ASSET PURCHASE AGREEMENT



         THIS  ASSET  PURCHASE  AGREEMENT  is  entered  into on this ____ day of
January,  1998,  by and between  VERMONT  PURE  SPRINGS,  INC.  (VPS) a Delaware
corporation with its principal place of business in Randolph,  Vermont ("BUYER")
and SAGAMON SPRING WATER OF VERMONT,  INC. (SSW), a Vermont corporation with its
principal place of business Rutland, Vermont ("SELLER").

                                    RECITALS

         WHEREAS,  VPS is a company  engaged in the bottling and sale of natural
spring water with its manufacturing  facility and principal place of business in
Randolph Center, VT and

         WHEREAS,  SSW is a company,  engaged in the  bottling and sale of water
with its principal place of business in Rutland, VT, and

         WHEREAS,  both  Parties  desire to enter into  agreements  by which VPS
shall (I)  purchase  the  business  of SSW  related to bottled  water,  bottling
equipments and springwater development,  springwater withdrawal rights and other
assets listed on Exhibit A.

         NOW  THEREFORE,  in  consideration  of the  mutual  promises  contained
herein, the parties agree as follows:

1. ASSETS

         1.1. Asset  Purchase and Sale.  Seller and Buyer mutually agree for the
Seller to sell,  convey,  transfer,  assign  and  deliver  to Buyer and Buyer to
purchase substantially all of the property of Seller, wherever located, tangible
and  intangible,   consisting  of  the  following  assets:  vehicles,   bottling
equipment,  spring  properties,  trademarks  and  other  intellectual  property,
purchase orders,  customer lists, and goodwill.  (The assets being purchased and
sold  hereunder  are  sometimes  referred   collectively  as  "Assets"  and  are
identified in Exhibit "A").  Assets of Seller not on the list are being retained
by Seller.

         1.2.  Bill of Sale.  Title to the Assets  will be  conveyed to Buyer by
Seller pursuant to a Bill of Sale, free and clear of all liens and  encumbrances
except  purchase money  financing liens as described in Paragraph 2. The form of
the Bill of Sale shall be approved by Buyer's  counsel prior to the closing Date
(as hereinafter defined).





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2.  PURCHASE PRICE

         2.1      Purchase Price:  $275,000, provided that:

                  (I) $170,000.00 of the Purchase Price to be paid in cash at
                      closing.

                  (ii) Buyer will pay Seller  compensation  for  goodwill of the
Company of  $8000.00  per year for five (5) years with the first  payment due on
the signing of this agreement;

                  (iii) the  issuance of a Note by Buyer to Seller in the amount
of  $65,000.00  for a term of five (5) years at the prime  rate of  interest  as
amended  from time to time by Chase  Manhattan,  N.A.  with  equal  payments  of
principal and interest based on a 5 year amortization schedule. The Note will be
secured  by a grant of a security  interest  in the  assets  acquired  including
equipment, contract rights, inventory, accounts receivable,  insurance proceeds,
and all tangible and intangible property and any replacement of said assets that
is the subject of this  Agreement  and a collateral  assignment of the lease for
mineral  rights  currently  granted by Glen W.  Merrill  and Glen D.  Merrill to
Seller,  which  leasehold  interest is being  transferred to Buyer in accordance
with the terms and conditions of this agreement;

                  (iv) Fred  Beauchamp and Jim Creed,  officers and employees of
Seller,  shall enter into with the Company (I) a non-compete  agreement for five
(5) years.

3. EXCLUDED SECURITIES AND LIABILITIES

         3.1 It is agreed and  understood  that this is a  purchase  and sale of
assets  (with  limited  assumption  of  certain  operating   liabilities).   The
securities  of the Seller are  expressly  excluded  from this  transaction.  All
liabilities not enumerated in Schedule B, including without limitation, Utility,
Taxing Authority and Employment Claims are expressly excluded.

4. CONDUCT OF BUSINESS AND CONDITION OF PREMISES

                               PENDING SETTLEMENT

         4.1      Prior to the Settlement:

                  4.1.1.  The business of Seller will be  conducted  only in the
ordinary  course,  in accordance  with all laws and regulations of the township,
state,  and federal  governments,  and Seller shall not violate the terms of any
existing leases or contracts.

