HealthWarehouse.com, Inc. – ‘DEFM14C’ on 3/11/99

As of:  Thursday, 3/11/99   ·   Accession #:  910680-99-113   ·   File #:  0-13117

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Definitive Proxy Information Statement — Merger or Acquisition   —   Schedule 14C
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: DEFM14C     Microframe, Inc. Definitive Info Statement           567   1.94M 

Document Table of Contents

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SCHEDULE 14C  

 Information Required in Information Statement

SCHEDULE 14C INFORMATION

Information Statement Pursuant to Section 14(c) of the
 Securities Exchange Act of 1934

Check the appropriate box:                                                      

[ ]    Preliminary Information Statement    [ ]    Confidential, for Use of the 
[X]    Definitive Information Statement            Commission Only (as permitted
                                          by Rule 14c-5(d)(2))

MICROFRAME, INC.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)

Payment of Filing Fee (Check the appropriate box):                              

[ ] No fee required.                                                            

[X] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.       

       a.    Title of each class of securities to which transaction applies:

Common Stock, par value $.001 per share           

    b.    Aggregate number of securities to which transaction applies:

3,000,000                                         

      c.    Per  unit  price  or other  underlying  value  of  transaction
            computed  pursuant  to  Exchange  Act Rule 0-11 (Set forth the
            amount on which the filing fee is calculated  and state how it
was determined):                                  

      $2.72 (average of high and low price on January 8, 1999)

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d.    Proposed maximum aggregate value of transaction:        

$8,160,000                                        

e.    Total fee paid:                                         

$1,632.00                                         

[X]      Fee paid previously with preliminary materials.                        

[ ]      Check box if any part of the fee is offset as  provided  by  Exchange  
         Act Rule  0-11(a)(2)  and identify the filing for which the  offsetting
         fee was paid  previously.  Identify the previous filing by registration
       statement number, or the Form or Schedule and the date of its filing.

a.       Amount Previously Paid:                              

b.       Form, Schedule or Registration Statement No.:        

c.       Filing Party:                                        

d.       Date Filed:                                          

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March 11, 1999                                                

To the Shareholders of MicroFrame, Inc.                                         

         Enclosed  is an  Information  Statement  relating  to three  matters of
importance to you as shareholders of MicroFrame, Inc. (the "Company"):          

1. The purchase by the Company of all of the outstanding share capital of SolCom
Systems Limited ("SolCom"),  a Scottish corporation in exchange for an aggregate
of shares  of common  stock of the  Company  ("Common  Stock")  and  options  to
purchase shares of Common Stock of up to 2,700,000  shares and options  together
with up to 300,000 performance-based options;                                   

2. The adoption of the Company's  1998 Stock Option Plan and the Company's  1998
U.K. Sub-Plan; and                                                              

3. The  reincorporation  of the Company in the State of Delaware  pursuant to an
Agreement and Plan of Merger dated as of December 15, 1998.                     

         The  acquisition of SolCom is designed to enable the Company to broaden
its market  presence  by  offering  secure  intelligent  remote  monitoring  and
management of both the physical and logical aspects of voice and data networks. 

         The adoption of new stock option plans and the  reincorporation  of the
Company in the State of  Delaware  will  create a more  favorable  and  flexible
corporate  structure  through which the Company will be able to more effectively
carry out its business objectives and goals.                                    

         Each of the above items has been  approved in writing by the holders of
a majority of the outstanding shares of Common Stock of the Company. No proxy is
being  solicited  from you and no meeting is being  held.  Under New Jersey law,
each of these items will become effective twenty (20) days from today.          

Thank you for your continued confidence and support.          

             Very truly yours,

           Stephen B. Gray
                                 President and Chief Executive Officer

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MICROFRAME, INC.
21 MERIDIAN AVENUE
EDISON, NEW JERSEY 08820
(732) 494-4440

 INFORMATION STATEMENT

         This Information Statement is being furnished to holders of shares (the
"Shareholders") of common stock, par value $.001 per share (the "Common Stock"),
of MicroFrame,  Inc., a New Jersey corporation (the "Company"). This Information
Statement  is being  furnished  in order to notify the  Shareholders  that on or
about  December 30, 1998 (the  "Written  Consent  Date"),  the Company  received
written  consents  (the  "Written  Consents")  in  lieu  of  a  meeting  of  the
shareholders  of the  Company  from the  holders of  2,994,179  shares of Common
Stock, representing approximately 54% of the total issued and outstanding shares
of voting  stock of the Company (the  "Written  Consent  Percentage"),  adopting
resolutions  approving (i) the purchase by the Company of all of the outstanding
share capital of SolCom Systems Limited ("SolCom"), a company incorporated under
the Companies Act 1985 of the United Kingdom (the "Transaction") in exchange for
an aggregate of shares of Common Stock and options to purchase  shares of Common
Stock aggregating up to 2,700,000 shares and options together with up to 300,000
performance-based  options, (ii) the adoption of the Company's 1998 Stock Option
Plan (the "Plan") and the  Company's  1998 U.K.  Sub- Plan (the  "Sub-Plan"  and
together  with the Plan,  the  "Plans")  and (iii)  the  reincorporation  of the
Company in the State of  Delaware  pursuant to an  Agreement  and Plan of Merger
dated as of  December  15,  1998 (the  "Reincorporation").  The exact  number of
shares of Common  Stock and  options to  purchase  shares of Common  Stock to be
issued and/or  granted by the Company in the  Transaction  will be determined in
accordance with a certain formula set forth in the Share Purchase  Agreement (as
hereinafter  defined)  upon the  completion of the  Transaction.  Based upon the
formula set forth in the Share Purchase Agreement (as hereinafter  defined),  if
the Transaction  were consummated as of January 5, 1999, the Company would issue
2,200,000  shares of Common  Stock and  500,000  options to  purchase  shares of
Common  Stock.  Upon  completion  of  the  Transaction,  all  Shareholders  will
experience immediate and substantial dilution of percentage ownership and voting
power with  respect to the  Company's  issued and  outstanding  Common  Stock of
between  approximately  39.6%  (assuming  2,200,000  shares of Common  Stock are
issued) and 48.6% (assuming 2,700,000 shares of Common Stock are issued).       

         In accordance with the applicable provisions of the New Jersey Business
Corporation Act (the "NJBCA"),  any Shareholder who has not executed the Written
Consent shall have the right to dissent therefrom and demand payment of the fair
value of shares of Common Stock owned by such Shareholder by delivering a notice
to the Company at 21 Meridian Avenue, Edison, New Jersey 08820, Attention:  John
F. McTigue,  Chief Financial Officer (tel.  732-494-4440),  of the Shareholder's
intention to so dissent  within  twenty (20) days of the date of the notice from
the Company to all nonconsenting  Shareholders delivered simultaneously with the
mailing of this  Information  Statement  informing each such  Shareholder of the
right to dissent.                                                               

         On November 16, 1998, the Board of Directors  approved the  Transaction
and the  Reincorporation  and  recommended  that the  Shareholders  grant  their
approval  thereto.  On September 15, 1998,  the Board of Directors  approved the
Plans and recommended that the Shareholders grant their approval thereto.       

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         This Information  Statement  describing the Transaction,  the Plans and
the  Reincorporation  is first being mailed or furnished to  Shareholders  on or
about  March  11,  1999  and  neither  the  Transaction  nor the  Plans  nor the
Reincorporation shall become effective until at least 20 days thereafter.       

 THIS INFORMATION STATEMENT IS FURNISHED FOR
INFORMATION PURPOSES ONLY.

 THE COMPANY IS NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED
NOT TO SEND A PROXY.

NO  PERSONS  HAVE  BEEN  AUTHORIZED  TO GIVE  ANY  INFORMATION  OR TO  MAKE  ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS INFORMATION  STATEMENT AND, IF
GIVEN OR MADE, SUCH  INFORMATION OR  REPRESENTATIONS  MUST NOT BE RELIED UPON AS
HAVING BEEN  AUTHORIZED  BY THE  COMPANY OR ANY OTHER  PERSON.  ALL  INFORMATION
CONTAINED  IN THIS  INFORMATION  STATEMENT  RELATING  TO THE  COMPANY  HAS  BEEN
SUPPLIED  BY THE  COMPANY  AND ALL  INFORMATION  CONTAINED  IN THIS  INFORMATION
STATEMENT RELATING TO SOLCOM HAS BEEN SUPPLIED BY SOLCOM.                       

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 AVAILABLE INFORMATION

         The  Company  is  subject  to  the  informational  requirements  of the
Securities  Exchange  Act of 1934,  as  amended  (the  "Exchange  Act"),  and in
accordance therewith files reports,  proxy statements and other information with
the U.S. Securities and Exchange Commission (the "Commission"). This Information
Statement,  as well as reports,  proxy statements and other information filed by
the Company can be inspected  and copied at the  Commission's  Public  Reference
Room,  Judiciary  Plaza,  450 Fifth Street,  N.W., Room 1024,  Washington,  D.C.
20549,  and at the public reference  facilities  maintained by the Commission at
its regional offices located at Suite 1400,  Citicorp  Center,  500 West Madison
Street, Chicago,  Illinois 60661 and 7 World Trade Center, Suite 1300, New York,
New York 10048.  Copies of such materials can be obtained from the Commission at
prescribed  rates from the Public  Reference  Section of the  Commission  at 450
Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information on
the   operation  of  the   Commission's   public   reference   room  by  calling
1-800-SEC-0330.   Electronic   registration   statements   filed   through   the
Commission's  Electronic  Data  Gathering,  Analysis  and  Retrieval  system are
publicly    available   through   the   Commission's   World   Wide   Web   site
(http://www.sec.gov).                                                           

CERTAIN DOCUMENTS ATTACHED TO THIS INFORMATION STATEMENT

         The  Company's  Annual  Report on Form 10-KSB for the fiscal year ended
March 31, 1998, as amended (the "Company 10-KSB"),  and the Company's  Quarterly
Report on Form  10-QSB for the  fiscal  quarter  ended  December  31,  1998 (the
"Company  10-QSB"),  which were previously filed with the Commission on July 14,
1998 (as amended on August 7, 1998) and  February 22,  1999,  respectively,  are
annexed hereto as Appendix F and Appendix G, respectively.                      

         All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this  Information  Statement  and
prior to the date of the  consummation of the Transaction  shall be deemed to be
incorporated by reference in this Information  Statement and to be a part hereof
from the  respective  dates  of the  filing  of such  documents.  Any  statement
contained  herein or in a document  incorporated or deemed to be incorporated by
reference  herein shall be deemed to be modified or  superseded  for purposes of
this  Information  Statement  to the extent  that a statement  contained  in any
subsequently  filed  document  that also is or is deemed to be  incorporated  by
reference  herein modifies or supersedes  such statement.  Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Information Statement.                             

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 SUMMARY

Item 1-Approval of the Transaction

         The Company has agreed to purchase all of the outstanding share capital
of SolCom in exchange for a certain number of shares of Common Stock and options
to purchase shares of Common Stock, as follows:                                 

                                                        [Enlarge/Download Table]

                                                                                          
Aggregate Common Stock to be issued/options to be granted by the Company..up to 2,700,000 

Approximate shares of Common Stock to be issued(1)(2)...........................2,200,000 

Approximate number of options to be granted by the Company(1)(2)..................500,000 

Number of performance-based options to be granted by the Company..................300,000 

Share capital of SolCom to be acquired by the Company...........................All Shares

The Company's Nasdaq SmallCap Market Symbol.....................................MCFR      

Item 2-Adoption of 1998 Stock Option Plan and 1998 U.K. Sub-Plan

         The Company's  Board of Directors has approved the Company's 1998 Stock
Option Plan and 1998 U.K. Sub-Plan.                                             

Aggregate  shares  of  Common  Stock  for which  options  may be  granted  under
Plans(3)..3,000,000                                                             

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

1        The exact  allocation  between  shares of Common Stock to be issued and
         options to be  granted  in  connection  with the  Transaction  is to be
         determined  pursuant  to a  formula  contained  in the  Share  Purchase
Agreement (as hereinafter defined).                           

2        In the event that the Transaction  were consummated on January 5, 1999,
         the  Company  would have issued an  aggregate  of  2,200,000  shares of
      Common Stock and options to purchase 500,000 shares of Common Stock.

3        Although there is no specific  allocation with respect to option grants
         as between the Plan and the Sub-Plan,  it is the Company's intention to
issue options pursuant to the Sub-Plan only to U.K. personnel.

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ITEM 1 - APPROVAL OF THE TRANSACTION

INTRODUCTION

         The  Company,  founded in 1982,  designs,  develops and markets a broad
range of remote network  management and remote maintenance and security products
for mission  critical  voice and data  communications  networks.  The  Company's
products provide for alarm and fault monitoring,  proactive  administration  and
reporting  capabilities  which are  being  used as a basis  for  remote  network
management and maintenance.  In addition, by incorporating a variety of hardware
and software  options for security and user  authentication,  these products can
deter as well as prevent  unauthorized  dial-in and/or in-band access to network
elements and systems (such as computers,  local area networks (LANs),  wide area
networks  (WANs),  routers,  hubs,  servers,  Private Branch Exchange  telephone
switches ("PBXs") as well as other network elements),  while allowing authorized
personnel  access to  perform  needed  administration  and  maintenance  of host
devices and networks from remote locations.                                     

         The Company's principal business address is 21 Meridian Avenue, Edison,
New Jersey 08820 and its telephone number is (732) 494-4440.                    

