vermogensverwaltungsgesellschaft   mbH  with  its  seat  in  Wiesbaden
          (Wiesbaden Local Court, HRB 10579),

                                                    - hereinafter: the "Buyer" -

4.        Mr. Thomas C. Foley, with business address TB Wood's Incorporated, 440
          North Fifth Avenue, Chambersburg, PA 17201-1778, USA,

5.        TB Wood's  Incorporated,  440 North  Fifth  Avenue,  Chambersburg,  PA
          17201-1778, USA, represented by Mr. Thomas C. Foley as Chairman of the
          Board,

                                                - hereinafter: the "Guarantor" -

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The parties No. 3 through 5 are represented by Mr. Martin  Schulte,  attorney at
law, Punder, Volhard, Weber & Axster, Cecilienallee 6, 40474 Dusseldorf


Recitals

The Seller is the sole shareholder of

                             Berges electronic GmbH
                       (Gummersbach Local Court, hrb 1671)
                             (hereinafter: "GmbH");

The Seller holds five shares of DM 19,000, DM 1,000, DM 30,000, DM 50,000 and DM
400,000 in GmbH's capital stock of DM 500,000;

GmbH and Mrs. Karen Sarstedt are the sole shareholders of

                    Berges electronic S.r.l. (Naturns, Italy)
                      (Bozen Commercial Register, No. 8404)
                            (hereinafter: "S.r.l.");

GmbH holds 17,820  shares of LIT 10,000 each and Mrs.  Karen  Sarstedt  hold 180
shares of LIT 10,000 each in the capital stock of S.r.l.;

Messrs.  Dietmar Sarstedt and Herbert  Wolfslast are Managing  Directors of GmbH
with sole powers of representation  and have been released from all limitations,
while the management of S.r.l. is the  responsibility of the Board of Directors,
to which  belong Mr.  Dietmar  Sarstedt as  Chairman,  Mr.  Bruno Svaldi as Vice
Chairman and

                                       85
<PAGE>


Mrs.  Karen Sarstedt as member  (updated  commercial  registry  excerpts for the
Seller  and the  personally  liable  shareholder  thereof,  as well as for GmbH,
S.r.l. and Berges Italiana S.r.l. have been attached hereto as Annex 1);

Mr. Dietmar  Sarstedt is the sole  shareholder  and Managing  Director of Berges
Scandinavia AB, Malmo, Sweden. He is prepared to sell the shares to the Buyer or
to liquidate the company as of 31 December  1997. The parties are yet to discuss
and come to an agreement on this issue.

NOW, THEREFORE, the Parties hereby execute the following


                               Purchase Agreement.

1.        Object of Agreement; Transfer

1.1       The Seller hereby sells and transfers its five (fully  paid-in) shares
          with  respective  par values of DM  19,000,  DM 1,000,  DM 30,000,  DM
          50,000  and DM  400,000  in  GmbH  along  with  all  of  the  dividend
          participation   rights  associated  therewith  for  the  current  1997
          financial year as well as any ancillary rights to the Buyer.

          Immediately following the execution of this Agreement,  the Seller and
          the Buyer shall  execute the  agreement  on the transfer of the shares
          referred  to in Section 1.1  attached  hereto as Annex 1 A in notarial
          form.

1.2       The Buyer hereby accepts the above purchase offer.

1.3       Mrs.  Karen  Sarstedt sells and transfers the 180 shares of LIT 10,000
          each,  which she holds in S.r.l.  to Mr.  Thomas C.  Foley  within the
          framework  of the  agreement  attached  as Annex 2;  Thomas  C.  Foley
          accepts this purchase offer.

                                       86
<PAGE>


1.4       The  Seller  and GmbH  have  each  provided  guarantees  for the other
          company or have taken out loans  which can be used by both  companies.
          Berges  Italiana  S.r.l.  and  S.r.l.   have  likewise  issued  mutual
          guarantees vis-a-vis the financing banks.  Reference is hereby made to
          Annex 3.

          Attached  hereto as Annex 4 are  certificates  from the relevant banks
          which,  in the  opinion  of the Seller  and  Berges  Italiana  S.r.l.,
          disclose the amount of the  liabilities  of GmbH and S.r.l.  vis-a-vis
          such banks as of 30 June 1997 and which,  in the opinion of the Seller
          and Berges Italiana S.r.l.,  furthermore  confirm that GmbH and S.r.l.
          shall no longer be liable for any  liabilities of the Seller or Berges
          Italiana S.r.l. from 1 July 1997.  Reference is made to Section 5.10.1
          i) of this Agreement.

          The Buyer shall be obligated to effect prior to the Transfer  Date the
          release  of the  Seller  and  Berges  Italiana  S.r.l.  from the joint
          liability and any  guarantees  in favor of the  companies  taken over.
          This  shall  transpire  through  the  redemption  of bank  loans,  the
          provision of other securities or through refinancing.

1.5       The Guarantor  waives its right  resulting from the Stand By letter of
          Credit No. 4765500264 i-a. (Appendix 5) against Deutsche Bank AG under
          the condition  precedent that the transfer of shares  contemplated  in
          Section  1.1 has  occurred.  It will  confirm  this  waiver  vis-a-vis
          Deutsche Bank AG as soon as  practically  possible.  The Parties agree
          that the  liability  potentially  arising  from such  Letter of Credit
          against  Deutsche  Bank AG is not counted as part of the loan and bank
          liabilities pursuant to Section 3.3 hereof.



                                       87
<PAGE>


2.        Transfer Date

          In the terms of this Agreement,  the Transfer Date shall be 12:00 a.m.
          on December 1, 1997.  The Companies are deemed to be conducted for the
          account of and at the risk of the Buyer from that date.


3.        Purchase Price; Loans

3.1       The purchase  price for all shares in GmbH shall  consist of a premium
          of DM  2,200,000.00  (in  words:  two  million  two  hundred  thousand
          Deutsche  marks) +/- the Asset Book Value of the Equity (as defined in
          No.  3.2  below) as of 30 June 1997,  which is to be  computed  on the
          basis of the Consolidated  Half-Year Financial  Statements (as defined
          in No. 3.6 below) of GmbH and S.r.l.  Out of the  purchase  price,  an
          amount of DM 40,000.00 is allocated to the shares  transferred by Mrs.
          Karen Sarstedt.

          The purchase  price shall bear interest for the time from July 1, 1997
          at a rate of 3%.