                  4.1.2.  Seller will  continue  to operate the  business in the
manner heretofore operated by Seller. Until Settlement date, a representative of
the Buyer  shall have the right,  during  normal  business  hours,  to visit the
Seller's place of business to examine  Seller's books and records and to observe
the operation of the business.

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                  4.1.3.  Seller  will keep all of the assets  and the  Premises
fully insured  against any loss,  either by fire,  other casualty or theft until
the time of settlement.


                  4.1.4.  SSW will use their  best  efforts  to  preserve  SSW's
organization.  to keep  available  the  services of  employees,  and to preserve
friendly relations with its customers and trade creditor.  Company shall make no
representation or promises with employees about future employment but Buyer will
consider existing employees for resumption of duties as appropriate.


                  4.1.5 In the  event  that  prior to the date of  Closing,  the
Assets  shall be totally or  substantially  lost or damages by fire or any other
casualty,  the Buyer shall have the option to terminate  this agreement or waive
the  diminution  in value and close under this  Agreement  buying the Assets "as
is", in which  latter  event it shall be  entitled to treat the  proceeds of any
insurance paid to Seller by reason of such loss or damage  (excepting  insurance
for lost profits, if any), as a payment on the purchase price or the Buyer shall
have the right to all insurance  proceeds to apply the funds to repair and/or to
reconstruct the Assets.

5. SETTLEMENT

         5.1  ("Settlement")  shall take place on or before June 30, 1997 and on
the date and time set forth by  written  notice  from the Buyer to the Seller at
least ten (10) days in advance thereto.


         5.2 Settlement  shall be held in Rutland,  VT or such other local place
as Seller and Buyer shall agree.

         5.3      Time shall be of the essence of this Agreement.

         5.4      Any closing adjustments shall be apportioned pro rata as of
                  the date of Settlement.

6.       BULK SALES ACT.

         6.1 Buyer and Seller waive  compliance  with the applicable  Bulk Sales
Act. Seller and its majority shareholder shall indemnify and hold Buyer harmless
for any loss to Buyer arising out of such  non-compliance  . Seller will execute
and deliver,  at closing,  an indemnification  agreement in accordance with this
Paragraph.

7.       SELLER'S WARRANTIES.

         7.1 The Seller  represents and warrants to Buyer that as of the date of
this Agreement and as of the date of the Settlement, that:


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                  7.1.1 The Seller is a corporation  duly organized and existing
in good standing under the laws of the State of Vermont with the corporate power
to own its assets and carry on its business as is now being conducted.


                  7.1.2  Seller has good and  marketable  title and the right of
sole  possession  and  control of all the assets  being  sold  pursuant  to this
Agreement, and that such assets at the time of Settlement will not be subject to
any mortgages,  pledges,  liens,  encumbrances,  security interest,  or charges,
except as described in Paragraph II (iv).

         7.2      The Seller represents that to the best of the Seller's
knowledge, information and belief:

                  7.2.1 The Seller is in compliance  with all  applicable  laws,
ordinances, rules, regulations, and requirements of all governmental authorities
having  jurisdiction  thereof,  and that  Seller  has  complied  with all  laws,
municipal  ordinances,  and regulations of all governmental  authorities  having
jurisdiction  thereof,  and that Seller has  complied  with all laws,  municipal
ordinances,  and  regulations  applicable  to Seller and in the ownership of the
assets and the business hereunder.

                  7.2.2 There are no actions,  suits, or proceedings  pending or
threatened against Sellers,  either at law or in equity, brought by any federal,
state, or municipal or other governmental agency, department,  board, bureau, or
other instrumentality.

                  7.2.3 All federal, state, and local tax returns required to be
filed have been  filed,  all  deficiencies  proposed  have  either  been paid or
settled or are  included  in an account  for  accrued  taxes;  all  withholding,
unemployment, social security, excise interest have been paid or will be paid by
Seller after Settlement from funds set aside at Settlement.