         SolCom,   founded  in  1992,  is  a  developer  of  remote   monitoring
technology. Originally approved by the Internet Engineering Task Force (IETF) in
1992,  Remote  MONitoring,  or  RMON,  is  a  standard  protocol  for  users  to
proactively manage multiple LANs and WANs from a central site. RMON 1 identifies
errors,  alerts  administrators  to network  problems and baselines  networks in
addition to its remote network analyzer capabilities. RMON's recent enhancement,
RMON 2, enables Network Managers to access higher-level network-wide application
and  protocol  information.   RMON  2  also  provides   enterprise-wide   and/or
point-to-point  traffic  statistics  that enables  trouble-shooting  and network
capacity planning.                                                              

         SolCom  is  in  the  process  of  developing   products  with  two  new
technologies,  "NetworX" products and "ASIC" products. Below are descriptions of
these two new projects.  See "Information With Respect to  SolCom-Description of
Business."                                                                      

         NetworX  is  being   developed  by  SolCom  as  the  industry's   first
comprehensive  management tool.  NetworX will be the industry's first integrated
platform for proactive,  remote, secure management and monitoring of voice, data
and video networks.  It uses "Dial Up",  "Telnet" or "SNMP"  connections so that
managers can monitor,  evaluate and control all aspects of their  network from a
single, remote point.                                                           

         An ASIC is an Application Specific Integrated Circuit that incorporates
all the hardware and software  required to carry out specific  tasks on a single
chip. This will lead to a substantial increase in processing speed and reduction
in build cost. Designing the ASIC requires SolCom to experience a steep learning
curve while its engineers become familiar with this technology.  Initially there
will be one ASIC but once the initial ASIC has been  developed  there will be an
ongoing development to introduce more capabilities and features into ASICs.     

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         SolCom's  principal  business  address is SolCom  House,  Meikle  Road,
Kirkton Campus, Livingston EH 547 DE, Scotland and its telephone number is (011)
44-1506-461-707.                                                                

WRITTEN CONSENT IN LIEU OF MEETING

         Under New Jersey law, the affirmative vote of the holders of a majority
of the outstanding  Common Stock entitled to vote thereon is required to approve
the  Share  Purchase  Agreement  and  the  transactions   contemplated  thereby.
Shareholders  owning the Written Consent  Percentage have executed and delivered
to the Company Written  Consents in lieu of a meeting of Shareholders  approving
and adopting the Share Purchase  Agreement and authorizing  the  consummation of
the  Transaction.   Accordingly,  no  vote  of  any  Shareholder  is  necessary,
Shareholder  votes are not being  solicited  and no meeting of  Shareholders  is
being held to approve the Transaction.                                          

REASONS/BACKGROUND FOR THE TRANSACTION

         General  Background.  In recent years,  the remote  network  management
marketplace   has  been   characterized   by  intense   competition,   continual
technological  innovation as well as  improvements in both hardware and software
offerings.  In light of these  developments,  the  Company has from time to time
considered  its  strategic  alternatives,  including the licensing of additional
technologies,   additional  development  of  internal   technologies,   and  the
possibilities of mergers or other strategic alliances to improve its position in
the  marketplace.  In  June  1997,  the  Company  concluded  that it  desired  a
significant increase in its presence in the data network management market place
in order to develop and control its technologies and intellectual  properties to
effectuate  future  growth.  The Company  identified  the "RMON"  technology and
determined that  incorporation  of such  technology into the Company's  existing
products   would  enhance  the  Company's   products  and   marketability.   The
complexities of the RMON  technology led the Company to seek viable  acquisition
candidates that already possessed such technology.                              

         Introduction  of Parties.  In early 1998,  the Company,  as part of its
strategic  search of companies  offering RMON  capabilities,  authorized Mr. Jim
Segala,  Director  of  Research  and  Development,  to contact  Mr.  Hugh Evans,
Director  of   Development   and  Mr.  Peter  Wilson,   Director  of  Marketing,
respectively,  of SolCom to discuss potential licensing arrangements.  SolCom, a
leading  developer  of RMON  technology,  had been  previously  considering  its
strategic  alternatives  including:  alliances,  potential  sale,  possible  IPO
alternatives  and  merger or  acquisition  possibilities.  Mr.  Segala  reported
favorably on the technology and its potential synergies with the Company's suite
of  products  as well as its ability to  accelerate  the  Company  into the RMON
marketplace.  Originally approved by the Internet  Engineering Task Force (IETF)
in 1992,  Remote  MONitoring,  or RMON,  is a  standard  protocol  for  users to
proactively  manage  multiple  LAN's  and  WAN's  from a  central  site.  RMON 1
identifies  errors,  alerts  administrators  to network  problems and  baselines
networks in addition to its remote network analyzer capabilities. RMON 2 enables
network  managers to access  higher-level  network wide application and protocol
information.  RMON 2 also provides enterprise-wide and/or point-to-point traffic
statistics that enables easy trouble shooting and effective network  management.
This combination of technologies would enable the Company to offer an integrated
remote management solution,                                                     

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incorporating  security,  remote  access,  monitoring  of physical  elements and
monitoring of logical content.                                                  

                  In January  1998, as a follow-up to Mr.  Segala's  discussions
with  SolCom,  Mr.  Stephen B. Gray,  Chief  Executive  Officer of the  Company,
arranged  to meet  with Mr.  Wilson of  SolCom  at the  Comnet 98 trade  show in
Washington , D.C. to continue discussions. This initial meeting included Messrs.
Gray, John F. McTigue,  the Company's Chief Financial Officer, and David Sawyer,
then the Company's Senior Vice President of Sales. During these discussions, the
possibility of the two companies considering a more strategic relationship apart
from  merely a  licensing  arrangement  was  introduced.  It was decided at this
meeting  that each party would begin the  initial  stages of merger  discussions
immediately and  individually  report to their  respective board of directors to
obtain necessary approvals.                                                     

         Background of  Discussions  and Meetings.  During  February  1998,  the
Company's  Board of  Directors  authorized  Messrs.  Gray and  McTigue  to visit
SolCom's  offices in Livingston,  which  occurred  during the week of March 2-6,
1998.  The purpose was to further  examine the potential  merits of the proposed
transaction,  as well as potential financial impacts, operating synergies, staff
overlap,  if any, and any  product/customer  related overlap or synergies.  This
visit further confirmed the Company's  position that this transaction had merits
from a product  (including  a  substantial  number of products  currently  under
technological   development,   customer,  staff,  target  market  and  financial
perspective. The following items were most significant: technology of the target
company, the target customer base was similar and the products of both companies
complimented  each other as opposed to  competing  with each  other,  SolCom was
heavily  staffed with  engineers  and needed  additional  sales  presence in the
United States and the Company had an  established  sales  presence in the United
States and Europe, and both had significant  customers that could be targeted by
the  products  and  services of the other.  At about this time,  both  companies
exchanged preliminary financial information.                                    

         On March 9, 1998, the Board of Directors of the Company  authorized Mr.
Gray and Mr.  McTigue  to proceed  with the  proposed  acquisition  and take any
necessary action in connection  therewith,  including entering into a "letter of
intent" and performing the required due diligence.  This included  retaining Van
Kasper & Company,  an  investment  banking  firm,  to advise the Board as to the
fairness of the proposed  Transaction from a financial point of view, as well as
retaining  PricewaterhouseCoopers  LLP and Semple Fraser WS in  connection  with
accounting and legal services, respectively, in Scotland.                       

         In  March  1998,  Messrs.  Wilson  and  Evans,  along  with  additional
engineering  staff,  visited  the  offices of the Company to perform the initial
stages of due  diligence as well as inform the Company that the SolCom Board had
approved in principle the concept of being  acquired by the Company.  During the
visit,  numerous matters were discussed with respect to products,  customers and
organizational structure.                                                       

         In April 1998,  Messrs.  McTigue and Gray returned to SolCom's facility
with representatives from Van Kasper and Company.  During this visit, Van Kasper
was given  unrestricted  access to SolCom's staff and financial records to allow
them to perform the reviews                                                     

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necessary to enable them to determine the fairness of the proposed  transaction.
It also allowed the  management of the two  companies to further lay  groundwork
for the transaction, prepare joint presentations for their respective Boards and
begin to prepare a model of the proposed financial plans of the combined entity.

         On April 9,  1998,  the  Company  entered  into a letter  of  intent to
acquire SolCom which was publicly announced on May 19, 1998.                    

         On June 10, 1998,  Van Kasper  delivered  its opinion to the  Company's
Board of  Directors as to the fairness of the  Transaction  to the  Shareholders
from a financial point of view.                                                 

         On June 23, 1998, the Company issued a press release announcing that an
agreement  with  respect  to the  principal  terms of the  Transaction  had been
reached.  The principal terms thereof were substantially the same as on June 10,
1998, the date of Van Kasper's fairness opinion.                                

         During  the  period of  April-August,  1998,  the  Company  and  SolCom
proceeded  to  negotiate  a  definitive   agreement  in   connection   with  the
Transaction.  During this timeframe,  both companies  continued  operational and
strategy  discussions  with  respect  to  the  anticipated  organization  of the
combined entity  subsequent to consummation of the Transaction as well as future
goals and objectives.                                                           

         On August  17,  1998,  the  definitive  Share  Purchase  Agreement  was
executed and delivered by all parties thereto.                                  

         The  Company  and  SolCom  renegotiated  the  principal  terms  of  the
Transaction  during the period of October through November 1998. On November 27,
1998, the principal terms and conditions of such  renegotiation were agreed upon
and a press release was issued in connection therewith. On December 23, 1998, an
Amendment to the Share  Purchase  Agreement  was  executed and  delivered by all
parties  thereto.  No update to the  Fairness  Opinion  will be  rendered by Van
Kasper & Company.                                                               

The Company's Reasons for the Transaction                                       

Positive Factors:                                             

         i.       The Company's  management  believes  that the combined  entity
                  will be able to provide a greater overall technology  delivery
                  engine and will  therefore  be better  able to  capitalize  on
                  market   opportunities;   accordingly,   the  Company's  Board
                  believes that shareholder  value will be likely to increase in
the future.                                 

         ii.      Both the Company and SolCom  have a similar  target  market as
                  well as non-  competing  and  complementary  products,  which,
                  together with each such entity's  technology and expertise and
                  the superior  technological  and market background of SolCom's
                  management, will create the ability to reach a "critical mass"
with                                        

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                  respect  to growth  and  opportunity,  the  ability to develop
           joint products and the fostering of economies of scale.

         iii.     The research and  development  products of SolCom are believed
                  to have great potential and are expected to create substantial
revenue growth for the combined Company.    

         iv.      The  combined   entity  will  offer  a  unified   presence  at
                  exhibitions  and trade shows  together with an enhanced  joint
                  site on the  Internet's  World Wide Web which will provide the
                  opportunity   for  the  combined  entity  to  develop  into  a
recognized leader in its field.             

         v.       The  Transaction  could  potentially   result  in  substantial
                  additional  revenues and accelerated  growth in the long term,
                  which  would   enable  the  Company  to  improve  its  overall
 financial position and results of operations.

         vi.      The terms and conditions of the Share  Purchase  Agreement are
                  fair to the Shareholders. Accordingly, over the long term, the
                  issuance of the  MicroFrame  Shares (as  hereinafter  defined)
                  would not be likely to result in  significant  dilution to the
                  Shareholders  as a function  of earnings  per share;  however,
                  Shareholders in the short term will  experience  immediate and
                  substantial  dilution of percentage ownership and voting power
                  with respect to the Company's  issued and  outstanding  Common
                  Stock  of  between  approximately  39.6%  (assuming  2,200,000
                  shares  of  Common  Stock  are  issued)  and  48.6%  (assuming
                  2,700,000  shares  of  Common  Stock  are  issued).  See "Risk
Factors-Dilution of Voting Power."          

         vii.     The   combination   of  the  two  companies   should   provide
                  synergistic  benefits in connection with the  consolidation of
                  certain  redundant  corporate  functions and accordingly,  the
                  combined  entity should be able to operate in a more efficient
                  and  profitable   manner  as  a  result  of  substantial  cost
reductions.                                 

Negative Factors:                                             

         i.       The Company's issuance of the MicroFrame Shares will result in
                  the  Shareholders   experiencing   immediate  and  substantial
                  dilution of percentage ownership and voting power with respect
                  to the  Company's  issued  and  outstanding  Common  Stock  of
                  between  approximately  39.6%  (assuming  2,200,000  shares of
                  Common Stock are issued) and 48.6% (assuming  2,700,000 shares
of Common Stock are issued).                

         ii.      As a result of SolCom's  substantial net operating  losses for
                  each of the fiscal  years ended June 30, 1996 and 1997 and the
                  six months ended  September 30, 1998 of $78,000,  $919,000 and
                  $180,000, respectively, together with SolCom's projection that
                  operating   losses  will   continue   into  the  near  future,
                  consummation  of the  Transaction may result in net losses for
the Company.                                

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         iii.     As of December 31, 1998,  SolCom had no available cash or cash
      equivalents to conduct its business or operations.

         iv.      The validity of SolCom's  technology  has not been  adequately
                  demonstrated  in  mass  market   applications.   In  addition,
                  SolCom's   relationship  with  the  Hewlett-  Packard  Company
                  constitutes  a  significant  portion of its current  business,
                  without which SolCom's business could be materially  adversely
affected.                                   

         v.       The  possibility  that the  merged  entity  would not  achieve
                  certain  synergies with respect to the combination of distinct
                  technologies  and  corporate  cultures  could have a potential
                  adverse  effect on the  business  as well as future  financial
                  operations  and  results.  In  addition,  if the  research and
                  development   efforts  of  SolCom  currently   in-process  are
                  ultimately  not  successful,   the  financial   condition  and
                  operations  of  the  Company  could  be  materially  adversely
affected.                                   