3.2       The Asset  Book Value of the Equity is to be  computed  in  accordance
          with the  following  example,  which is based on the  figures as of 31
          December 1996:

a)        Equity

(1.)      Subscribed capital                                       DM 500,000.00
(2.)      Surplus capital                                        DM 1,135,300.00
(3.)      Retained earnings/accumulated deficit                  DM 1,698,874.47
                                                                 ---------------
(4.)      Interim sum                                            DM 3,334,174.47
(5.)      Compensatory item for currency translation                DM 41,772.84
(6.)      Compensatory item for shares of other
          shareholders
          a)       in subscribed capital                             DM 1,810.08
          b)       in surplus capital                                  DM 781.27
          c)       in retained earnings/accumulated deficit         DM 10,331.89
                                                                    ------------
                                                                    DM 12,923.24
                                                                    ------------
(7.)      Total equity                                           DM 3,388,870.55

b)        less

(1.)      Intangible assets
          Franchises, trademarks, patents, licenses              DM 1,050,430.53
(2.)      Goodwill  DM 2,086,470.18
(3.)      Advance payments                                               DM 0.00
(4.)      Total                                                  DM 3,136,900.71

     Material book value of net equity (a minus b)               + DM 251,969.84

3.3       The Parties assume that the sum of a) the purchase price under No. 3.1
          above, b) the liabilities of the companies taken over (after deduction
          of  accounts  receivable)   vis-a-vis  subsidiary  and  c)  affiliated
          companies  and d) the loan  liabilities  of the  companies  taken over
          shall not exceed DM  11,000,000.00.  In the event such  assumption  be
          wrong,  the purchase  price under No. 3.1 above shall be reduced until
          the sum of a), b), c) and d) be DM 11,000,000.00. For the avoidance of
          doubt, the term "loan liabilities" shall not encompass any liabilities
          listed under the heading "trade liabilities" or "other liabilities" in
          the Consolidated Half-Year Financial Statements.

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<PAGE>


The figures are as follows as of December 31, 1996:

a)        Purchase price under No. 3.1
          Asset Book Value of the Equity                           DM 251,969.84
          Premium  DM 2,200,000.00

b)        Liabilities to subsidiary companies (Berges
          Antriebstechnik GmbH & Co. KG)                           DM 381,391.55

c)        Liabilities to affiliated companies (Berges
          Italiana S.r.l.)                                       DM 2,025,608.22
          less accounts receivable from affiliated
          companies                                               - DM 67,511.83

d)        Loan liabilities (vis-a-vis banks and other
          loan creditors)                                        DM 4,818,047.50

          Total                                                  DM 9,609,505.28

3.4       Prior to the Transfer Date, the Buyer shall pay a partial amount of DM
          1,660,000  (in words:  one  million  six  hundred  and sixty  thousand
          Deutsche  marks) to Seller and Mr. Thomas C. Foley shall pay DM 40,000
          (in words:  forty thousand Deutsche Marks) to Mrs. Karen Sarstedt onto
          the following bank accounts:

              Seller:
              Account Holder:        Berges Antriebstechnik GmbH & Co. KG
              Account No.:           0104364
              Bank:                  Deutsche Bank AG, Gummersbach
              Bank Code:             384 700 91

              Mrs. Karen Sarstedt:
              Account Holder:        Dietmar Sarstedt
              Account No.:           0161091
              Bank:                  Deutsche Bank AG, Gummersbach
              Bank Code:             384 700 91

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<PAGE>


          The   remainder  of  the   purchase   price  must  be  paid  onto  the
          above-mentioned bank account within 10 days after the Parties agree on
          the Consolidated Half-Year Financial Statements.

          The  following  shall apply in the event the Buyer not  recognize  the
          Consolidated Half-Year Financial Statements presented by the Seller:

          A  purchase  price  established  on the basis of the  variant  version
          prepared  by Arthur  Andersen  (see No.  3.7  below)  shall be payable
          within 10 days after presentation of the modified version. Any further
          remaining  amounts  must be paid  within  10 days of the  Arbitrator's
          decision on the Consolidated Half-Year Financial Statements.

3.5       In  the  event  any  actual  additional  tax  expense  arise  for  the
          assessment  periods prior to the Transfer Date - even as a consequence
          of any  subsequent  tax audits by the  Revenue  Service - which is not
          covered by  corresponding  liability items - including  reserves - and
          which is not  offset  by any  reduction  of taxes or  earnings  in the
          subsequent   years,  the  purchase  price  shall  be  reduced  by  the
          additional  tax  expense.  With  regard  to  the  computation  of  the
          additional tax expense,  the allocation of profit to reserves on a pro
          rata  temporis  basis  must be  assumed.  The Buyer and  Seller  shall
          mutually  provide each other any assistance  related to the defense of
          any tax claim.  In the event any audit by the Revenue Service reveal a
          refund,  the Buyer shall be obligated to forward the resulting  amount
          to the Seller.

3.6       The Asset  Book Value of the  Equity as of the  Transfer  Date must be
          computed on the basis of the consolidated financial statements of GmbH
          and S.r.l. to be prepared as of 30 June 1997  (Consolidated  Half-Year
          Financial Statements).

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<PAGE>


          GmbH and S.r.l.  (hereinafter  jointly referred to as "the Companies")
          have taken  inventories  as of 30 June  1997.  The  Guarantor  did not
          exercise the  possibility  granted it to  participate in the taking of
          the inventories. The Parties agree, however, that no acknowledgment of
          the  results  of the  inventories  on the  part  of the  Buyer  or the
          Guarantor  is  to  be  seen  herein.   The  Seller   commissioned  the
          independent  auditing  firm Tombers u. Partner GmbH  (Gummersbach)  to
          audit and certify the  half-year  financial  statements of GmbH and to
          prepare the Consolidated  Half-Year Financial  Statements on the basis
          thereof and on the basis of the  financial  statements  of S.r.l.  The
          Seller shall present these financial  statements prior to November 30,
          1997 at the latest. The financial statement must be prepared observing
          balance sheet  consistency and in accordance  with generally  accepted
          accounting  principles  in  Germany  and Italy.  However,  in order to
          compute  profit on an  accrual  basis,  trade  fair  costs,  insurance
          premiums,  allocations  rendered  for  insurance  premiums  as well as
          vacation pay accrued over the year must be accounted for on a pro rata
          temporis  basis.  No  liability  items  are  to  be  set  up  for  the
          preparation  and  auditing of the interim  financial  statements.  Any
          claim for the  reimbursement  of corporate income tax resulting from a
          potential loss as of June 30, 1997 shall be activated.

3.7       After receipt thereof,  the Seller shall immediately  forward one copy
          respectively  of the  semi-annual  financial  statements  of GmbH  and
          S.r.l. as well as the Consolidated  Half-Year Financial  Statements to
          the Buyer as well as to Arthur  Andersen GmbH  (hereinafter,  "AA") as
          well as to PUENDER,  VOLHARD, WEBER & AXSTER, Attorneys at Law (Attn.:
          Attorney  Martin  Schulte).   Insofar  as  the  Buyer  not  raise  any
          objections  to the  Consolidated  Half-Year  Financial  Statements  in
          writing within six weeks after receipt  thereof,  which deadline shall
          under  no  circumstances  expire  prior to  December  15,  1997,  such
          financial statements shall become binding.