                  7.2.4  All  financial  information  provided  to the  Buyer is
accurate and in accordance with the books and records of the Company, and fairly
represents the financial condition, assets and liabilities of the Company.

                  7.2.5  Neither  Seller nor any direct or indirect  shareholder
thereof has made any  agreement  or taken any action which might cause anyone to
become entitled to a broker's fee or commission.

         7.3 If Seller  obtains any  knowledge or  information  between the date
hereof and Settlement, making or indicating that any of the aforesaid warranties
or  representations   are  no  longer  true,  or  indication  that  any  of  the
representations and conditions set forth in this Section VII hereof are not true
and  cannot be made true by the  Seller  by the time of  Settlement,  or will no
longer be true as of the date of Settlement,  Seller will promptly  notify Buyer
of such change in circumstances.

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8.       CONDITIONS PRECEDENT

         All  obligations  of the Buyer  under  this  Agreement  are  subject to
fulfillment, prior to or at Settlement, of each of the following conditions:

         8.1 Due Diligence.  Buyer has been afforded the  opportunity to conduct
due diligence on the business and operations of the Seller and is satisfied,  in
its reasonable  discretion,  that the business is as represented to VPS prior to
entering into this Asset Purchase Agreement.

         8.2 Representation and Warranties.  The  representations and warranties
of Seller  contained in this  Agreement  being true at the time of Settlement as
though such representations and warranties were made at such time.

         8.3 Compliance with Agreement. Seller shall have performed and complied
with all agreements and conditions required by this Agreement to be performed or
complied with by prior to or at closing.

         8.4 Opinion of counsel.  Seller shall have delivered to Buyer,  in form
and content satisfactory to Buyer's counsel, an opinion of its counsel issued to
Buyer to the effect that:

                  8.4.1 Seller has been duly  incorporated  and is existing as a
corporation in good standing under the laws of the State of Vermont.

                  8.4.2    This transaction and its terms do not violate any
provisions of Seller's Articles of Incorporation or Bylaws;

                  8.4.3    Seller has taken all shareholder, director and other
actions necessary to authorize the transactions contemplated by the parties
hereto;

                  8.4.4    Seller has the authority to carry on the business 
presently being conducted by Company;

                  8.4.5 Seller has full power and authority to sell,  assign and
transfer the Assets sold pursuant to this Agreement.

         8.5 Documentation. Negotiation and preparation of definitive documents,
including all  collateral  documents,  governing the  transactions  contemplated
herein under terms and conditions acceptable to Buyer's and Seller's counsel.

         8.6      Financing.  Buyer obtains financing for the purchase of assets
herein described on terms acceptable to the Buyer.

         8.7      Seller's Shareholder Approval.  Seller shall have obtained the
necessary Shareholder 
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approval for this transaction.

         8.8      Non-Compete Agreement. Fred Beauchamp  and Jim Creed shall 
execute and deliver at Closing the Non-Compete Agreements attached as Exhibits
"C"and "D".

         8.9 Water Rights.  Successful negotiation and preparation of definitive
documents,  including  all  collateral  documents,  governing  the  transfer and
renegotiation  of water  withdrawal  rights  contained  in an  agreement  by and
between  Seller and Glenn W. Merrill  under terms and  conditions  acceptable to
Buyer and Buyer's counsel.


9.       NONDISCLOSURE OF CONFIDENTIAL INFORMATION

         9.1  Seller  and its  directors,  shall  not,  during  the term of this
Agreement  or at any time for a period of two years  following  closing,  unless
authorized to do so in writing by the Buyer,  directly or indirectly disclose or
permit to be known to, or used for the benefit of, any  person,  corporation  or
other entity (outside of the employ of the Company), or itself, any confidential
information.  For the  purposes  of  this  Section  IX,  the  term  confidential
information  shall include,  but not be limited to,  confidential or proprietary
knowledge or information  with respect to the conduct or details of the Seller's
business  including,  but not  limited  to,  lists of  customers  of the Buyer's
business,  pricing strategies,  or marketing methods.  Confidential  information
does not include matters which are generally known outside of the Buyer,  public
knowledge or in the public domain.