SolCom's Reasons for the Transaction                                            

         i.       The combined  entity will be able to provide a greater overall
                  technology  delivery  engine and, as a stronger  company  than
                  SolCom is now,  will be better  able to  capitalize  on market
                  opportunities;   accordingly,  SolCom's  Board  believes  that
                  shareholder  value will be likely to increase in the future as
                  shareholders  of the Company  rather than as  shareholders  of
SolCom.                                     

         ii.      Both the Company and SolCom  have a similar  target  market as
                  well as non-  competing  and  complementary  products,  which,
                  together with each such entity's  technology and expertise and
                  the superior  technological  and market background of SolCom's
                  management, will create the ability to reach a "critical mass"
                  with respect to growth and opportunity, the ability to develop
                  joint  products  (such  as  the  Sentinel   product)  and  the
fostering of economies of scale.            

         iii.     The  combined   entity  will  offer  a  unified   presence  at
                  exhibitions  and trade shows  together with an enhanced  joint
                  site on the  Internet's  World Wide Web which will provide the
                  opportunity   for  the  combined  entity  to  develop  into  a
recognized leader in its field.             

         iv.      SolCom  will  achieve  an  increased   sales,   marketing  and
                  distribution  presence  in the  United  States,  which  SolCom
                  believes  will  alleviate a  significant  barrier to sales and
profitability.                              

         v.       The Company is better  capitalized and has greater  managerial
                  depth than SolCom;  accordingly,  SolCom  recognized  that the
                  combined   entity  would  be  poised  to  take   advantage  of
opportunities in the technology field.      

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         vi.      SolCom's current  capitalization  is inadequate to produce the
                  kind  of  growth   necessary  for  an  acceptable   return  on
                  investment;  as a result of its larger size,  market  position
                  and  NASDAQ  listing,  it is easier  for the  Company to raise
capital.                                    

         vii.     The terms and conditions of the Share  Purchase  Agreement are
                  fair to the SolCom  shareholders.  SolCom  concluded  that the
                  possibility of appreciation of the Common Stock, when balanced
                  with all of the costs and challenges SolCom would encounter by
                  remaining  independent,  make the Transaction  fair and in the
best interests of the SolCom shareholders.  

FAIRNESS OPINION

         General.  At the  meeting of the Board of  Directors  of the Company on
June 10, 1998,  Van Kasper & Company,  600  California  Street,  Suite 1700, San
Francisco,  California 94108 ("Van Kasper")  delivered a written opinion,  as of
June 10, 1998, to the Board as to the fairness of the Transaction, as structured
on June 10,  1998,  to the Company and the  shareholders  of the Company  from a
financial  point of view (the  "Fairness  Opinion").  Van  Kasper's  opinion  is
limited  to the  fairness  of the terms and  conditions  of the  Transaction  as
structured on June 10, 1998, from a financial point of view, to the shareholders
of the Company and does not address the Company's  underlying  business decision
to proceed with the Transaction.                                                

         In conducting its review and rendering its opinion, Van Kasper, without
any independent verification, (i) relied on the accuracy and completeness of all
the  financial  and other  publicly  available  information  reviewed by them or
furnished or otherwise  communicated to them as written by the Company or SolCom
and (ii) assumed that the projections for the Company,  SolCom, and the combined
company after  completion of the Transaction  were reasonably  prepared based on
assumptions  reflecting good faith  judgments of the management  teams preparing
them as the most likely  future  performance  of the  Company,  SolCom,  and the
combined  company  after  completion  of the  Transaction  and that  neither the
management of the Company nor the  management of SolCom has any  information  or
belief  that would make any such  projections  misleading  in any  respect.  Van
Kasper  was not  retained  to,  and Van  Kasper  did not,  make any  independent
evaluation or appraisal of the assets,  liabilities or prospects of the Company,
SolCom or the combined company after completion of the Transaction.             

         Fairness Opinion Not Updated. Van Kasper delivered the Fairness Opinion
on June 10, 1998.  Since that date, Van Kasper has not been requested to and has
not updated the Fairness Opinion. Among the principal  considerations taken into
account by Van Kasper in  rendering  the  Fairness  Opinion  were the  financial
condition, results of operations, projections and business prospects of both the
Company  and  SolCom,  as well as the  consideration  proposed to be paid by the
Company in connection with the Transaction as structured on June 10, 1998. Based
on a  current  evaluation  by the  Board  of  Directors  of the  Company  of the
financial condition,  results of operations,  projections and business prospects
of both the Company and SolCom,  the terms of the Transaction were substantially
renegotiated by the Company and the Sellers in December 1998.  Accordingly,  the
Fairness Opinion by its terms is not directed at, and cannot be relied upon     

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with respect to, the fairness of the Transaction as presently  structured to the
shareholders of the Company.                                                    

         However,  based  in part on the  conclusions  reached  in the  Fairness
Opinion as of the date of its  delivery,  the Board of  Directors of the Company
has  carefully  evaluated  the  changes  that  have  occurred  in the  financial
condition,  results of operations,  projections  and business  prospects of both
SolCom and the Company since June 1998,  particularly  the adverse  changes that
have occurred in the financial condition,  results of operations and projections
of SolCom,  and the Board of  Directors  of the Company has  concluded  that the
renegotiated  reduced  level of  consideration  to be paid by the Company in the
Transaction  results in a Transaction  that is fair,  from a financial  point of
view, to the shareholders of the Company.                                       

         The full text of the written  opinion of Van  Kasper,  which sets forth
assumptions made, matters considered and limitations on the review undertaken in
connection  with the  Fairness  Opinion,  is  attached  hereto as Appendix B and
incorporated  herein by reference.  The summary contained herein is qualified in
its entirety by reference to the full text of the Fairness Opinion.             

         Summary of Methods Utilized.  Set forth below is a brief summary of the
analyses performed by Van Kasper in conjunction with the delivery of its written
Fairness Opinion stating that the  Transaction,  as structured on June 10, 1998,
was fair to the Company  and the  shareholders  of the Company  from a financial
point of view.                                                                  

         Comparisons  to Selected  Publicly  Traded  Comparable  Companies.  Van
Kasper  performed a valuation  of SolCom  using  selected  financial  ratios and
multiples of seven comparable publicly traded companies identified by Van Kasper
(consisting of Applied Digital Access, Inc., Concord Communications,  Inc., Jyra
Research,  Inc., Peregrine Systems, Inc., Sync Research,  Inc., Visual Networks,
Inc.,  and  Wandel  &  Goltermann  Technologies,  Inc.).  Because  most of these
companies are not currently profitable,  Van Kasper utilized the market value of
invested  capital  (i.e.,  market  capitalization  plus  interest  bearing debt)
("MVIC") as a multiple of revenues for the twelve months ended March 31, 1998 to
derive an indicated  equity value for SolCom.  The range of multiples of MVIC to
revenues for the twelve  months  ended March 31, 1998 was 1.6 to 213.4,  with an
adjusted  average  (eliminating  the highest  and lowest  values) of 8.8. On the
basis of this  average  multiple,  Van Kasper  then  calculated  an  approximate
indicated equity value of SolCom on a stand-alone basis of $20.0 million.       

         No  company  used in the above  analysis  for  comparison  purposes  is
identical to SolCom. Accordingly, an analysis of the results of the foregoing is
not purely mathematical; rather it involves complex considerations and judgments
as to the  financial and  operating  characteristics  of the companies and other
factors  that could  affect the value of the  companies to which SolCom is being
compared.                                                                       

         Discounted Cash Flow Analysis.  Van Kasper  performed a discounted cash
flow analysis of SolCom utilizing the anticipated  future cash flow streams that
SolCom would  produce over the period from June 30, 1998 through  March 31, 2001
if SolCom  performed in accordance with forecasts  provided by the management of
SolCom. Van Kasper also estimated a terminal value of                           

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SolCom as of March 31,  2001 by  applying  multiples  ranging  from 23.0 to 27.0
times  SolCom's  projected net income for the fiscal year ending March 31, 2001.
Van Kasper based the range of terminal value multiples,  in part, on the trading
multiples of the publicly traded comparable companies. The cash flow streams and
terminal value were  discounted to their present value as of June 30, 1998 using
a range of discount rates from 23.0% to 27.0%,  reflecting different assumptions
regarding  SolCom's  weighted  average  cost of  capital.  On the basis of these
calculations,  Van Kasper  determined an approximate  indicated  equity value of
SolCom,  on a stand alone basis, of $20.9 million.  However,  it should be noted
that  from June 30,  1998  through  December  31,  1998,  SolCom  has  performed
significantly below the forecasts provided by SolCom's management.              

         Van Kasper  also  performed  a  discounted  cash flow  analysis  of the
post-Transaction  combined  company  utilizing the anticipated  future cash flow
streams that the combined  company  would  produce over the period from June 30,
1998 through March 31, 2001 if the post- Transaction  combined company performed
in accordance with forecasts  provided by management of the Company.  Van Kasper
also estimated a terminal value for the post-Transaction  combined company as of
March 31, 2001 by applying  multiples  ranging from 23.0 to 27.0 times the post-
Transaction  combined company's  projected net income for the fiscal year ending
March 31, 2001. Van Kasper based the range of terminal value multiples, in part,
on the trading multiples of the publicly traded comparable  companies.  The cash
flow streams and terminal  value were  discounted to their present  values as of
June 30,  1998 using a range of  discount  rates  from 21.0% to 25%,  reflecting
different assumptions regarding the post-Transaction combined company's weighted
average  cost of  capital.  On the  basis  of  these  calculations,  Van  Kasper
calculated  an  approximate  indicated  equity  value  for the  post-Transaction
combined  company of $38.4 million and an indicated equity value of the proposed
ownership  interest in the  post-Transaction  combined company to be held by the
shareholders of the Company following the Transaction of $21.3 million. However,
it should be noted that from June 30, 1998 through December 31, 1998, SolCom has
performed significantly below the forecasts provided by SolCom's management.    

         Comparable  Merger and  Acquisition  Transaction  Analysis.  Van Kasper
researched  a variety  of  merger  and  acquisition  transaction  data  sources,
including on-line databases,  public filings,  press releases and newspapers for
the time period  from  January 1, 1996 to the date of its  analysis.  Van Kasper
located 305 potentially comparable merger and acquisition transactions, however,
only 18 such  transactions  disclosed  sufficient  details  to draw  conclusions
regarding  valuation.  Upon further  examination,  an additional 14 transactions
were  eliminated for a variety of reasons  including  differences in transaction
size,  incompatible  underlying  deal  structures  or lack of data.  Van  Kasper
utilized  the  remaining  four  transactions  (consisting  of  Visual  Networks,
Inc./Net2Net Corporation, Network General Corporation/Cinco Networks, Inc., 3Com
Corporation/Axon  Networks, Inc., and Bay Networks,  Inc./Armon Networking Ltd.)
to derive a valuation  of SolCom  utilizing  the multiple of total deal value to
latest  twelve  months  revenues.  The range of multiples of total deal value to
latest twelve months  revenues were 6.9 to 13.0,  with an average of 8.6. On the
basis of this  average  multiple,  Van Kasper  then  calculated  an  approximate
indicated equity value of $19.8 million.                                        

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         The summary set forth above describes the material  analyses  performed
by Van  Kasper  and  does  not  purport  to be a  complete  description  of such
analyses.  The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. In addition,
the evaluation of fairness of the  Transaction,  from a financial point of view,
as of the date of the opinion was to some extent a  subjective  one based on the
experience and judgment of Van Kasper, and not merely the result of mathematical
analysis of the financial data. Therefore,  notwithstanding the separate factors
summarized  above, Van Kasper believes that its analyses must be considered as a
whole and that  selecting  portions of its  analyses,  without  considering  all
factors and analyses,  would create an incomplete view of the process underlying
the analyses by which Van Kasper reached its opinion.                           

         In performing its analyses,  Van Kasper made numerous  assumptions with
respect to industry  performance,  general business and economic  conditions and
other matters,  in addition to the financial  assumptions  described  above. The
analyses performed by Van Kasper are not necessarily indicative of actual values
or actual future results, which may be significantly more or less favorable than
those suggested by such analyses.  Such analyses were prepared solely as part of
Van  Kasper's  analysis of the  Transaction.  The  analyses do not purport to be
appraisals  or to  reflect  the  prices at which a company  might be sold or the
prices at which any securities of the Company or the  post-Transaction  combined
company  may trade at any time in the future.  Furthermore,  Van Kasper may have
given  certain  analyses  more or less weight than other  analyses  and may have
deemed various assumptions more or less probable than other assumptions, so that
the ranges of valuations  resulting from any particular analysis described above
should not be taken to be Van Kasper's  view of the actual value of the Company,
SolCom, or the post-Transaction combined company.                               

         Method of Selection. The Board of Directors of the Company retained Van
Kasper to act as its financial advisor based upon its qualifications, experience
and  expertise.  Van Kasper,  as part of its  investment  banking  business,  is
engaged in the valuation of businesses and securities in connection with mergers
and  acquisitions,  private  placements  and  valuations for corporate and other
purposes.                                                                       

         Relationship/Compensation. The Company paid Van Kasper a fee of $80,000
in  connection  with  the  rendering  of  the  opinion  and  has  agreed  to pay
approximately  $21,500 in expenses thereof.  Van Kasper is a private  investment
bank with no affiliations with the Company,  SolCom or the Sellers.  The Company
has had no material  relationship  with Van Kasper within the last two years and
has no present  intention  to retain Van  Kasper in  connection  with any future
services.                                                                       

         Management of the Company  determined the amount of consideration to be
paid to the Sellers (as hereinafter defined) without any recommendation from Van
Kasper.                                                                         

         In no event did the Company  instruct  Van Kasper  with  respect to the
methodologies or conclusions  reached in connection with the Fairness Opinion or
impose any limitations on Van Kasper in respect thereof.                        

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THE PROPOSED TRANSACTION

         General.  The  Company has agreed to  purchase  all of the  outstanding
share capital of SolCom (the  "Shares")  pursuant to that certain share purchase
agreement dated as of August 17, 1998, as amended on December 23, 1998,  entered
into by and among the Company,  SolCom,  each of the Sellers (as defined  below)
and certain representatives of the Sellers (the "Share Purchase Agreement"), the
full text of which,  together with all exhibits  thereto,  is annexed  hereto as
Appendix A, after which SolCom will be a wholly-owned subsidiary of the Company.
In  consideration  of the sale  and  transfer  of the  Shares  from  the  SolCom
shareholders  (the  "Sellers")  to the Company,  the Company  shall issue to the
Sellers  shares of Common  Stock and options to purchase  shares of Common Stock
aggregating  up to 2,700,000.  It is currently  estimated  that the Company will
issue  approximately  2,200,000  shares of Common Stock and grant  approximately
500,000  options to purchase  shares of Common Stock.  In addition,  the Company
will issue up to 300,000  performance-based options to purchase shares of Common
Stock. The final  share/option  breakdown shall be determined in accordance with
certain  formulas  set  forth in  greater  detail  below.  See  "Share  Purchase
Agreement-Share Purchase."                                                      

         The discussion in this Information Statement of the Transaction and the
description of the principal terms thereof are subject to and qualified in their
entirety by reference to the Share  Purchase  Agreement,  which is  incorporated
herein by reference. Shareholders are urged to read the Share Purchase Agreement
in its entirety.                                                                

         Approval  by the  Board of  Directors.  The Board of  Directors  of the
Company  believes that the  Transaction  is in the best interests of the Company
and the Shareholders and has unanimously approved the Transaction.              