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<PAGE>


          The Buyer  shall have AA audit the  Consolidated  Half-Year  Financial
          Statements  which are  prepared by the  Seller.  If  necessary  in the
          opinion of AA, AA shall prepare a modified version of the Consolidated
          Half-Year Financial Statements,  which the Buyer shall then forward to
          the Seller within the six-week period. Insofar as the Seller not raise
          any written  objections to the version of the  Consolidated  Half-Year
          Financial  Statements  modified by AA within six weeks  after  receipt
          thereof,   the  version  of  the  Consolidated   Half-Year   Financial
          Statements modified by AA shall become binding.

          Any objections must be made in writing,  whereby communication per fax
          shall satisfy the requirement for the written form. Objections

          -    of the Seller are to be addressed to:

               Mr.  Thomas C.  Foley,  TB Wood's  Incorporated,  440 North Fifth
               Avenue, Chambersburg, PA 17201-1778, Telefax 203 622 6538

               Arthur          Andersen          Wirtschaftsprufungsgesellschaft
               Steuerberatungsgesellschaft  mbH,  Mergenthalerallee 10-12, 65760
               Eschborn/Frankfurt am Main

               PUENDER,   VOLHARD,  WEBER  &  AXSTER  (Attn.:   Attorney  Martin
               Schulte),  Cecilienallee  6,  40474  Duesseldorf,  Telefax:  0211
               4355600

               The aforementioned six-week period is satisfied if the objections
               have reached  either of the three  aforementioned  addressees  in
               time.

          -    of the Buyer are to be addressed to:

               Mr.  Dietmar  Sarstedt at Berges  Antriebstechnik  GmbH & Co. KG,
               Industriestr. 13, 51709 Marienheide, fax: (+49 2264) 17130.

3.8       In the event each Party object to the Consolidated Half-Year Financial
          Statements  presented by the other Party,  the Parties hereby agree to
          initially enter into  negotiations to attain a concerted  arrangement.
          Such  negotiations  shall include a personal  meeting at which Messrs.
          Thomas C. Foley and Dietmar  Sarstedt  must be in  attendance.  In the
          event  such  negotiations  and  meetings  not  lead to any  settlement
          arrangement  within  four weeks  after the  receipt of the most recent
          objection,  the two versions of the Consolidated  Half-Year  Financial
          Statements  shall be presented to KPMG  Deutsche  Treuhandgesellschaft
          AG,   Wirtschaftsprufungsgesellschaft,   Cologne  (hereinafter,   "the
          Arbitrator").   The  Arbitrator  shall  then  make  a  final  decision
          regarding the Consolidated Half-Year Financial Statements.  Within the
          framework  of such  decision,  the  Arbitrator  shall audit the drafts
          prepared  by  each  Party  and  shall  take  into   consideration  the
          objections  raised by each Party  against the draft of the  respective
          other Party.  The Arbitrator must request to hold a joint meeting with
          both  Parties at which the  respective  opinions  may be  explained in
          order to attain a concerted  arrangement.  This  meeting may also take
          place within the framework of a phone conference.

3.9       The  Seller  shall  render  any  advance  payments  requested  by  the
          Arbitrator. Upon the relevant request, the Buyer shall be obligated to
          immediately  reimburse  the  Seller  for half of the  amounts  paid in
          advance.

3.10      The  costs  for  the  preparation  and  formulation  of the  half-year
          financial   statements  of  S.r.l.  and  the  Consolidated   Half-Year
          Financial  Statements  as  well  as the  costs  for  the  preparation,
          formulation and auditing of the half-year financial statements of GmbH
          shall be borne by the respective company. Insofar as any review by the
          Arbitrator be necessary,  the Arbitrator  must divide the costs in its
          invoice  between  the  Seller  and the  Buyer in  accordance  with the
          principles of ss.ss. 91 et seq. of the Civil Procedure Code.


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4.        Compensation of Liabilities; INDEL

4.1       In the past, GmbH and S.r.l.  regularly executed exchange transactions
          with the  Seller on the one hand and  Berges  Italiana  S.r.l.  on the
          other.  The liabilities of GmbH and S.r.l.  currently amount to (after
          deduction of counter-claims):

          a)   Liabilities of S.r.l. vis-a-vis Berges Italiana S.r.l.: around DM
               1,630,000.00

          b)   Liabilities of GmbH vis-a-vis the Seller: around DM 500,000.00

          c)   Liabilities of S.r.l. vis-a-vis the Seller: none

          The Buyer is aware that the  respective  balance  bears  interest at a
          rate of 5.5% p.a.

          The Buyer shall ensure that GmbH and S.r.l. repay the  above-mentioned
          amounts to the respective creditors prior to the Transfer Date.

4.2       The figures specified in Section 4.1 above have been computed roughly.
          The exact amounts of the balances of the transfer accounts have yet to
          be determined, given, for example, that rent and allocations are still
          to be settled on a prorated basis.  Insofar as it become evident after
          the Transfer  Date that the  above-mentioned  values are not accurate,
          the Parties shall  compensate  any  difference  upon  presentation  of
          proof.

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<PAGE>


4.3       The Buyer shall assume an absolute  guarantee for the  above-mentioned
          claims of the Seller and Berges Italiana S.r.l. against the Companies.

4.4       S.r.l. is entitled to a claim against INDEL (Austria) in the amount of
          ATS 4,106,486.10 (in words:  four million one hundred and six thousand
          four hundred eighty-six Austrian shillings).  S.r.l. sold and assigned
          this claim at the nominal value to Berges  Italiana  S.r.l.  by way of
          the Deed of 24 July  1997,  which is  attached  hereto as Annex 6. The
          purchase price shall be offset by the claims to which Berges  Italiana
          S.r.l. is entitled against S.r.l.

          The Buyer  shall  instruct  S.r.l.  to pay Berges  Italiana  S.r.l.  a
          commission  of  3%  plus  the  applicable   value-added  tax  for  all
          transactions conducted with Vogel Pumpen (Austria).  This payment duty
          shall not apply so long as and  insofar  as INDEL be  entitled  to any
          commission claim against S.r.l.  for these types of  transactions.  By
          way of the agreement with INDEL  attached  hereto as Annex 6, it shall
          be ensured  that the  commission  due to INDEL shall be  disbursed  to
          Berges  Italiana  S.r.l.  S.r.l.  shall not have to pay the  provision
          twice. The duty to pay commission to Berges Italiana S.r.l.  shall end
          as soon as Berges  Italiana  S.r.l.  has  received  the  amount of ATS
          4,106,486.10 from INDEL or S.r.l.