         9.2 All confidential  information  described in Section IX (A) shall be
the  exclusive  property of the Buyer,  and Seller shall use its best efforts to
prevent any publication or disclosure thereof.

         9.3 The  provisions  of this  Section IX shall  survive the closing and
shall continue for a period of two years.

10.      RESTRICTIVE COVENANT

         In order to protect the Buyer in its full  beneficial use and enjoyment
of the goodwill, assets, business relationships,  marketing techniques and other
know-how acquired as a result of this Agreement,  for a period of five (5) years
after  the  closing  of this  Agreement,  Seller,  including  its  officers  and
directors will not, within the United States of America,  directly or indirectly
compete with the Buyer in the bottling of home/office water, and will not either
(I)  solicit  any  persons or  entities  known to be  customers  of the Buyer to
purchase  any of the  aforementioned  products;  or (ii)  solicit  or induce any
employee of the Buyer to leave such employment to take a position with Seller or
with any  company  for which any  officer or  director  then  works.  During the
aforesaid  period,  Seller  shall not make any  statements  or  commit  any acts
(including  contacting  any of the  Buyer's  customers  that would in any way be
tortiously injurious or detrimental to the

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Company's image, business or customer relations.  The provisions of this Section
X shall survive the  termination,  for any reason,  of this  Agreement and shall
continue for the two year period contemplated by this Section X.

11.       GOVERNING LAW

         This  Agreement  shall  be  construed,   interpreted  and  enforced  in
accordance with the laws of the State of Vermont.




12.      TERMS SEVERABLE

         In the  event  that any term or  provision  hereof  or the  application
thereof  to  persons  or  circumstances  shall  to  any  extent  be  invalid  or
unenforceable,  then the  remainder  of this  Agreement  shall  not be  affected
thereby and each term or  provision  hereof  shall be valid and  enforced to the
fullest extent permitted by law.

12.      SURVIVAL OF TERMS

                  The terms of this Agreement,  including but not limited to the
warranties,  representations  and covenants  made by the parties  hereto,  shall
survive for a period of one (1) year from the Closing  Date and the Seller shall
remain liable for any deficiency arising from any breach of the same.

13.      FORCE MAJEURE

                  The  failure of or delay in  compliance  with any of the terms
and  conditions  of this  Agreement  by either  party  shall be  excused if said
failure or delay is due to an Act of God, fire,  flood,  strike,  labor dispute,
accident,  act of government or any similar cause beyond the reasonable  control
of said party.

14.      ENTIRE AGREEMENT

         This  Agreement,  including the  Preambles,  and any other  document or
exhibit  incorporated herein by reference sets forth the entire understanding of
the parties. It shall not be changed or terminated orally. This Agreement may be
executed in one or more  counterparts  each of which shall be deemed an original
but all of which together shall constitute one and the same document.

15.      NOTICE

Notices required under this Agreement shall be in writing sent by certified mail
and facsimile to the representatives of the parties as follows:

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                  Vermont Pure Springs, Inc.
                  Route 66
                  Randolph Center, VT 05061
                  Attn:  Timothy G. Fallon
                  Facsimile (802) 728-4814
With Copy to:
                  Kevin F. Berry, Esquire
                  Ledgewood Law Firm
                  1521 Locust Street
                  Philadelphia, PA 19102
                  Facsimile:  (215) 735-2513
To Seller:
                  Sagamon Spring Water of Vermont
                  P.O. Box 907
                  Rutland, VT 05701
                  Attention: Fred Beauchamp and Jim Creed

         IN WITNESS WHEREOF,  the parties hereto have executed this agreement as
of the day, month and year first written above.


WITNESS:                                             VERMONT PURE SPRINGS, INC.

______________________              By:_____________________________

                                    Name:___________________________

                                    Title:__________________________



                                                       SAGAMON SPRING WATER
                                                       OF VERMONT, INC

WITNESS:
_______________________             By:___________________________

                                    Name:_________________________

                                    Title:________________________


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                                                     Exhibit A
List of Assets
                                                     Exhibit B
Liabilities assumed
                                                     Exhibit C
Non-compete of Fred Beauchamp
                                                     Exhibit D
Non-compete of Jim Creed



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