         Approval  by the  Shareholders.  Holders of a majority of the shares of
Common  Stock of the  Company  have  approved  the  Transaction  pursuant to the
Written Consents.                                                               

         Management  of  the  Business   Following  the  Proposed   Transaction.
Effective  as of the  Closing  (as such term is  defined  in the Share  Purchase
Agreement),  the Company's  Board of Directors shall consist of six (6) members,
four (4) of whom currently  constitute the Board (and who will remain as members
thereof) and the remaining two (2) of whom shall constitute  representatives  of
SolCom or its  nominees.  In  addition,  the  officers  of the Company as of the
Closing shall consist of the present officers of the Company, namely, Stephen B.
Gray,  President,  Chief Executive Officer and Chief Operating Officer,  Michael
Radomsky,  Executive  Vice  President and a Secretary,  John F.  McTigue,  Chief
Financial Officer and Treasurer,  and Robert M. Groll,  Vice  President-Business
Development,   as  well  as,  from  SolCom,   Peter   Wilson,   Executive   Vice
President-Marketing and Hugh Evans-Executive Vice President-Development.        

         Dissenters'  Rights of  Appraisal.  In accordance  with the  applicable
provisions  of the New  Jersey  Business  Corporation  Act  (the  "NJBCA"),  any
Shareholder  who has not  executed the Written  Consent  shall have the right to
dissent therefrom and demand payment of the fair value of shares of Common Stock
owned by such  Shareholder  by delivering a notice to the Company at 21 Meridian
Avenue, Edison, New Jersey 08820, Attention: John F. McTigue, Chief Financial   

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Officer (tel. 732-494-4440), of the Shareholder's intention to so dissent within
twenty   (20)  days  of  the  date  of  the  notice  from  the  Company  to  all
non-consenting  Shareholders  delivered  simultaneously with the mailing of this
Information  Statement  informing each such Shareholder of the right to dissent.
Section  14A:11-1 of the NJBCA sets forth the rights of Shareholders  who object
to the Transaction or the Reincorporation.  Any Shareholder who does not vote in
favor of the Transaction or the Reincorporation, or who duly revokes his vote in
favor  of  the  same,  may,  if  the  Transaction  and/or   Reincorporation  are
consummated,  obtain payment in cash of the fair value of his shares by strictly
complying with the requirements of Chapter 11 of the NJBCA. The Company,  within
20 days after the date on which the Transaction and Reincorporation take effect,
shall give written  notice of the effective  date thereof,  by certified mail to
each  Shareholder  that has filed a written  notice of dissent  and not voted to
approve  the  same.  Within  20 days  after  the  mailing  of such  notice,  any
Shareholder  may make written  demand on the Company for the payment of the fair
value of such  Shareholder's  shares.  Not later  than 20 days  after  demanding
payment for the shares of Common Stock held by such Shareholder, the Shareholder
shall submit the certificate or certificates  representing such shares of Common
Stock to the Company.  The Company  shall note that such demand has been made on
the certificate or certificates  and return such  certificate or certificates to
the  Shareholder.  Not later than 10 days after the  expiration of the period in
which  Shareholders  may make written demand to be paid the fair value for their
shares of Common  Stock,  the Company  shall mail to any  Shareholders  making a
written demand the balance sheet of the Company, as of the latest available date
which shall not be earlier  than 12 months prior to the making of the demand and
a profit and loss  statement  for not less than a 12- month  period ended on the
date of such balance sheet.  The fair market value of any shares of Common Stock
to which dissenters' rights are exercised shall be the fair market value of such
Common  Stock as of the  Closing.  Reference  is made to Sections  14A:11-1  and
14A:11-2 of the NJBCA, the full texts of which are annexed hereto as Appendix H.

         Effect on Shareholders.  Following the consummation of the Transaction,
the number of issued and outstanding  shares of Common Stock of the Company will
increase by an amount equal to the number of MicroFrame  Shares (as  hereinafter
defined)  issued to the Sellers  pursuant  thereto.  Shareholders of the Company
will continue to have the same voting,  dividend and  liquidation  rights in the
Company  after  the  Transaction.  However,  Shareholders  of the  Company  will
experience  immediate and substantial dilution following the consummation of the
Transaction  with  respect  to  percentage  ownership  and  voting  power of the
Company's  issued and outstanding  Common Stock of between  approximately  39.6%
(assuming  2,200,000  shares of Common  Stock are  issued)  and 48.6%  (assuming
2,700,000 shares of Common Stock are issued).                                   

         Accounting Treatment of Transaction.  The Transaction will be accounted
for by the Company under the "purchase  method" of accounting in accordance with
generally   accepted   accounting   principles.   Accordingly,   the   aggregate
consideration  paid by the Company in connection  with the  Transaction  will be
allocated to SolCom's  assets  based upon their fair values,  and the results of
operations  of SolCom  will be  included  in the  results of  operations  of the
Company only for periods subsequent to the Closing.                             

         Resale  Restrictions.  All shares of Common  Stock  received by Sellers
will be unregistered  restricted securities under the Securities Act of 1933, as
amended (the "Act") and Regulation S                                            

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promulgated thereunder. Sellers will be permitted to sell certain shares held by
them in accordance with Regulation S and Rule 144 promulgated  under the Act. In
general,  Regulation S prohibits  resales of securities sold pursuant thereto in
the United  States for a period of one (1) year,  after  which such  "restricted
securities" may be sold in reliance on Rule 144. Rule 144 as currently in effect
provides that an "affiliate" of the Company (as defined in Rule 144) or a person
who has beneficially owned restricted securities (as defined in Rule 144) for at
least one (1) year is entitled to sell within any three-month period a number of
shares  that does not exceed the  greater of 1% of the then  outstanding  Common
Stock or the average  weekly  trading volume in the Common Stock during the four
calendar  weeks  preceding  such sale.  Sales under Rule 144 are also subject to
certain manner-of-sale  provisions,  notice requirements and the availability of
current  public  information  about  the  Company.  Persons  who are not  deemed
affiliates of the Company and who have beneficially owned restricted  securities
for at least  two (2)  years are  entitled  to sell all of the  shares of Common
Stock owned by them  without  regard to the volume  limitation,  manner-of-sale,
notice or current public information requirements.                              

Share Purchase Agreement.                                     

                  Share  Purchase.   The  Company  shall  purchase  all  of  the
outstanding Shares pursuant to the Share Purchase Agreement,  after which SolCom
will be a wholly-owned  subsidiary of the Company.  In consideration of the sale
and transfer of the Shares from the SolCom  shareholders  (the "Sellers") to the
Company,  the Company shall issue to the Sellers an aggregate of up to 2,700,000
shares of  Common  Stock  and  options  to  purchase  shares of Common  Stock in
accordance with the following formula:                                          

                  (i) that  number of shares of Common  Stock  (the  "MicroFrame
         Shares"),  in proportion to each Seller's share ownership in SolCom, in
accordance with the following formula:                        

a                 x       2,700,000         
---------                                   
a + b + c                                   

         where  'a'  equals  the  number  of Shares  held by  Sellers  as of the
         Closing;  'b' equals the number of  ordinary  shares of 1 pence each in
         the capital of SolCom as of the Closing subject to options to subscribe
         therefor; and 'c' equals the number of Third Party Shares (as such term
    is defined in the Share Purchase Agreement) as of the Closing; and

         (ii) that number of options to purchase shares of Common Stock equal to
         (x) the total number of options to purchase  shares of capital stock of
         SolCom as of the  Closing  divided by (y) the  Conversion  Factor.  The
         Conversion  Factor  is  determined  in  accordance  with the  following
formula:                                                      

a + b                                       
---------                                   
2,700,000                                   

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         where  'a'  equals  the  number  of Shares  held by  Sellers  as of the
         Closing;  and 'b' equals the number of ordinary  shares of 1 pence each
         in the  capital  of SolCom as of the  Closing  subject  to  options  to
subscribe therefor.                                           

         It  should be noted  that the  greater  the  number of shares of Common
         Stock issued pursuant to the Share Purchase Agreement,  the greater the
dilutive effect upon the Shareholders.                        

                  Performance-Based  Stock Options. In addition to the 2,700,000
shares of Common  Stock and  options  therefor,  the Company has agreed to grant
300,000  performance-based  options  upon the Closing to certain key  management
members of  SolCom,  150,000  of which  will vest if the  newly-combined  entity
achieves  revenues of at least $30 million in fiscal year 2000 and the remaining
150,000 of which will vest if the newly-combined entity achieves revenues of $60
million in fiscal year 2001. In the event that such targets are not reached, the
options will not vest and will expire.                                          

                  Escrow.  Approximately  fifty (50%) percent of the  MicroFrame
Shares  to be  issued  will be held in  escrow  for a period of one year for the
purpose of permitting the Company to set off against any liabilities incurred by
the  Company in the event of  breaches  of  representations  and  warranties  or
covenants by the Sellers or SolCom pursuant to an escrow agreement to be entered
into by and among the Company, certain Sellers, the Sellers' Representatives (as
such term is defined in the Share Purchase  Agreement) and Dundas & Wilson CS, a
Scottish law firm, as escrow agent.                                             

                  Exchange  of  Certificates.  Upon the  execution  of the Share
Purchase Agreement, there were delivered to a representative of the Sellers (the
"Sellers'  Representative")  certificates  representing  all of the  outstanding
Shares  together with duly executed share transfers to be held in custody by the
Sellers'   Representative   until  the  Closing,  at  which  time  the  Sellers'
Representative  shall  deliver the Shares and  transfers to the Company.  At the
Closing,  the  Company  will  deliver  the  MicroFrame  Shares  to the  Sellers'
Representative.                                                                 

                  Representations and Warranties.  The Sellers have made certain
representations  and warranties to the Company,  including  without  limitation,
existence  and  qualification,   capitalization,   options,  consents,  material
contracts,  financial statements,  absence of undisclosed liabilities,  tangible
and intangible  property,  title to assets,  debt,  absence of certain  changes,
litigation,  insurance,  employee  benefit plans,  environmental  matters,  real
property, taxation,  compliance with laws and permits, conflicts,  suppliers and
customers, labor matters, bank accounts, creditors,  officers, directors and key
employees,  insolvency,  computer systems and subsidiaries. The Company has made
certain  representations  and  warranties  to  the  Sellers,  including  without
limitation,    existence   and   qualification,    capitalization,    authority,
enforceability,  consents and approvals,  public filings,  the MicroFrame Shares
and NASDAQ.                                                                     

                  Covenants.  The Sellers  have made  certain  covenants  to the
Company,  including  without  limitation,  conduct and preservation of business,
insurance,  litigation,  repayment of debts,  notification  of certain damage or
destruction, indemnification of brokerage, taxes, standstill,                   

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exclusivity  and  technology.  The Company  has made  certain  covenants  to the
Sellers,  including  without  limitation,  conduct and preservation of business,
insurance,   litigation,   notification   of  certain  damage  or   destruction,
indemnification  of brokerage,  NASDAQ Listing,  employee  options,  filings and
registration rights.                                                            

                  Management  after the  Transaction.  Effective at the Closing,
SolCom will become a  wholly-owned  subsidiary of the Company.  The directors of
the Company  shall be Stephen B. Gray,  Stephen M.  Deixler,  Michael  Radomsky,
Alexander  C. Stark (each of whom is currently a director of the  Company),  and
two (2) nominees of SolCom.  In addition,  the officers of the Company as of the
Closing shall consist of the present officers of the Company, namely, Stephen B.
Gray,  President,  Chief Executive Officer and Chief Operating Officer,  Michael
Radomsky,  Executive  Vice  President and a Secretary,  John F.  McTigue,  Chief
Financial Officer and Treasurer,  and Robert M. Groll,  Vice  President-Business
Development,   as  well  as,  from  SolCom,   Peter   Wilson,   Executive   Vice
President-Marketing and Hugh Evans-Executive Vice President- Development.       

                  Conditions to the Transaction.  The respective  obligations of
the  Company  and  SolCom to  consummate  the  Transaction  are  subject  to the
fulfillment of certain conditions, including without limitation, filing with the
Securities  and  Exchange  Commission  (the  "Commission")  of this  Information
Statement  in  definitive  form,  execution  and  delivery of certain  ancillary
agreements,  delivery of certain  financial  statements and opinions of counsel,
approval of a majority of the Shareholders, regulatory approvals, exemption from
registration  under  the Act for the  issuance  of the  MicroFrame  Shares,  and
clearance  from the Inland  Revenue of the United  Kingdom.  The Share  Purchase
Agreement  contains no condition of closing with respect to  fluctuations in the
price of the  Common  Stock;  accordingly,  no party  may  terminate  the  Share
Purchase Agreement or their respective obligations contained therein as a result
of any such fluctuations.                                                       

                  Termination.  The Share  Purchase  Agreement may be terminated
upon  certain  events,  as  follows:  (i)  written  consent of the Buyer and the
Sellers or  Sellers'  Representatives,  (ii) the failure of the Closing to occur
before  June  30,  1999 or (iii)  the  failure  to  satisfy  any of the  closing
conditions set forth in Sections 8 and 9 of the Share Purchase Agreement without
waiver  thereof prior to June 30, 1999.  Upon  termination of the Share Purchase
Agreement,  all obligations of all parties  terminate,  except those relating to
non-solicitation, confidentiality and public announcements.                     