5.        Representations and Warranties

5.1       The Seller does not assume any warranty or guarantee for the long-term
          value  or  earnings  capacity  of the  shares  or the  two  Companies.
          However,  the Seller hereby represents and warrants that the following
          facts and  circumstances  are

                                       94
<PAGE>


          accurate and complete in relation to the Transfer Date. Insofar as the
          following  representations  not  represent  any  "warranted  features"
          (zugesicherte  Eigenschaften),  the Seller shall assume an independent
          guarantee for the accuracy and completeness of the following facts and
          circumstances.

5.2       The Companies

5.2.1     The  Companies  have  been  properly  formed  in  accordance  with the
          respective  laws of the  places of  incorporation  and the  registered
          offices under the bylaws, and continue to operate with legal effect.

5.2.2     The  shareholders of the Companies have neither  proposed nor approved
          the dissolution or windup of the Companies; likewise, no merger of the
          Companies with other companies has been proposed or approved.

5.2.3     No petition to initiate bankruptcy or composition proceedings has been
          filed with regard to the Companies.

5.2.4     The commercial  registry excerpts which are attached hereto as Annex 1
          are accurate and complete.  All  shareholders'  resolutions  and other
          circumstances  which are subject to registration are reflected in such
          commercial registry excerpts.

5.2.5     The  Companies  are not bound by any company  agreements  in the terms
          ofss.ss. 291 et seq. of the Corporation Act.

5.2.6     Beyond  the  holdings  mentioned  in  the  Recitals,  neither  of  the
          Companies holds any shares or other holdings in other companies. ASEL,
          a former  subsidiary  of  S.r.l.,  has been  wound up. No  liabilities
          remain.

                                       95
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5.3       Shares

5.3.1     The factual data in the Recitals are accurate and complete.

5.3.2     The shares in GmbH and S.r.l. (hereinafter collectively: "the Shares")
          are free of any pledges,  seizures,  usufructs or other  encumbrances,
          including any options or preemption  rights in favor of third parties.
          The  Seller  may  dispose of the Shares  without  the  cooperation  or
          approval of third parties.  The Seller hereby  expressly  declares its
          approval of the share sale executed by way of this  Agreement (see ss.
          13 of the GmbH's  Articles of  Association).  The  approval of GmbH as
          shareholder of S.r.l. has likewise been obtained (Annex 7). No further
          restrictions exist in relation to the transferability of the Shares.

5.3.3     Since  January 1, 1997,  no dividends or interim  dividends  have been
          approved with regard to the Shares.  No rights to future  dividends or
          other  rights  related to profit have been  promised,  transferred  or
          pledged to third parties.  No other payments to shareholders have been
          made  outside  the course of ordinary  business;  the  Companies  have
          likewise not made any promises to make such payments in the future.

5.3.4     Neither the Seller itself nor the  shareholders  thereof nor relatives
          in the first or second degree of such  shareholders  nor any companies
          controlled  by  these  groups  of  people  hold  shares   directly  or
          indirectly  in  companies  which  compete  with  the  Companies.  As a
          supplement hereto, reference is hereby made to No. 6.2 hereof.

                                       96
<PAGE>


5.4       Financial Information

5.4.1     The annual  financial  statements  of the Companies as of December 31,
          1994, 1995 and 1996 (hereinafter jointly referred to as "the Financial
          Statements"), which are attached hereto as Annexes 8 - 13,

          a)   have been prepared in relation to the past five  financial  years
               in accordance  with the  applicable  laws and generally  accepted
               accounting  principles  in Germany and Italy,  observing  balance
               sheet consistency;

          b)   provide in the terms of the Commercial  Code a true and fair view
               of the  financial  position and earnings and  performance  of the
               Companies.

5.4.2     The annual financial statements of GmbH have been given an unqualified
          auditor's  opinion by the company's  independent  auditor.  The annual
          financial  statements of S.r.l.  have been formulated by the company's
          independent auditor and accountant.

5.4.3     All  accounting  documents,  main  ledgers  and  financial  and  other
          documents of the Companies (including  electronically stored financial
          information and data):

          a)   are in the possession of the Companies;

          b)   have been properly kept with due diligence;

          c)   have been stored for the periods prescribed by law.

5.4.4     Upon  the  balance  sheet  cutoff  dates  relevant  to the  respective
          financial  statements,  no  liabilities  or  obligations  were  known,
          whether  conditional  or  not,  due  or  not  due,  except  for  those
          liabilities  and  obligations  which have been listed in the  attached
          financial statements or for which reserves have been built.

                                       97
<PAGE>


5.4.5     As far as is  known,  the  Companies  have no  contingent  liabilities
          except  for those  which  have been  completely  accounted  for in the
          Financial   Statements  or  the   Consolidated   Half-Year   Financial
          Statements.

5.4.6 For the period from 1 January 1997, the following is true:

          a)   As  far  as is  known,  the  Companies  have  not  conducted  any
               transactions  or  entered  into  any  liabilities  which  were in
               themselves  or in  their  entirety  serious  in  relation  to the
               Companies' business activity, except for those transactions which
               fell within the course of ordinary business.

          b)   The  Seller  has not made any  withdrawals.  The  Companies  have
               likewise not rendered directly or indirectly to the Seller or the
               shareholders  thereof  any  payments  beyond the  fulfillment  of
               obligations arising in the course of ordinary business.

          c)   Irrespective of whether insurance  protection  existed or not, no
               damage has occurred and no damage compensation claims against the
               Companies  have been  asserted  which have  affected the business
               activity or the assets of the  Companies in any  significant  way
               beyond the course of ordinary business.

          d)   The Companies have neither provided  guarantees nor assumed joint
               and  several   liability  nor  issued  any   guaranties  for  the
               liabilities  of third  parties,  unless such occurred  within the
               course of ordinary  business upon conditions and in amounts which
               were consistent with the previous business practice.

                                       98
<PAGE>


          e)   The inventory has neither increased nor decreased  exceptionally.
               Apart from common exceptions in the course of ordinary  business,
               the Companies  have neither sold goods under any amount which was
               below the valuation in the 1996 annual  financial  statements nor
               have they sold inventory at any prices which did not cover costs.

          f)   No severance payments have been rendered to managing directors of
               the  Companies.  The  total  payments  rendered  in  relation  to
               severance pay or dismissals have not increased in relation to the
               average of the previous year.

          g)   The salaries, ancillary compensation,  bonuses and other benefits
               which the managing  directors or other employees of the Companies
               are to be  granted  have  not  increased  except  for the  normal
               increases and adjustments in the course of ordinary business.

5.4.7     In the  period  from June 30,  1997,  the  economic  situation  of the
          Companies did not deteriorate in any  identifiable or material fashion
          such that the Companies were burdened either  individually or together
          by more than DM 500,000.00.

5.5       Leased Property

5.5.1     Neither of the Companies owns property.

5.5.2     The subject-premises described in the lease agreements attached hereto
          as Annex 14 are  rented or leased  by the  Companies  at the terms and
          conditions evident in the Annexes; the subject-premises are suited for
          the use for which they are intended.