                  Ancillary  Agreements.  Consummation  of  the  Transaction  is
conditioned upon the execution and delivery at the Closing of certain  ancillary
agreements, including, among others, (i) an escrow agreement by and among Buyer,
certain Sellers,  the Sellers'  Representatives,  and Dundas & Wilson, as escrow
agent, (ii) employment agreement amendments by and among Buyer and each of Peter
Wilson, Hugh Evans, Keith Laing, Robert Struthers and Stephen Connelly,  (iii) a
registration  rights agreement by and among Buyer and the Sellers,  (iv) certain
opinions of counsel,  (v) stock  option  contracts  with respect to employees of
SolCom and (vi) a representation letter of Francis DeLaura.                     

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         Employment  Agreement  Amendment of Peter  Wilson.  Effective as of the
Closing,  the Company,  SolCom and Peter Wilson shall enter into an amendment to
that certain Employment Agreement by and among SolCom and Mr. Wilson dated March
17, 1993,  as amended on June 28, 1996,  which shall,  among other  things,  (i)
increase his annual salary to (pound)70,000 per year with a provision for annual
salary  increases,  (ii) grant 50,000  options to purchase  Common Stock,  (iii)
provide an  automobile  allowance  of  (pound)5,000  per year and (iv)  impose a
one-year covenant not to compete.                                               

         Employment  Agreement  Amendment  of Hugh  Evans.  Effective  as of the
Closing,  the  Company,  SolCom and Hugh Evans shall enter into an  amendment to
that certain Employment  Agreement by and among SolCom and Mr. Evans dated March
17, 1993,  as amended on June 28, 1996,  which shall,  among other  things,  (i)
increase his annual salary to (pound)70,000 per year with a provision for annual
salary  increases,  (ii) grant 50,000  options to purchase  Common Stock,  (iii)
provide an  automobile  allowance  of  (pound)5,000  per year and (iv)  impose a
one-year covenant not to compete.                                               

         Employment  Agreement  Amendment  of Keith  Laing.  Effective as of the
Closing,  the  Company,  SolCom and Keith Laing shall enter into an amendment to
that  certain  Employment  Agreement  by and among  SolCom and Mr.  Laing  dated
September 26, 1995,  which shall,  among other  things,  (i) increase his annual
salary to  (pound)55,000  per year,  (ii) grant 7,500 options to purchase Common
Stock and (iii) impose a three-month covenant not to compete.                   

         Employment Agreement Amendment of Robert Struthers. Effective as of the
Closing, the Company,  SolCom and Robert Struthers shall enter into an amendment
to that certain Employment Agreement by and among SolCom and Mr. Struthers dated
February 21,  1995,  which shall,  among other  things,  (i) increase his annual
salary to  (pound)43,000  per year,  (ii) grant 7,500 options to purchase Common
Stock and (iii) impose a three-month covenant not to compete.                   

         Employment Agreement Amendment of Stephen Connelly. Effective as of the
Closing, the Company,  SolCom and Stephen Connelly shall enter into an amendment
to that certain Employment  Agreement by and among SolCom and Mr. Connelly dated
February 21,  1995,  which shall,  among other  things,  (i) increase his annual
salary to  (pound)33,000  per year,  (ii) grant 7,500 options to purchase Common
Stock and (iii) impose a three-month covenant not to compete.                   

         Registration Rights Agreement. Effective as of the Closing, the Company
will enter into a registration  rights  agreement  with the SolCom  shareholders
which shall  entitle  each such  shareholder,  for a period of one year from the
Closing,  to (i) "piggyback"  registration  rights in the event that the Company
registers any Common Stock and (ii) certain limited "demand" registration rights
in the event the Company breaches certain  covenants  contained therein relating
to the availability of Rule 144 promulgated under the Act.                      

         Stock Option Contracts. Effective as of the Closing and pursuant to the
Sub-Plan,  the Company shall grant stock options to certain  employees of SolCom
who currently                                                                   

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hold options to purchase  shares in SolCom (the "Original  Options")  evidencing
the grant of options to purchase  approximately  500,000  shares of Common Stock
(the "Employee Options"). The Employee Options shall contain terms substantially
similar to the Original Options,  including without  limitation,  exercise price
(fair market value) and vesting period (between approximately 5 and 7 years from
the Closing) thereof.                                                           

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PRO FORMA CONDENSED FINANCIAL STATEMENTS

Unaudited Pro Forma Consolidated Balance Sheet (Note 7)                         
MicroFrame, Inc.-As of December 31, 1998                                        
SolCom Systems Ltd..-As of December 31, 1998                                    

The following  unaudited pro forma consolidated  balance sheet and statements of
operations  give effect to the share  purchase as if it had occurred on December
31,  1998 for  balance  sheet  purposes  and  April 1,  1997  for  statement  of
operations  purposes,  and should be read in conjunction  with the  consolidated
financial  statements of MicroFrame  and SolCom for the relevant  period and the
related notes thereto included, or incorporated by reference, elsewhere herein. 

                                                        [Enlarge/Download Table]


                                                       MicroFrame      SolCom     Pro Forma Adjustment       Pro Forma    
                      ASSETS                                                                                              

Current assets                                                                                                            
                                                                                                                          
   Cash and cash equivalents                        $      345,892        135,300                         $       481,192 
   Accounts receivable, less allowance for doubtful                                                                       
      accounts of $95,249                                2,823,565        610,500                               3,434,065 
   Inventory, net                                        2,036,567        358,050                               2,394,617 
   Deferred tax assets                                     337,512                                                337,512 
   Prepaid expenses and other current assets               461,557        207,900                                 669,457 
                                                      ------------  ----------------------------------- ----------------- 
      Total current assets                               6,005,093      1,311,750                               7,316,843 

Property and equipment, less accumulated depreciation of                                                                  
   $585,015 and $971,903                                   693,423        234,300                                 927,723 
Capitalized software, less accumulated amortization of                                                                    
   $1,309,856 and $1,054,827                             1,426,567                     3,855,000(Note 2)        5,281,567 
Goodwill, less accumulated amortization of $33,555 and                                                                    
   $26,130                                                  68,055                       931,636(Note 2)          999,691 
Other intangible assets                                                                  250,000(Note 2)          250,000 
Security deposits                                           39,798                                                 39,798 
Other assets                                             1,026,064                  (1,026,064)(Note 2)                 0 
                                                      ------------  ----------------------------------- ----------------- 
      Total assets                                 $     9,259,000      1,546,050             4,010,572   $    14,815,622 
                                                      ============  =================================== ================= 

       LIABILITIES AND STOCKHOLDERS' EQUITY                                                                               

Current liabilities                                                                                                       
   Bank borrowings                                 $     1,100,428         66,000                         $     1,166,428 
   Accounts payable                                      1,694,260      1,959,800                               3,654,060 
   Accrued payroll and related liabilities                 212,348                                                212,348 
   Deferred income                                          95,673                                                 95,673 
   Other current liabilities                               337,697        994,950        267,400 (Note2)        1,600,047 
                                                      ------------  ----------------------------------- ----------------- 
      Total current liabilities                          3,440,406      3,020,750               267,400         6,728,556 
                                                      ------------  ----------------------------------- ----------------- 

Deferred tax liabilities, net                               48,808                                                 48,888 
Long-Term debt                                             500,000                                                500,000 
Other liabilities                                                          85,800                                  85,800 
Commitments and contingencies                                                                                             

Stockholders' equity                                                                                                      

   Common stock                                              6,652        701,852    (699,652) (Note 2)             8,852 
   Preferred stock - par value $10 per share; authorized                                                                  
      200,000 shares, none issued                                                                                         
   Additional paid-in capital                            7,366,221      1,449,588     4,524,997(Note 2)        13,340,806 
   Accumulated deficit                                  (1,886,534)    (3,713,639)    (80,474) (Note 2)        (5,680,647)
   Accumulated comprehensive income                         (9,434)         1,699                (1,699)           (9,434)
                                                      ------------  ----------------------------------- ----------------- 

   Less - Treasury stock, 62,031 shares, at cost          (207,199)                                              (207,199)
                                                      ------------  ----------------------------------- ----------------- 
      Total stockholders' equity                         5,269,706     (1,560,500)            3,743,172         7,452,378 
                                                      ------------  ----------------------------------- ----------------- 
      Total liabilities and stockholders' equity   $     9,259,000      1,546,050             4,010,572   $    14,815,622 
                                                      ============  =================================== ================= 

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Unaudited Pro Forma Consolidated Statement of Operations (Note 7)               
MicroFrame, Inc.-Nine Months Ended December 31, 1998                            
SolCom Systems, Ltd.-Nine Months Ended December 31, 1998                        

                                                        [Enlarge/Download Table]


                                              MicroFrame              SolCom      Pro Forma Adjustment           Pro Forma    

                                                                                                                              
Net Sales                                  $  9,451,604   $         2,314,950   $       (350,000) (Note4)        $ 11,416,554 

Cost of sales                                 3,436,590               277,200                                       3,713,790 
                                           ------------        --------------     ---------------             --------------- 

Gross margin                                  6,015,014             2,037,750           (350,000)                   7,702,764 

   Research and Development expenses          1,285,809               562,650            350,000 (Note 4)           2,198,459 

                                                                                                                    6,495,647 

   Selling, general and administrative                                                                                        
expenses                                      3,671,247             2,824,000                                                 

   Depreciation and amortization                454,418               186,450           1,229,364(Note 3)           1,870,232 
                                           ------------        --------------     ---------------             --------------- 

Income (loss) from operations                   603,540            (1,535,750)         (1,929,364)                 (2,861,574)

Interest income                                   5,139                 1,656                                           6,795 

Interest expense                               (55,725)               (34,650)                                        (90,375)
                                           ------------        --------------     ---------------             --------------- 

Income (loss) before income tax provision       552,954           (1,568,744)         (1,929,364)                  (2,945,154)
(benefit)                                                                                                                     
                                           ------------        --------------     ---------------             --------------- 

Income tax provision (benefit)                  207,850                     0           (241,452)                     (33,602)
                                           ------------        --------------     ---------------             --------------- 

Net income (loss)                          $    345,104     $      (1,568,744)  $     (1,687,912)          $       (2,911,552)
                                           ============        ==============     ===============             =============== 
Per share data (Note 5)                                                                                                       

   Net income (loss) per share                                                                                                

Basic                                      $       0.06                                                    $            (0.38)
Diluted                                    $       0.05                                                    $            (0.38)

   Weighted average number of common                                                                                          
   shares outstanding basic                   5,490,922                                                             7,690,922 

   Weighted average number of common                                                                                          
      shares outstanding diluted              6,455,398                                                             7,690,922 


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                                                        [Enlarge/Download Table]


Unaudited Pro Forma Consolidated Statement of Operations (Note 7)                                                             
MicroFrame, Inc.-Year ended March 31, 1998                                                                                    
SolCom Systems Ltd..-Year ended March 31, 1998                                                                                

                                                                         SolCom       Pro Forma Adjustments                   
                                                     MicroFrame         (Note 6)                                    Pro Forma 

                                                                                                                              
Net sales                                        $     10,217,911   $    2,168,313   $                       $     12,386,224 
Cost of sales                                           4,285,134          456,225                                  4,741,359 
                                                   --------------      -----------    -------------------    ---------------- 
Gross Margin                                            5,932,777        1,712,088                                  7,644,865 
      Research and development expenses                 1,117,151          562,401                                  1,679,552 
      Selling, general and administrative expenses      3,933,783        2,002,727                                  5,936,510 
      Depreciation and amortization                       485,738           76,000       1,889,153(Note 3)          2,450,891 
                                                   --------------      -----------    -------------------    ---------------- 
Income (loss) from operations                             396,105         (929,040)            (1,889,153)         (2,422,088)
Interest income                                            14,888            1,659                                     16,547 
Interest expense                                           (4,344)         (43,134)                                   (47,478)
                                                   --------------      -----------    -------------------    ---------------- 
Income (loss) before income tax provision (benefit)       406,649         (970,515)            (1,889,153)         (2,453,019)
Income tax provision (benefit)                           (304,661)                               (433,333)           (737,994)
                                                   --------------      -----------    -------------------    ---------------- 
Net income (loss)                              $          711,310  $      (970,515)  $         (1,455,820$         (1,715,025)
                                                   ==============      ===========    ===================    ================ 
Per  share data (Note 5)                                                                                                      
   Net income (loss) per share                                                                                                
Basic                                          $             0.15                                        $              (0.24)
                                                   --------------                                            ---------------- 
Diluted                                        $             0.14                                        $              (0.24)
                                                   --------------                                            ---------------- 

   Weighted average number of common shares                                                                                   
   outstanding basic                                    4,840,357                                                  7,040,357  
                                                                                                             -----------------
                                                   --------------                                                             
   Weighted average number of common shares                                                                                   
   outstanding diluted                                  5,195,357                                                  7,040,357  
                                                   --------------                                            ---------------- 


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MicroFrame, Inc.                                                                
SolCom Systems, Ltd.                                                            
Notes to Unaudited Pro Forma Combined Financial Statements                      

1        Basis of Presentation                                                  
         MicroFrame and SolCom entered into a definitive agreement that provides
         for  the  purchase  of all  outstanding  share  capital  of  SolCom  by
         MicroFrame.  The  transaction  will be accounted for by the  "purchase"
  method of accounting with MicroFrame as the purchaser of SolCom.