                                       99
<PAGE>


5.5.3     According  to  the  Seller's   knowledge,   the  current  use  of  the
          subject-premises  is neither hindered nor prejudiced by any public law
          or  third-party  right.  According  to  the  Seller's  knowledge,  the
          official permits and approvals  required for the current use have been
          presented.

5.5.4     The  Buyer  hereby  confirms  that  the  subject-premises  are in good
          conditions in conformance with the provisions of the lease agreement.

5.5.5     The  Companies  have not used or possessed  any other  property in the
          10-year period prior to the execution hereof.

5.5.6     According  to the Seller's  knowledge,  the  subject-premises  contain
          neither  asbestos  nor any  other  substances  which  are  harmful  in
          accordance with the current state of scientific knowledge.

5.5.7     The Seller is unaware of any  contamination  of the  subject-premises,
          the surroundings or ground water thereof which require redress.

5.6       Legality of Business Activity

5.6.1     According to the Seller's knowledge,  no applicable laws,  regulations
          or  provisions  are being  violated  by the  business  activity.  This
          applies in particular to environmental law.

5.6.2     According  to  the  Seller's  knowledge,  the  Companies  have  always
          observed the provisions applicable to employment protection, safety at
          the workplace and hygiene.

5.6.3     According  to the Seller's  knowledge,  the  Companies  have not used,
          stored,  removed or emitted into the environment any substances  which
          harm or pollute the  environment in any way which violates  applicable
          provisions and which is thus  inadmissible  and could disrupt business
          activity.

                                      100
<PAGE>


5.6.4     According  to  the  Seller's  knowledge,  the  Companies  possess  all
          necessary  official permits so that nothing opposes the continuance of
          the business  activity at the same place, in the same type and way and
          in the  current  scope.  No  issued  permits  have  been  canceled  or
          restricted  nor  is  any   cancellation,   revocation  or  restriction
          currently  foreseeable.  The  business  activity of the  Companies  is
          operated within the framework of the admissible.

5.6.5     The Seller is unaware of any serious  on-the-job  accidents  which are
          not fully covered by insurance and which could lead to claims  against
          the Companies. No employees have asserted claims against the Companies
          for any other work-related illnesses.

5.6.6     The  Seller is unaware  of any facts  which  make it evident  that the
          products it produces have not always complied with all applicable laws
          and regulations as well as the applicable industrial standards.

5.7       Insurance

5.7.1     The Companies have concluded the insurance  agreements listed in Annex
          15 the policies of which are attached.  The Companies have  undertaken
          everything  in order to  maintain  the  insurance  coverage  resulting
          therefrom.

5.7.2     All  insurance   premiums  which  are  due  in  accordance   with  the
          above-mentioned  policies have been paid and all obligations for which
          the Companies are  responsible  in accordance  with such policies have
          been fulfilled.

                                      101
<PAGE>


5.7.3     The insurance  agreements  shall remain valid until December 31, 1997,
          unless the respective insurance companies terminate such agreements.

5.7.4     The  Companies  have not  been  presented  any  notices,  whereby  the
          insurance  companies  intend  to  terminate  or no  longer  renew  the
          insurance agreements.

5.7.5     The Seller is unaware of any circumstances  which could invalidate any
          of the  insurance  agreements  or enable the  insurance  companies  to
          exercise the special right to termination.  The Seller is also unaware
          of any circumstances  which could lead to an increase of the insurance
          premiums or deductibles.

5.8       Intellectual and Industrial Property Rights

5.8.1     The  Companies are the sole and  exclusive  owners of the  copyrights,
          patents and trademark  rights which are listed in the certificate from
          the patent  attorney  active for the  Companies,  which is attached as
          Annex 16 and specifies the respective  registration numbers, terms and
          material contents thereof. None of the above-mentioned property rights
          is  encumbered  in favor  of third  parties.  The  Companies  shall be
          entitled to continue the use of the company logo (right No.  117288 of
          Seller) in red.

5.8.2     To the best of Sellers'  knowledge,  the Companies  have taken all the
          measures  necessary  to  maintain  the  above-mentioned  licenses  and
          property rights; insofar as possible,  these property rights have been
          registered in the names of the Companies. No registration has expired.

5.8.3     The Companies  have not entered into any  obligations to provide third
          parties  access  to their  business  secrets,  know-how,  confidential
          information  or lists of  customers  or  suppliers.  According  to the
          Seller's knowledge,  such information was exclusively  provided in the
          past to the Guarantor.

                                      102
<PAGE>


5.8.4     As far  as the  Seller  is  aware,  the  performance  of the  business
          activity  of the  Companies  does not  infringe  upon any  third-party
          property rights.

5.8.5     The Companies  have only  concluded the license  agreements  listed in
          Annex 17 hereto.  All relevant  details,  including the amounts of the
          license fees, are evident in such annex. Insofar as the Seller, one of
          the  shareholders  thereof  or any of the other  companies  controlled
          thereby hold rights which  pertain to the  business,  the Seller shall
          ensure  that GmbH or S.r.l.  be  granted  irrevocable,  unlimited  and
          exclusive licenses free of charge.

5.9       Employees; Supplementary Pensions

5.9.1     All of the persons employed with the Companies as of the Transfer Date
          are listed in Annex 18. The Annex also  contains  part-time  employees
          and   managing   directors   (hereinafter   jointly   referred  to  as
          "Employees").  The Annex lists the birth date, date of entry,  current
          remuneration  and other  benefits,  such as  vacation  pay,  Christmas
          money,  private use of company cars,  benefits for retirement  pension
          within  the  framework  of direct  company  insurance,  as well as the
          position  of each  Employee.  No  benefits  granted in the past on the
          occasion of company anniversaries have been listed.

          No  employment  relations  exist with  persons  not  specified  in the
          above-mentioned Annex. No obligations have been entered into vis-a-vis
          the Employees beyond the above-mentioned performances, unless such was
          required  by  law  or   collective   agreements.   No   benefits   for
          supplementary retirement pension beyond the direct insurance mentioned
          in  the  Annex  have  been  promised.  This  also  applies  to  former
          Employees.

                                      103
<PAGE>


5.9.2     No  obligations  from the  cessation,  termination,  or  rescission of
          employment agreements are in arrears.

5.9.3     With the exception of the Company  Agreement on Premiums under Article
          9 of the  Collective  Agreement  (Annex 19),  the  Companies  have not
          reached any  agreements  which the Employees or works  councils  which
          grant  Employees   claims  to  profit  shares  in  relation  to  early
          retirement or to any acquisition of shares in the broadest sense.  Mr.
          Dietmar Sarstedt receives a percentage of profit, while the commercial
          agents  active  for  the  Companies  are  remunerated  independent  of
          turnover.

5.10      Material Agreements

5.10.1    With the exception of the  agreements  listed in Annex 20 hereto,  the
          Companies are not bound by any of the following agreements  ("material
          agreements"):

          (a)  lease or  lease-purchase  agreements with a term of more than six
               months;

          (b)  agreements for the  acquisition of goods or services for a period
               of more  than six  months  and/or  with a value  of more  than DM
               60,000.00;

          (c)  purchase or similar agreements whereby the Companies be obligated
               to acquire goods,  provided such  agreements  have a term of more
               than six months and/or a value of more than DM 60,000.00;

          (d)  shareholders', joint venture and similar agreements;

                                      104
<PAGE>


          (e)  loan and other  bank and  overdraft  agreements  other than those
               referred to in Section 3.3;

          (f)  agreements  which  significantly  restrict  the  freedom  of  the
               Companies  in the  future to compete  in any  business  sector or
               vis-a-vis any particular persons;

          (g)  agreements  or  obligations  related to the business of either of
               the Companies as a whole;

          (h)  powers of attorney in favor of third parties;

          (i)  guarantees,  sureties  or  similar  obligations  in  favor of the
               Seller,  Berges Italiana S.r.l. or third parties or agreements to
               provide  securities in favor of others (In  particular,  no claim
               can be brought  against the Companies  based on the guarantees or
               the joint acceptance of bank lonas with respect to liabilities of
               the Seller of or Berges Italiana S.r.l.);

          (j)  pledges or other securities  (including the assignment of claims)
               other than those given to the banks;

          (k)  agreements  outside of the course of ordinary  business and/or at
               conditions  which would not normally be agreed upon with external
               third parties;

          (l)  any other agreement which obligates the Companies to pay expenses
               of more than DM 60,000.00;

          (m)  commercial agent and authorized dealer agreements.

                                      105
<PAGE>


5.10.2    According  to the  Seller's  knowledge,  within the  framework  of the
          material  agreements  concluded,   no  breach  of  contract  has  been
          committed by the parties to the agreements  such that any  significant
          prejudicial  effects on the business  activity of the Companies are to
          be anticipated.

5.10.3    According  to the  Seller's  knowledge,  no customer of the  Companies
          intends to terminate or modify any existing  agreements.  In addition,
          no reason  exists to  assume  that any  customer  of  supplier  of the
          Companies shall terminate or restrict its business  relations with the
          Companies  due to the  execution of this  Agreement  and the covenants
          related hereto.

5.10.4    No reason  exists to assume that any of the Employees of the Companies
          decisive  for  the  business  activity  shall  terminate  his  or  her
          employment relation with either of the Companies due to this Agreement
          or the covenants related hereto.

5.10.5    Through the execution  hereof and the covenants  related  hereto,  the
          Seller shall not breach any other agreement to which the Companies are
          bound.  The  execution  hereof shall  furthermore  neither  enable the
          termination  of  any  other  agreement  nor  obligate  either  of  the
          Companies to fulfill their  obligations from any other agreement early
          nor  shall  either  of  the  Companies  fall  into  arrears  in  their
          obligations as a result hereof.  In no case does the  continuation  of
          the agreements entered into by the Companies depend upon the fact that
          particular  persons (as  managing  director or in any other  capacity)
          have a legal relation to the Companies.

5.10.6    Beyond the course of ordinary business,  the Companies have not issued
          any guaranties or undertakings or commitments in relation to the goods
          sold thereby. No servicing  agreements which obligate the Companies to
          service the goods distributed  thereby have been executed.  The Seller
          is unaware of any warranty claims or claims to subsequent  improvement
          or replacement  deliveries  which exceed the average  framework of the
          previous year.

                                      106
<PAGE>


5.11      Legal Violations and Litigation

5.11.1    The Seller is unaware of any pending or threatened  administrative  or
          judicial  proceedings or proceedings by the district attorney's office
          against the  Companies  or any of the  Employees  thereof  which would
          significantly  affect  the  financial  or  economic  position  of  the
          Companies.

5.11.2    Apart from disputes  related to individual  rights,  no labor disputes
          have occurred  between the Companies and the Employees in the previous
          five years.  No  circumstances  which could lead to labor disputes are
          currently evident to the Seller.

5.11.3    According to the Seller's  knowledge,  the  Companies are not party to
          any agreements or covenants  which violate the Act against  Restraints
          on Competition or the corresponding  provisions of other countries. No
          agreements  or  covenants  are  known  which  have  been or  should be
          registered in accordance with the  above-mentioned  laws or which have
          been or should  have  been  notified  to the  European  Commission  in
          accordance with Article 85 of the EU Treaty.

5.11.4    The  Companies  have not  received  any  requests or notices  from the
          European  Commission or from the authorities  competent for cartel and
          competition matters in Germany or any other country which could affect
          the activities of the Companies in any aspect.

5.11.5    The  Companies  are not party to any legal  disputes,  whether they be
          criminal,  civil  (including labor law  proceedings),  administrative,
          arbitration or other proceedings,  which are directed toward either of
          the  Companies  or  affect  them.  Likewise,  no such  proceedings  or
          investigations against the Companies are foreseeable.

                                      107
<PAGE>


5.12      Taxes

5.12.1    The  Companies  have  properly  filed in a timely  fashion all tax and
          other  declarations which had to be issued in relation to the taxes to
          be paid  prior to the  Transfer  Date.  All taxes  were paid when due.
          Insofar as taxes for the period prior to the Transfer  Date not yet be
          due,  reserves shall be built for such in the  Consolidated  Half-Year
          Financial  Statements.  The  Companies  have  properly and  completely
          conducted all relevant fiscal transactions.

5.12.2    According to the Seller's knowledge,  the Companies shall not lose any
          tax advantages  due either to the  performance of this Agreement or to
          any other transactions prior to the Transfer Date.

5.12.3    The structure of the  available  equity of GmbH as of 31 December 1996
          is evident in Annex 21.

5.12.4    According to the Seller's knowledge, no hidden distributions of profit
          have been made.

5.12.5    Pursuant to the tax  declaration as of 31 December 1996, the GmbH does
          not have any loss  carry-forward  for  corporate  income tax purposes.
          Pursuant to verbal  information  given by the  auditor,  the tax audit
          performed  by  the  tax  authority  in  1997  did  not  result  in any
          objections. A written confirmation has not yet been received.

                                      108
<PAGE>


5.13      Performance of Business Activity

5.13.1    According to the  Seller's  knowledge,  the  tangible  and  intangible
          assets and rights and  know-how at the disposal of the  Companies  are
          sufficient  to continue  the  business  activity in the same manner as
          before the Transfer Date.