2        Application of Purchase of SolCom                                      

         The revised purchase  agreement  specifies that MicroFrame will acquire
         all of the  outstanding  shares of SolCom in exchange  for a maximum of
         3,000,000 MicroFrame equity units, 2,700,000 of which will be comprised
         of common  shares and stock options  subject to a formula  contained in
         the Revised Purchase Agreement.  Included in the 3,000,000 equity units
         is a grant of  300,000  performance-based  options  that will  occur at
         consummation  to certain key management  members of SolCom,  150,000 of
         which will vest if the  newly-combined  entity achieves  revenues of at
         least $30  million  in fiscal  year 2000 and the  remaining  150,000 of
         which will vest if the  newly-combined  entity achieves revenues of $60
         million in fiscal year 2001. All of the  aformentioned  options (except
         for the  performance-based  options) will vest  immediately and have an
         average   exercise  price  of   approximately   $1.65  per  share.  The
         performance-based  options will vest upon reaching the  above-mentioned
         targets  and,  based upon the current  market value of the Common Stock
         (subject to fluctuations in the Common Stock), have an average exericse
price of approximately $2.25 per share.                       

         The following  tables detail the estimated  purchase price  calculation
         and the estimated  purchase price  allocation  that was utilized in the
pro forma financial statements:                               

Calculation of Purchase Price                               

Number of shares to be issued by MicroFrame         2,200,000                   
Average stock price for three days before and after                             
November 27, 1998                                       2.46      $5,401,786  
Number of options to be issued in the Transaction     500,000                   

Estimate fair value using Black Scholes model            1.15         575,000   
Total value of equity consideration                               $ 5,976,786   
Estimated transaction costs of MicroFrame                             999,350   
SolCom deficit at December 31, 1998                                 1,560,500   

                                                                   -----------
Total Consideration                                               $ 8,536,636   
                                                                   ===========

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Purchase Price Allocation                                         

Existing and core technology products                      $ 3,855,000          
Covenant not to compete                                        250,000          
In-process research and development                          3,500,000          
Goodwill                                                       931,636          
                                                  ----------
Total Purchase Price                                      $  8,536,636          
                                                  ==========

         For  purposes  of the pro forma  financials,  the Company has split the
         equity  units into the  following  classes of equity to  determine  the
consideration in the transaction:                             

o 2,200,000 common shares                                     
o 500,000 stock options                                       
o 300,000 performance-based options                           

         The Company has  utilized an average  stock price for a short period (3
         days)prior to and after the  announcement of the newly negotiated terms
         to the public that  occurred on November  27,  1998.  The  average,  as
         computed, is $2.46 per share. This average was applied to the 2,200,000
         common  shares  to  arrive at the  applicable  value for  consideration
         exchanged.  In  addition,  the Company has  estimated  the value of the
         500,000 stock options using a Black Scholes option valuation model. The
         estimated  value per option was $1.15.  The assumption  utilized in the
         model  include an expected  validity  of 80%; a dividend  yield of 0, a
         risk free  interest  rate of 5.33%  and an  expected  option  term of 5
         years.   The  Company  has  not  included  the  value  of  the  300,000
         performance-based  options in its  consideration,  as the  options  are
         contingent  upon the realization of the future revenues as noted above.
         If the contingency is resolved, additional purchase price consideration
will be recorded at that time.                                

         The  consideration  will be adjusted at consummation as the composition
         of shares and options will then be known. However, the Company believes
         that the consideration utilized in the calculations  underlying the pro
forma financial statements will not change materially.        

         In addition to the consideration noted above, the Company has estimated
         that  transaction  costs will be  $1,000,000.  The costs are  primarily
         comprised of  professional  fees and other  incremental  costs directly
         related to the  transaction.  The Company had  incurred  $1,026,064  of
         costs directly related to the transaction as of December 31, 1998. This
         amount has been reclassed in the pro forma adjustment  column to become
         part of the estimated  purchase  price  allocation.  Additionally,  the
         Company will assume  approximately  $950,000 of liabilities  related to
         SolCom in  connection  with the  transaction.  These  amounts have been
         recorded on SolCom's  historical  balance sheet as of December 31, 1998
    and accordingly, have been reflected as additional purchase price.

         The  preliminary  purchase  price  allocation  results  in a value  for
         existing and core  technology of $3,855,000,  which has been classified
         as  capitalized  software,  covenants  not to compete of $250,000,  and
         IPR&D of  $3,490,177.  These  estimates  will be refined upon the final
         purchase  price   allocation.   Management   believes  that  these  are
reasonable                                                    

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         estimates for pro forma  purposes,  as it knows of no events that would
currently cause a material change to preliminary estimates.   

         In-process  research  and  development,  which is not  expected to have
         reached  technological  feasibility  by the  consummation  date  of the
         Transaction  and which will have no  alternative  future use,  includes
         certain of the research and development  projects currently underway at
         SolCom. The projects fall into two broad categories: "NetworX" products
         and  Application   Specific   Integrated   Circuit  ("ASIC")  products.
         "Modular" and "Sentinel III" products,  although categorized and valued
         separately due to the nature of the lifecycle and expense  assumptions,
         falls under the NetworX  technology as defined.  NetworX  products will
         allow  network  managers to  evaluate  and control all aspects of their
         networks.  The ASIC  projects  underway  are likely to create  products
         where all the application  hardware and software necessary to carry out
         specific  tasks will be resident on a single  computer  chip. The chips
         will have substantial increases in processing speed and a lower cost to
         the  consumer.  This  will lead to  increased  benefits  to the  SolCom
product set.                                                  

         As  stated  above,   none  of  these  projects  has  met  technological
         feasibility.  If,  as a result  of the  uncertainties  surrounding  the
         successful  completion  of these  projects,  the  Company  is unable to
         establish  technological   feasibility  and  is  unable  to  produce  a
         commercially  viable product,  then the anticipated  incremental future
         cash flows  attributable to expected sales and profits from the NetworX
         and ASIC  products  will not be  realized.  This  could have a material
         adverse effect on the combined  Company's  future  financial  position,
results of operations and cash flows.                         

         The Company  does  believe,  however,  that it will be able to complete
         these projects and produce  commercially  viable products using the new
   NetworX and ASIC technologies that are currently being developed.

3        Pro Forma Statement of Operations                                      

         The statement of operations  for the year ended March 31, 1998 reflects
         pro  forma   adjustments  for  the  annual   amortization  of  existing
         technology,  covenants  not  to  compete  and  goodwill.  Based  on the
         estimated lives of the technology  that is being acquired,  the Company
         has assigned a three-year  life to these assets and to the goodwill for
         amortization  purposes.  The covenants not to compete will be amortized
         over one year, the contractual  life of the  restriction.  Amortization
         expense was  $833,333,  $250,000  and  $805,820,  respectively  for the
         capitalized software, the covenant not to compete, and the goodwill for
         the year ended March 31, 1998. The statement of operations for the nine
         months ended  December  31, 1998  reflects  pro forma  adjustments  for
         9/12ths amortization of existing technology and goodwill of $624,999and
$604,365, respectively.                                       

4        Inter-Company Transactions                                             

         All inter-company transactions between MicroFrame and SolCom during the
periods presented have been properly eliminated.              

5        Weighted Average Shares and Earnings Per Share                         

         The weighted  average shares  outstanding  has been adjusted to reflect
         the issuance of 2,200,000  shares of  MicroFrame's  common  stock.  The
500,000 options to purchase                                   

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         MicroFrame's common stock as a result of this transaction have not been
         included, as to include such shares would be anti-dilutive.  All of the
         2,200,000  shares  have  been  reflected  as  outstanding  despite  the
         transaction  provision that stipulates that 50% of the shares are to be
         held in escrow for up to one year after  consummation,  as the  Company
      believes beyond any reasonable doubt that the shares will be issued.

6        Foreign Currency Translation                                           

         The  financial  statements  of SolCom were  prepared in local  currency
         (British pounds sterling) and translated into U.S. dollars based on the
         current  exchange rate at the end of the period (December 31, 1998) for
         the balance sheet and weighted  average rate for the periods  presented
         on the  statements of operations  (nine months ended  December 31, 1998
and the year ended March 31, 1998).                           

7        In-Process Research and Development                                    

         SolCom  is  in  the  process  of  developing   products  with  two  new
         technologies,  NetworX technology and ASIC technology,  and several new
         products that are categorized as Modular, NetworX, Sentinel III or ASIC
products.                                                     

Description of Products                                       

         SolCom's Modular product line, although valued separately,  falls under
         the NetworX  technology as defined below.  SolCom is developing NetworX
         as the industry's first comprehensive  management tool. NetworX will be
         the industry's first integrated platform for proactive,  remote, secure
         management and monitoring of voice,  data and video  networks.  It uses
         Dial up,  Telnet or SNMP  connections  so that  managers  can  monitor,
         evaluate and control all aspects of their network from a single, remote
point.                                                        

         Sentinel products offer a range of comprehensive  site management tools
         for centralized  remote maintenance of large distributed voice and data
         networks.  All Sentinel products will feature Alarm & Fault Management,
         PBX Toll Fraud Detection,  Environmental Monitoring and Control as well
         as Security  Access  Management.  Sentinel III is an  intelligent  port
         controller  that will secure  remote  access to voice and data  network
         node maintenance  ports. The technology will combine remote  monitoring
         and Sentinel network device  management,  allowing control of a network
         as well as a comprehensive picture of its activities. It is expected to
         be a  low  cost  integrated  platform  for  proactive,  remote,  secure
         management and monitoring of voice,  data and video networks.  Sentinel
         III has all the security  features of Sentinel  and Sentinel  Slimline,
combined with the remote monitoring capabilities of NetworX.  

         An ASIC is an Application Specific Integrated Circuit that incorporates
         all the hardware and software required to carry out specific tasks on a
         single chip.  This will lead to a  substantial  increase in  processing
         speed and  reduction  in build cost.  Designing  the ASIC  requires the
         Company to  experience  a learning  curve  while the  engineers  become
         familiar  with this  technology.  Initially  there will be one ASIC but
         once the  initial  ASIC has been  developed,  there  will be an ongoing
     development to introduce more capabilities and features into ASICs.

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         In general, the major risks for the IPR&D products consists of: Time to
         market;  meeting  anticipated  sales  and COGS  levels;  and  providing
         competitive  products.  On a more  specific  level,  each IPR&D product
       still needs developments to be completed prior to commercial release.

         The  remaining  risks for the Modular  products are  ensuring  that the
         cards   operate  as  expected   when  fitted  to  the  "RMON"   Engine.
         Furthermore,  SolCom must make sure that the Modular products reach the
expected performance levels during testing.                   

         NetworX requires that the hardware  development is complete with all of
         the  associated  drivers.  The new  operating  system has to be running
         correctly  and the  developed  code  needs to be  completed,  ported to
         NetworX and launched.  Daughter cards for the NetworX system have to be
         completed along with all associated  drivers.  The software needs to be
         completed for the daughter cards and then the daughter cards need to be
tested in the NetworX platform.                               

         Sentinel III requires  that the hardware  development  is completed and
the associated software drivers are completed and operational.

         The new  ASIC-based  products  need  much  more  extensive  development
         efforts.  First,  since the technology is so new, the engineers need to
         complete their  familiarization  with the  technology.  SolCom needs to
         find a chip  manufacturer  with  which to work.  The cards have to have
         their  design  verified  and have to be tested  both  with the  NetworX
         motherboard and the new NetworX  operating  system,  with many expected
         refinements.  Finally, the chip will need to be manufactured. ASIC then
         needs to be tested to verify that it will meet the required performance
levels prior to releasing the technology.                     

         Modular products have been in development  since early fiscal year 1999
         and  $230,928  will have been spent on Modular  products at the time of
         closing.  Another $57,732 will need to be spent in order to release the
         Modular  products by their  expected  release  date of April 1999.  The
         Sentinel  III  product is expected to be released in the market in June
         1999. To date, SolCom has spent $67,354 on research and development and
         expects to spend an additional $15,395 prior to release. Management has
         projected  revenues for Sentinel III beginning in 2000. As of March 31,
         1999, $250,172 will have been spent on research and development for the
         NetworX products.  Another $45,395 of research and development expenses
         has been  budgeted to complete  these  products.  NetworX  products are
         expected to be commercially released in June of 1999 but management has
         projected NetworX products to start generating  revenues in fiscal year
         2000.  ASIC-based  products  are  less  complete  than  NetworX.  As of
         consummation  of  the  Transaction,   only  $105,842  in  research  and
         development  expenses  will have been spent and ASIC products will need
         another  $350,000 in order to become  technologically  and commercially
         feasible.  ASIC is  expected to be launched in the first half of fiscal
         year 2001 and  management  has projected  revenues  beginning in fiscal
year 2001.                                                    

Analysis of Products/IPR&D                                    

         SolCom was analyzed on a stand-alone  basis.  The analysis was adjusted
         so that any  projections  for  products  that were known to include the
         Company's  technology  and/or  know-how  were  reduced to reflect  only
         SolCom's  efforts  and  contributions  as  appropriate.  The Company is
contributing technology to both Sentinel III and the          

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         NetworX  Motherboard  product  of  30%  and  20%,   respectively.   The
         percentage attributable to the Company's technology was eliminated from
         the product's value in the analysis.  For example, the present value of
         cash  flow  for  Sentinel  III is  approximately  $2.1  million.  After
         adjusting the cash flows to exclude the Company's portion of those cash
         flows, the SolCom value decreases to $1.5 million.  After adjusting for
         the stage of completion,  Sentinel III value  accounted for as IPR&D is
$1.2 million.                                                 

         The  Company's  professional  appraisal  firm has updated the valuation
         models to comply with the stage of  completion  and  multiple  discount
         rate guidance that has been issued by the Staff.  The analysis that has
         been performed by the Company's  professional  appraisal firm concluded
         an IPR&D value of  $3,490,177.  The IPR&D is  comprised  of $77,062 for
         Modular  Products,  $2,043,539  for NetworX  products,  $1,224,702  for
         Sentinel  III and  $144,874  for  ASIC-based  products.  The  following
         discussion  provides  information  regarding the expected revenue to be
         generated by these  projects,  associated  costs of the  projects,  the
         period  over  which the  revenues  will be  generated  and the stage of
completion of each project at the time of acquisition.        