5.13.2    The  Companies  have  access  to all  business  documents  and  files,
          including  such documents to which the Companies do not hold exclusive
          title or which are not under the direct control of the Companies.  The
          Buyer is aware  that the  Companies  have  jointly  used the  computer
          systems of the Seller and Berges Italiana S.r.l.  and shall also do so
          in the future.  The Seller and Berges Italiana S.r.l.  hereby agree to
          grant the Companies access at any time to the data which affects them.

5.13.3    During the 12 months  prior to the  execution  of this  Agreement,  no
          material changes  occurred in relation to the clientele,  the business
          or other terms and conditions.  This is true with the exception of the
          price  changes  known  to the  Buyer  as  well as the  customers  ICBT
          (France) and INAG (Germany).  In addition,  no significant customer or
          supplier of the Companies  discontinued or  significantly  reduced its
          business relation with the Companies during such period. The Companies
          and the  Seller  have no  reason  to  assume  that  any  such  change,
          discontinuation or reduction will occur in the foreseeable future.

5.14      Legal  Relation  between the  Companies  and the Seller as well as the
          Limited Partners Thereof and Berges Italiana S.r.l.

          The managing  director  agreements  between  GmbH and Messrs.  Dietmar
          Sarstedt and Herbert  Wolfslast will be rescinded by mutual  agreement
          as of November 30,  1997.  This also  applies to the  agreements  upon
          which the  activity  of both Mr.  Dietmar  Sarstedt as Chairman of the
          Board of Directors of S.r.l. and Mrs. Karen Sarstedt as member thereof
          is  based.  Moreover,  the lease and  allocation  agreements  existing
          between  GmbH and the  Seller as well as S.r.l.  and  Berges  Italiana
          S.r.l.  have  also  been  rescinded  as of the  above-mentioned  date.
          Reference  is  hereby  made to the  new  arrangements  agreed  upon in
          accordance with Nos. 7 to 9 hereof.

                                      109
<PAGE>


          The Parties are aware that  agreements  for the  exchange of goods and
          services  have  continuously  been and  shall  still  continuously  be
          executed in the future  between the Seller and Berges  Italiana of the
          one part and the Companies of the other.

5.15      Product Liability

          No claims which have not been dealt with have been  asserted  from the
          point of view of product  liability.  The  Seller is unaware  that the
          products  distributed  by the Companies  could  disclose any design or
          series  production  defects.  Reference  is hereby made to No.  5.18.3
          above.

5.16      Grants and Subsidies

          The Companies  have not been granted or paid any grants,  subsidies or
          similar  preferential  treatment  during the last three years from any
          international, national or regional agency or authority.

5.17      Miscellaneous

5.17.1    All written  information which has been provided by the Seller and the
          advisors thereof to the legal  representatives,  employees or advisors
          of the Buyer within the course of the negotiations over this Agreement
          is true,  complete and accurate in every respect;  such information is
          likewise not misleading as a result of any omissions or ambiguities or
          for any other reason. The contents of such information  corresponds to
          the state of the Seller's knowledge.

                                      110
<PAGE>


5.17.2    The Buyer has  audited  both  Companies  within the  framework  of due
          diligence proceedings.  The Seller hereby warrants and represents that
          all  inquiries  made within the  framework of the  purchase  agreement
          negotiations  and the due  diligence  proceedings  have been  answered
          completely and  accurately to the best  knowledge of the Seller.  This
          applies in particular to inquiries related to the assets, the business
          activity and the financial situation of the Companies.

5.17.3    The Parties hereby agree that ss. 377 and 378 of the  Commercial  Code
          and the  second  sentence  of ss.  460 of the Civil  Code shall not be
          applicable hereto.

5.17.4    Through the execution or performance of this Agreement,  the Seller is
          not selling either its entire assets or any substantial part thereof.

5.18      Legal Consequences

5.18.1    Insofar as the Seller has limited the above-mentioned  representations
          and warranties by reference to its knowledge or lack thereof, warranty
          or damage  compensation  claims  shall  not  exist if such  statements
          merely be objectively  false but shall only exist when such statements
          be consciously false.

5.18.2    The right to rescind this Agreement shall be excluded hereby.  Insofar
          as any warranty claims or claims due to breach of contractual  duties,
          warranties  or  representations   exist,  such  shall  be  limited  to
          reduction  of  the  purchase  price  and  damage  compensation  due to
          non-performance.  Payment need only be rendered  insofar as the sum of
          the  justified  reductions  and damage  compensation  claims exceed DM
          200,000.00.

                                      111
<PAGE>


          This  limitation  shall  apply  neither  to  claims  arising  from the
          violations  of  Sections  5.2,  5.3,  5.4.7 or 5.12  above  nor to the
          provisions  regarding the  formulation of the  Consolidated  Half-Year
          Financial Statements.

          The Buyer must establish a reasonable  period of at least one month by
          way of registered  letter for the Seller to produce the  conditions in
          accordance herewith.

5.18.3    The  representations and warranties issued by the Seller do not relate
          to the  merchandise  procured  from  the  Guarantor  or to any  claims
          related to such merchandise.




                                      112
<PAGE>



5.19      Limitation of Claims

5.19.1    Unless  provided  otherwise  herein,  all  claims of the  Buyer,  even
          warranty  and damage  compensation  claims on whatever  legal  ground,
          shall lapse upon the expiration of June 30, 1999.

5.19.2    The Seller  shall be liable for the legal  existence  of the shares as
          well as for the right to transfer such to the Buyer for a period of 30
          years from the Transfer Date.

5.19.3    Any  claims  of  the  Buyer  related  to  taxes  and  social  security
          contributions,  including any claims to exemptions, shall lapse within
          one year after the  corresponding  decision by the relevant  authority
          has become non-appealable.

6.        Covenant Not to Compete

6.1       The  Seller  hereby  agrees  for the  period  of five  years  from the
          Transfer  Date to desist from any  competition  with the  Companies in
          their  current  geographical  and  technical  sector of  activity.  In
          particular,  the  Seller  shall not hold  shares  either  directly  or
          indirectly  in  competing  companies  nor  enter  the  service  of any
          competing  company nor promote any such company directly or indirectly
          in any way through advice or action.

6.2       The Parties are aware of the following:

          The  Companies  are  active  in the  production  and  distribution  of
          electrical and electronic  propulsion  elements,  while the Seller and
          Berges Italiana S.r.l.  produce and distribute  mechanical  propulsion
          elements which are merely electrically  controlled.  The Parties agree
          that the above-mentioned  companies may continue to be active in their
          respective fields in the future,  without such representing any breach
          of this Covenant Not to Compete.

                                      113
<PAGE>


          This  shall  apply  irrespective  of  the  fact  that  electrical  and
          mechanical  propulsion elements are interchangeable in specific cases.
          So long as Mr. Dietmar Sarstedt be Managing Director of the Seller and
          Chairman or member of the Board of Directors of Berges Italiana S.r.l.
          on the one hand and  Managing  Director  of GmbH and  Chairman  of the
          Board of Directors of S.r.l. on the other,  such shall not represent a
          breach of any covenant not to compete  arising from his fiduciary duty
          vis-a-vis the individual companies.