         The value  allocated to acquired IPR&D for the  Transaction as of March
         31, 1999,  the expected  closing  date,  was  determined  utilizing the
         income  approach  via an excess  earnings  analysis.  This  methodology
         requires  the  projection  of revenues and expense that will arise as a
         result of the successful completion of the IPR&D project. The operating
         income  attributable  to each IPR&D project was calculated as projected
         revenues less the projected operating expenses. Net operating income is
         calculated  after  applying the  projected  effective  tax rate for the
Company.                                                      

         A charge  was taken to reflect  the  economic  rent  related to the net
         assets  required to run the business and support  future  growth.  This
         return  on the  requisite  assets  was  based  on  industry  comparable
         companies and company  specific  information.  Where it was  determined
         that core  technology of the existing  technology  would be utilized by
         the IPR&D, a charge was applied against IPR&D revenues. Core technology
         was identified for all of the IPR&D projects.  A core technology charge
         of 30% of operating  profit was applied for each of the IPR&D projects.
         The charge for use of the core  technology  and the return on requisite
assets was subtracted from net income.                        

         The value  allocated to acquired  IPR&D was  determined  utilizing  the
         Stage of Completion  methodology.  This  methodology  utilizes the same
         cash flows as the excess  earnings  analysis,  but removes all research
         and development costs to complete the identified  project. In addition,
         the  discounted  value of these cash flows is reduced to represent  the
         percentage of which the project has been  completed as of the estimated
         Transaction closing date. The determination of the percentage completed
         is based  primarily on the amount of effort (cost or time)  expended to
         date and remaining until completion. Consideration is also given to the
         amount of risk and  effort  incorporated  in the  development  steps in
      relation to the development steps remaining to complete the project.

         New Modular products that will replace the current Modular products are
         expected to be released in April 1999.  Based on the risk and effort to
         date,  it has been  determined  that the Modular  products  will be 80%
         complete.  Based on historical research and development expenditures as
         a  percentage  of total  research  and  development  costs to bring the
         products to market,  the  percentage  complete is calculated to be 85%.
         Sentinel III is expected to be released in June 1999. Based on the risk
and effort to date, it has                                    

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         been  determined  that  Sentinel  III will be 80%  complete as of March
         31,1999.  Based  on  research  and  developments  spent  to  date  as a
         percentage of total budgeted costs until release,  the percent complete
         is 80%. The NetworX  products are expected to be released in June 1999.
         Two of these  NetworX  products are  considered to be 70% completed and
         two are considered to be 80% complete. The new ASIC based products were
         determined  to be  approximately  20%  complete  and are expected to be
         released in the first half of fiscal year 2001.  Based on research  and
         development   expenditures  as  a  percentage  of  total  research  and
         development  costs  needed to  complete  the  project,  the  percentage
complete is calculated to be 23%.                             

         The resulting cash flows were then  discounted at an  appropriate  rate
         based  on the risk  profile  and the  nature  of each  project  and the
         market. Due to the stage of each product, the expected release date and
         the  reliability  of the  projections,  a  range  of 30% to 40% for the
         discount  rates was  selected  as  appropriate.  Specifically,  Modular
         products,  NetworX and Sentinel III were discounted at 30% and ASIC was
         discounted  at 40%.  According  to the  Handbook  of Modern  Finance by
         Dennis E. Logue,  1997 Edition,  the required rate of return by venture
         capitalists  generally  ranged between 20% and 60%. We considered these
         projects to be similar to a late stage  venture  capital or a mezzanine
financing company at a 20% to 40% range.                      

         Modular  products  are  expected  to have a one-year  life  cycle.  The
         Company  started to develop the  Modular  products in fiscal year 1999.
         They  will  fully  replace  the  existing  Modular  products  that were
         developed  in fiscal  year 1998.  Total  revenues,  including  product,
         warranty and Hewlett Packard revenue,  are expected to be approximately
         $590,000  in  fiscal  year  2000  and zero in  fiscal  year  2001.  The
         associated  expected  costs of goods sold  ("COGS")  are 5% of expected
         sales.  Other operating  expenses  (sales,  marketing,  administrative,
         internal  support,  maintenance  research  and  development,  etc.) are
         attributed to each IPR&D product based on the overall  Company  expense
         margins. Those operating expenses are expected to be approximately 48%.
         Research  and  development  costs to  complete  were  determined  to be
$57,732.                                                      

         NetworX products are expected to have a seven-year life cycle, with its
         peak after  three  years.  Total  revenue  growth,  including  product,
         warranty  and  Hewlett  Packard  revenue is  expected  to  increase  by
         approximately  200% in fiscal  year 2001 and then to 80% by fiscal year
         2002.  Revenue growth will then decrease over the life of the products.
         The associated expected COGS are 15% of expected sales. Other operating
         expenses   (sales,   marketing,   administrative,   internal   support,
         maintenance  research and  development,  etc.) are  attributed  to each
         IPR&D  product  based on the overall  Company  expense  margins.  Those
         operating  expenses are expected to be approximately  48%. Research and
development costs to complete were determined to be $49,244.  

         Sentinel  III is expected to have an  eight-year  life cycle,  with its
         peak  after  four  years.  Total  revenue  growth,  including  product,
         warranty  and  Hewlett  Packard  revenue is  expected  to  increase  by
         approximately 200% in 2001 and then to 80% by fiscal year 2003. Revenue
         growth will then decrease over the life of the products. The associated
         expected  COGS are 14% of  expected  sales.  Other  operating  expenses
         (sales,  marketing,   administrative,   internal  support,  maintenance
         research and  development,  etc.) are  attributed to each IPR&D product
         based on the overall Company expense margins.  Those operating expenses
         are expected to be approximately 48%. Research and development costs to
complete were determined to be $15,395.                       

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         ASIC based products are expected to have a seven-year life cycle,  with
         its peak after three years.  Total revenue growth,  including  product,
         warranty and Hewlett  Packard revenue is expected to increase to 80% by
         fiscal year 2003.  Revenue  growth will then  decrease over the life of
         the products.  The associated  expected COGS are 9% of expected  sales.
         Other operating expenses (sales,  marketing,  administrative,  internal
         support, maintenance research and development,  etc.) are attributed to
         each IPR&D product based on the overall Company expense margins.  Those
         operating  expenses are expected to be approximately  48%. Research and
development costs to complete were determined to be $350,000. 

         Since the  Transaction  has not yet closed,  the Company  believes that
         disclosure  in the  Company's  financial  statements  and  MD&A  is not
         warranted at this time.  However,  the Company will disclose the effect
         and expected effect of the uncertainty of the successful  completion of
         the aforementioned  research and development  projects that the Company
         is acquiring pursuant to the Transaction in the Company's 1934 Exchange
Act filings subsequent to the consummation of the Transaction.

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RISK FACTORS

Risks Relating to an Investment in the Company

     References  to  the  "Company"  include  the  Company  and  SolCom  as  the
post-Closing  combined entity,  except where otherwise  indicated or appropriate
within the context thereof.                                                     

     Competition.  The market for network  management and remote maintenance and
security products for mission critical voice and data communications networks is
highly  competitive.  There can be no assurance that the proprietary  technology
which  forms the basis for most of the  Company's  family of  modular  standards
oriented  hardware  and  software  components  will  continue  to  enjoy  market
acceptance  or that  the  Company  will be able to  compete  successfully  on an
on-going  basis.  The Company  believes  that the  principal  factors  affecting
competition in the network management business are: (1) the products' ability to
meet a multiplicity  of network  management and security  requirements;  (2) the
products' ability to conform to the network  topologies and/or computer systems;
(3)  the  products'  ability  to  avoid  technological  obsolescence;   (4)  the
willingness and the ability of a vendor to support  customization,  training and
installation;  and (5) the price. Although the Company believes that its present
products and services are  competitive,  the Company  competes  with a number of
large computer,  electronics  and  telecommunications  manufacturers  which have
financial,   research  and  development,   marketing  and  technical   resources
substantially  greater than those of the Company,  including without limitation,
Net Scout Inc., Hewlett-Packard,  Inc., 3Com Corp., Technically Elite, Inc., Bay
Networks  Inc.,   Shomiti  Systems  Inc.,   Visual   Networks,   Inc.,   Concord
Communications,  Inc. and Sync  Research,  Inc.  Such  companies  may succeed in
producing  and  distributing  competitive  products  more  effectively  than the
Company  can produce  and  distribute  its  products,  and may also  develop new
products which compete effectively with those of the Company.                   

     Limited  Protection From Duplication of Proprietary  Products.  The Company
holds no patents on any of its technology.  Although it does license some of its
technology from third parties,  it does not consider any of these licenses to be
material to the Company's operations.                                           

     The  Company  has made a  consistent  effort to  minimize  the  ability  of
competitors  to duplicate  the  Company's  software  technology  utilized in its
products. However, there remains the possibility of duplication of the Company's
products, and competing products have already been introduced.                  

     No  Dividends.  The Company has not paid any cash  dividends  on its Common
Stock.  The  Company  presently  intends to retain all  earnings  to finance its
operations  and,  therefore,  does  not  presently  anticipate  paying  any cash
dividends in the foreseeable future.                                            

     Possible Volatility of Market Price of the Company's Securities. Because of
the nature of the  industry in which the Company  operates,  the market price of
the Company's  securities is highly  volatile.  Factors such as announcements by
the Company or others of  technological  innovations,  new commercial  products,
regulatory approvals or proprietary rights developments,                        

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and  competitive  developments  all may have a significant  impact on the future
business  prospects  of the  Company  and  the  market  price  of the  Company's
securities.                                                                     

     Rapid Industry Change and Technological  Change. The Company's success will
depend on the continued  and expanded use of its existing  products and services
and its ability to develop new products and services or adapt existing  products
and services to keep pace with change in the communications  industry. There can
be no assurance  that the Company will be  successful in modifying or developing
its existing or future  products in a timely manner or at all. If the Company is
unable,  due to resource,  technological  or other  constraints,  to  adequately
anticipate   or  respond  to  changing   market,   customer   or   technological
requirements,  the  Company's  business,  financial  condition  and  results  of
operations  will be  materially  adversely  affected.  Further,  there can be no
assurance  that  products  or services  developed  by others will not render the
Company's products and services non-competitive or obsolete.                    

     Technological  Factors;   Uncertainty  of  Product  Development;   Unproven
Technology.  The Company's  products are currently  being  utilized by a limited
number of  customers  and there can be no  assurance  that they will prove to be
sufficiently  reliable in widespread  commercial  use. It is common for hardware
and software as complex and  sophisticated as that incorporated in the Company's
products to experience  errors or "bugs" both during  development and subsequent
to  commercial  introduction.  There can be no assurance  that any errors in the
Company's  existing or future  products will be  identified,  or if  identified,
corrected.  Any such errors could delay commercial  introduction of new products
and  require  modifications  in  products  that  have  already  been  installed.
Remedying such errors has been and may continue to be costly and time consuming.
Delays in  remedying  any such  errors  could  materially  adversely  affect the
Company's  competitive position with respect to existing or new technologies and
products offered by its competitors.                                            

     Dependence on Key Personnel. The Company's success depends in large part on
the continued services of its key management,  sales, engineering,  research and
development and operational personnel and on its ability to continue to attract,
motivate and retain highly  qualified  employees and independent  contractors in
those  areas.  Competition  for such  personnel  is intense  and there can be no
assurance  that the Company will be successful  in  attracting,  motivating  and
retaining key personnel. The inability to hire and retain qualified personnel or
the loss of the services of key personnel  could have a material  adverse effect
upon the Company's business, condition and results of operations. Currently, the
Company maintains no "key man" insurance  policies with respect to any employees
of the Company.                                                                 

     Potential   Fluctuations   in  Quarterly   Performance.   The  Company  has
experienced fluctuations in its quarterly operating results and anticipates that
such  fluctuations  will continue and could intensify.  The Company's  quarterly
operating  results  may vary  significantly  depending  on a number of  factors,
including  the timing of the  introduction  or  acceptance  of new  products and
services  offered by the  Company,  changes in the mix of products  and services
provided by the Company, long sales cycles, changes in regulations affecting the
Company's business,  changes in the Company's operating expenses, uneven revenue
streams, and general economic conditions.  Revenue recognition for the Company's
products is based upon various performance criteria and                         

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varies  from  customer  to  customer  and  product to  product.  There can be no
assurance that the Company's levels of profitability will not vary significantly
among  quarterly  periods  or that in future  quarterly  periods  the  Company's
results of  operations  will not be below prior results or the  expectations  of
public market analysts and investors.  In such event, the price of the Company's
Common Stock could be materially adversely affected.                            

     Potential Negative  Financial Impact of In-Process  Research & Development.
The  Company's  in-process  research and  development  products have not yet met
technological feasibility.  If, as a result of the uncertainties surrounding the
successful  completion  of these  projects,  the Company is unable to  establish
technological  feasibility  and is  unable  to  produce  a  commercially  viable
product, the anticipated  incremental future cash flows attributable to expected
sales and profits from the NetworX and ASIC products will not be realized.  This
could have a material adverse effect on the Company's future financial position,
results of operations and cash flows.                                           

     Possible  Need for  Additional  Financing.  In the  event of  unanticipated
technical  or other  problems,  the Company  may be required to seek  additional
financing. There can be no assurance that additional financing will be available
on acceptable terms or at all.                                                  

     Government Regulation and Legal Uncertainties. Due to the sophistication of
the  technology  employed  in the  Company's  devices,  export of the  Company's
products is subject to governmental  regulation.  As required by law or demanded
by customer contract,  the Company routinely obtains approval of its products by
Underwriters' Laboratories. Additionally, because many of the Company's products
interface with telecommunications  networks, its products are subject to several
key Federal  Communications  Commission  ("FCC")  rules and thus FCC approval is
necessary as well.                                                              

     Part  68  of  the  FCC  rules   contains  the  majority  of  the  technical
requirements  with  which  telephone  systems  must  comply to  qualify  for FCC
registration  for  interconnection  to the  public  telephone  network.  Part 68
registration  represents  a  determination  by the  FCC  that  telecommunication
equipment  interfacing with the public  telephone  network complies with certain
interference  parameters  and the  Company  intends  to  apply  for FCC  Part 68
registration for all of its new and future products.                            