7.        Management

7.1       Effective  immediately,  Mr. Herbert Wolfslast hereby resigns from his
          office as Managing Director of GmbH. Effective immediately, Mrs. Karen
          Sarstedt hereby withdraws as Prokuristin [holder of a general power of
          attorney] of the GmbH and from the Board of  Directors  of S.r.l.  and
          shall  provide  any  statements  which  are  necessary  to  enter  her
          withdrawal in the competent registry.

7.2       After the  Buyer's  take  over of the  shares  in the  Companies,  Mr.
          Dietmar  Sarstedt shall also manage the business of GmbH and S.r.l. as
          Managing  Director  and  Chairman  of  the  Board  of  Directors.  The
          contractual  relations  between  Mr.  Dietmar  Sarstedt  and  the  two
          Companies  shall be regulated  as of the  Transfer  Date by way of the
          Employment Agreement attached hereto as Annex 22. Mr. Dietmar Sarstedt
          shall be entitled to Christmas  money and a percentage  of profit on a
          pro rata temporis basis for the 1997 calendar year from the employment
          agreements  rescinded as of November 30, 1997. No further claims shall
          exist from the  employment  agreements  rescinded  as of November  30,
          1997.




                                      114
<PAGE>



8.        Lease Agreements

The lease  agreements  existing between the Seller and Berges Italiana S.r.l. as
Lessors  of the one part and GmbH and S.r.l.  as Lessees of the other  regarding
the commercial space used in Marienheide and Naturns shall be replaced as of the
Transfer Date by the lease agreements attached hereto as Annex 14.


9.        Allocation Agreements

9.1       Employees of the Seller and Berges Italiana S.r.l. are active for GmbH
          and S.r.l.  particularly  in the accounting and  controlling  areas as
          well  as  in  the  warehouse  and  shipping  departments.  Conversely,
          employees of GmbH and S.r.l.  also render  services for the Seller and
          Berges Italiana S.r.l.

9.2       Furthermore,  various material costs, such as for electricity,  postal
          fees, cleaning costs,  insurance  premiums,  etc. are mutually settled
          between the above-mentioned companies. The amounts mutually settled in
          the  period  from 1994 to 1996 may be found in Annex  23. In  relation
          thereto, the following is hereby agreed upon between the Parties:

          GmbH and S.r.l.  shall  modify the  present  phone and fax  systems at
          their  own  expense  in  order to  determine  in  detail  which of the
          Companies is to be allocated the specific costs.  New systems shall be
          installed if necessary.

          In relation to the other  costs,  the Parties  hereby  agree that such
          shall be divided and settled as far as possible in accordance with the
          scope of the actual use or instigation.  Any agreements reached in the
          past between the Seller and Berges Italiana S.r.l. of the one part and
          GmbH and  S.r.l.  of the other  shall lose  their  validity  as of the
          Transfer  Date.  In the  event no exact  costs can be  calculated,  an
          estimate  shall  be made as  appears  just  based  on the  percentages
          evident in Annex 23.

                                      115
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          The cost prices shall always be decisive. The settlement shall be made
          for each calendar year prior to 31 March of the  following  year.  The
          Seller and Berges Italiana  S.r.l.  shall be entitled to claim monthly
          payments  on  account  in the  amount of 1/12 of the costs paid in the
          previous  year after  deductions.  In the event any  individual  costs
          which were  considered  in the previous  year be  eliminated or in the
          event new costs arise, such shall be taken into account accordingly.

10.       Guarantee; Modified Joint and Several Liability

10.1      The  Guarantor  hereby  assumes the absolute  guarantee for all of the
          Seller's claims arising from this Agreement vis-a-vis the Buyer.

10.2      The Seller shall be liable  jointly and severally for the  obligations
          of Mrs.  Karen  Sarstedt  arising from this  Agreement and the Annexes
          hereto.  The Buyer hereby waives the assertion of any claims from this
          Agreement against Mrs. Karen Sarstedt, with the exception of the claim
          to share transfer under Section1.3 hereof.

11.       Transition

11.1      As soon as this Agreement becomes binding for both Parties, the Seller
          shall  ensure that the Buyer's  agents be  provided  upon  request any
          information   regarding  business  transactions  and  be  granted  the
          opportunity to inspect all business documents.

                                      116
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11.2      From the execution hereof,  the Seller shall ensure that the Companies
          only conduct any transactions  outside the course of ordinary business
          after obtaining the Buyer's prior approval.

11.3      The Seller and the Buyer shall be  obligated to provide each other any
          information and to cooperate in all  transactions and legal acts which
          are necessary for the performance of this Agreement and to desist from
          anything  which  opposes the  performance  hereof.  In relation to the
          assertion  of claims  against  third  parties or the  defense  against
          third-party claims, the Parties shall provide each other all necessary
          information  and grant  each  other the  opportunity  to  inspect  any
          business  documents  necessary in this  regard.  The  Companies  shall
          authorize   the  Seller  to  conduct  any   necessary   administrative
          proceedings on behalf of the Companies but at the costs of the Seller,
          insofar  as the  financial  results  of such  proceedings  affect  the
          Seller.


12.       Final Provisions

12.1      Any  modifications  of or additions to this  Agreement must be made in
          writing, unless notarization be required.

12.2      The Parties  hereby  confirm that no collateral  agreements  have been
          made.  This Agreement  completely and accurately  reflects the will of
          the Parties.

12.3      In the  event  any  provision  hereof  be null  and void now or in the
          future,  the remaining  parts of this Agreement  shall not be affected
          thereby.  In the event of the  nullity  or  invalidity  of any  clause
          hereof,  such clause shall be replaced by that valid clause which most
          closely  approximates the financial purpose of the invalid  provision.
          This shall also apply in the event of any contractual gaps.

                                      117
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12.4      This Agreement  shall replace all written and verbal  declarations  of
          intent of the  Parties  hereto  which were  issued in  relation to the
          contractual negotiations,  even in the event such declarations deviate
          from the content hereof.

12.5      This Agreement  shall be subject to German law.  Duesseldorf is hereby
          agreed  upon as the  jurisdiction  for the  settlement  of all  claims
          arising herefrom.

12.6      The Parties  hereby  declare that no property forms part of the assets
          of the Companies.


13.       Costs

The Buyer shall bear the costs of the notarization of the agreements pursuant to
Section 1.2 and Section  1.3 and any further  costs which might  result from the
application for registration  with the commercial  register of any actions under
this Agreement. Each Party shall bear the costs of its advisors.


Dusseldorf, this 23rd day of October 1997, 7 p.m.


     signed by K. Sarstedt, H. Wolfslast, D. Sarstedt and M. Schulte