     Part 15 of the FCC rules  requires  equipment  classified  as  containing a
Class A  computing  device to meet  certain  radio and  television  interference
requirements,  especially  as such  requirements  relate to  operations  of such
equipment in a residential area.  Certain of the Company's  products are subject
to Part 15.                                                                     

     The European  Community is developing a similar set of requirements for its
members and the Company has begun the process of compliance for Europe.         

     Potential Future Sales Pursuant to Rule 144. Sale of substantial amounts of
Common Stock in the public  market could  adversely  affect the market price for
the Common Stock.  As of January 5, 1999, an aggregate of 988,174  shares of the
Company's Common Stock were held by                                             

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officers,  directors and certain  principal  stockholders  of the Company and an
additional  892,922  shares of the  Company's  Common Stock will be held by such
persons upon their exercise of currently exercisable stock options and warrants.
Such  shares of Common  Stock may not be freely  resold as they are  "restricted
securities" under Rule 144, as promulgated by the Commission pursuant to the Act
and the rules and regulations  thereunder.  Rule 144 provides,  in essence, that
all shareholders must hold restricted securities for a minimum period of one (1)
year.  After  holding  restricted  securities  for a  period  of one  year,  any
shareholder may sell them in an unsolicited brokerage transaction within a three
month  period in an amount  which does not exceed the  greater of 1% of the then
outstanding  Common Stock or the average  weekly  trading volume during the four
calendar  weeks  prior  to  such  sale.   Non-affiliated   shareholders  holding
restricted  securities  for more  than  two  years  are not  subject  to  volume
limitations  and may sell unlimited  amounts of Common Stock under Rule 144. The
price of the Company's Common Stock might be adversely affected if a substantial
portion of the Common Stock is sold pursuant to Rule 144.                       

 Risks Relating to the Transaction

     Operating Losses.  SolCom has experienced  substantial net operating losses
for each of the fiscal  years ended June 30, 1996 and 1997 and the three  months
ended December 31, 1998 of $78,000, 919,000 and $180,000,  respectively.  SolCom
anticipates   that  operating   losses  will  continue  into  the  near  future.
Accordingly, there can be no assurance that consummation of the Transaction will
result in profitability for SolCom or the Company.                              

     Lack of Cash Flow. As of December 31, 1998, SolCom had no available cash or
cash  equivalents  to  conduct  its  business  or  operations.  There  can be no
assurance  that  SolCom  will be able to  increase  its cash flow in the future.
Accordingly,  this  may  result  in the  necessity  for the  Company  to  infuse
substantial  capital into SolCom which could have a material adverse effect upon
the Company's business, results of operations and financial condition.          

     Competition.  The  business of the combined  entity is highly  competitive.
Many of the  entities  with which the Company  will  compete  subsequent  to the
consummation of the Transaction have  substantially  greater financial and other
resources  than the Company and SolCom  combined.  In addition,  the Company may
require substantially more time to bring the technology of the combined entities
and the corresponding new products to the marketplace than its competitors, many
of which have established  products and markets.  Competitors  include Net Scout
Inc.,  Hewlett-Packard,  Inc., 3Com Corp., Technically Elite, Inc., Bay Networks
Inc., Shomiti Systems Inc., Visual Networks, Inc., Concord Communications,  Inc.
and Sync Research,  Inc. Accordingly,  the Company may be unable to successfully
compete in this environment.                                                    

     No  Assurance  that the Company  Will  Realize  Anticipated  Benefits  from
Transaction.  The Transaction involves the combination of certain aspects of two
companies  that  have  operated  independently.  Accordingly,  there  can  be no
assurance that SolCom can be  successfully  integrated  into the Company or that
the Company and the Shareholders (including persons who become Shareholders as a
result  of the  Transaction)  will  ultimately  realize  any of the  anticipated
benefits of the Transaction.                                                    

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     Lack of Update to Fairness  Opinion.  Although  the Company has received an
opinion from Van Kasper & Company  dated June 10, 1998 to the effect that, as of
such date and based upon  certain  matters as stated  therein,  the terms of the
Transaction,  as  then  contemplated,  were  fair  to  the  Shareholders  from a
financial  point of view,  the Company  does not  presently  intend to obtain an
update to such opinion.                                                         

     Dilution of Voting Power.  Consummation of the  Transaction  will result in
immediate and substantial dilution of percentage ownership and voting power with
respect to the Common Stock of between  approximately  39.6% (assuming 2,200,000
shares of Common  Stock are  issued)  and 48.6%  (assuming  2,700,000  shares of
Common Stock are issued).                                                       

 OUTSTANDING VOTING SECURITIES

     As of the Written Consent Date, there were 5,557,980 issued and outstanding
shares of Common Stock.  Each holder of Common Stock is entitled to one vote for
each share held by such holder.                                                 

     The NJBCA  provides in substance  that unless the Company's  certificate of
incorporation  provides otherwise,  shareholders may take action (except for the
election of  directors)  without a meeting and without prior notice if a consent
or  consents  in writing,  setting  forth the action so taken,  is signed by the
holders of  outstanding  stock having not less than the minimum  number of votes
that  would be  necessary  to take such  action at a meeting at which all shares
entitled to vote thereon were present.  Under the  applicable  provisions of the
NJBCA,  such action is effective when written consents from holders of record of
a majority of the outstanding  shares of voting stock are executed and delivered
to the  Company  within  60 days of the  earliest  dated  consent  delivered  in
accordance with the NJBCA.                                                      

     In  compliance   with  the  provisions  of  the  NJBCA  and  the  Company's
certificate  of  incorporation,  on or  about  the  Written  Consent  Date,  the
Shareholders  executed and delivered to the Company the Written Consents in lieu
of a meeting of the Shareholders  representing  the Written Consent  Percentage,
approving and adopting the Share Purchase Agreement, the agreements contemplated
thereby and authorizing the consummation of the  Transaction,  the Plans and the
Reincorporation.                                                                

 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

         The following  table sets forth,  as of the Written  Consent Date,  the
ownership of the  Company's  Common Stock by (i) each person who is known by the
Company  to own of record or  beneficially  more than five  percent  (5%) of the
Company's  Common  Stock,  (ii)  each  of the  Company's  directors,  (iii)  the
Company's  Chief  Executive  Officer and the most highly  compensated  executive
officers  with  aggregate  compensation  which  exceeds  $100,000  and  (iv) all
directors  and  officers  as  a  group.  Except  as  otherwise  indicated,   the
shareholders  listed in the table have sole  voting and  investment  powers with
respect to the shares indicated.                                                

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                                                                [Download Table]

                                                                    Percent of  
                                                      Percent of       Class    
                                                        Class       Subsequent  
                                                       Prior to         to      
Name and Address                       Shares Owned  Transaction   Transaction* 
----------------                       ------------  -----------   -----------  
                                                                                
Stephen M. Deixler (1)                      760,532         13.7%           9.8%
371 Eagle Drive                                                                 
Jupiter, Florida 33477                                                          

Stephen B. Gray (2)(10)                     477,309          8.6%           6.2%

Michael Radomsky (3)(10)                    356,643          6.4%           4.6%

Robert M. Groll (4)(10)                     100,852          1.8%           1.3%

John F. McTigue (5)(10)                     100,760          1.8%           1.3%

Alexander C. Stark (6)                       85,000          1.5%           1.1%
356 Eagle Drive                                                                 
Jupiter, Florida 33477                                                          

Special Situations Fund, III, L.P.(7)       855,863         15.4%          11.0%

MGP Advisers Limited Partnership (7)        855,863         15.4%          11.0%

AWM Investment Company, Inc. (7)          1,170,133         21.1%          15.1%

Austin W. Marxe (7)                       1,170,133         21.1%          15.1%

Jay Associates LLC (8)                      480,000          8.6%           6.2%
1118 Avenue J                                                                   
Brooklyn, New York  11230                                                       

Alpha Investments LLC (9)                   336,000          6.0%           4.3%
5611 North 16th Street #300                                                     
Phoenix, Arizona  85016                                                         

Stephen P. Roma                             403,569          7.3%           5.2%
91 Durand Drive                                                                 
Marlboro, New Jersey 07748                                                      

Directors and executive                   1,881,096         33.8%          24.2%
  officers as a group (6 Persons)                                               

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

(1)      Does not include 214,436 shares of Common Stock owned by Mr.  Deixler's
         wife, mother, children and grandchildren as to which shares Mr. Deixler
         disclaims beneficial ownership. Includes 120,406 shares of Common Stock
         held by Merrill Lynch Pierce Fenner & Smith  custodian f/b/o Stephen M.
Deixler, IRA. Includes 27,500 shares of Common Stock          

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         which may be acquired pursuant to currently  exercisable options.  Also
         includes 53,330 shares issuable upon exercise of currently  exercisable
Class A and Class B Warrants.                                 

(2)      Consists  of  477,309  shares of  Common  Stock  which may be  acquired
pursuant to currently exercisable options.                    

(3)      Includes 142,339 shares of Common Stock which may be acquired  pursuant
to currently exercisable options.                             

(4)      Includes  56,684 shares of Common Stock which may be acquired  pursuant
to currently exercisable options.                             

(5)      Consists  of  100,760  shares of  Common  Stock  which may be  acquired
pursuant to currently exercisable options.                    

(6)      Includes  35,000 shares of Common Stock which may be acquired  pursuant
to currently exercisable options.                             

(7)      Special Situations Fund III, L.P., a Delaware limited  partnership (the
         "Fund"),   MGP  Advisers  Limited   Partnership,   a  Delaware  limited
         partnership   ("MGP"),   AWM  Investment  Company,   Inc.,  a  Delaware
         corporation ("AWM"), and Austin W. Marxe have filed a Schedule 13G, the
         latest  amendment  of which is dated  February 7, 1997.  All  presented
         information is based on the information  contained in the Schedule 13G.
         The address of each of the  reporting  persons is 153 East 53rd Street,
         New York,  New York  10022.  The Fund has sole  voting and  dispositive
         power with respect to 855,863 shares;  MGP has sole  dispositive  power
         with respect to 855,863 shares;  AWM has sole voting power with respect
         to 314,270 shares and sole dispositive  power with respect to 1,170,133
         shares;  and Mr.  Marxe has sole voting  power with  respect to 314,270
         shares,  shared  voting power with  respect to 855,863  shares and sole
         dispositive  power with respect to 1,170,133  shares.  MGP is a general
         partner of and investment  advisor to the Fund. AWM, which is primarily
         owned by Mr. Marxe, is the sole general partner of MGP. Mr. Marxe,  the
         principal  limited partner of MGP and the President and Chief Executive
         Officer  of  AWM,  is  principally   responsible   for  the  selection,
         acquisition  and  disposition  of the  portfolio  securities  by AWM on
         behalf of MGP, the Fund and another fund that  beneficially owns shares
         included  in the shares  beneficially  owned by AWM and Mr.  Marxe (the
         "Cayman Fund").  Also includes 267,242 shares issuable upon exercise of
         currently exercisable Class A and Class B Warrants held by the Fund and
         MGP and 364,422 shares issuable upon exercise of currently  exercisable
         Class A and Class B  Warrants  held by AWM,  Mr.  Marxe and the  Cayman
Fund.                                                         

(8)      Includes  320,000  shares of Common  Stock  issuable  upon  exercise of
         currently exercisable Class A and Class B Warrants. A principal of such
entity is Sidney Borenstein.                                  

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(9)      Includes  224,000  shares of Common  Stock  issuable  upon  exercise of
         currently  exercisable  Class A and Class B  Warrants.  A Schedule  13D
         dated June 27, 1996 filed by such entity  discloses that Daniel Lemberg
and Daniel A. Bock are members thereof.                       

(10)     The address of such  person is c/o the  Company,  21  Meridian  Avenue,
Edison, New Jersey 08820.                                     

*        Assumes the  issuance of 2,200,000  shares of Common Stock  pursuant to
the Transaction.                                              

MARKET PRICE

         The Common Stock is traded on The NASDAQ SmallCap System.  The high and
low sales prices for the Common Stock on November 25, 1998,  two days before the
Company publicly  announced the principal terms of the  Transaction,  were $2.63
and $2.38, respectively.  The Company's Common Stock commenced trading on August
17, 1995 on the NASDAQ  SmallCap  Market under the symbol "MCFR".  Prior to that
date,  the Common  Stock was not traded on any  registered  national  securities
exchange, although several registered broker-dealers made a market in the Common
Stock.  The following table sets forth the high and low bid prices of the Common
Stock during fiscal year 1997, 1998 and 1999, by quarter, as reported by NASDAQ.
The  quotations  set forth below do not include  retail  markups,  markdowns  or
commissions and may not represent actual transactions.                          

                                                       HIGH                  LOW
Fiscal 1997               
                           June 30                    $2.88                $1.75
                           September 30                2.25                 1.06
                           December 31                 2.56                 1.50
                           March 31                    2.44                 1.56

Fiscal 1998               
                           June 30                    $1.88                $1.56
                           September 30                1.63                 1.25
                           December 31                 1.84                 1.31
                           March 31                    2.75                 1.13

Fiscal 1999               
                           June 30                    $4.63                $2.84
                           September 30                3.19                 1.44
                           December 31                 2.94                 1.50

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INFORMATION WITH RESPECT TO MICROFRAME

The  Company's  Annual Report on Form 10-KSB for the fiscal year ended March 31,
1998 (the "Company  10-KSB") and the Company's  Quarterly  Report on Form 10-QSB
for the fiscal  quarter ended  December 31, 1998 (the "Company  10-QSB"),  which
were previously filed with the Commission,  are annexed hereto as Appendix F and
Appendix G,  respectively.  As of the date of this  Information  Statement,  the
Company has not filed any reports pursuant to the Exchange Act subsequent to the
Company 10-QSB.                                                                 

Year 2000 Compliance                                                            

Background.  Some computers,  software,  and other equipment include programming
code in which calendar year data is abbreviated to only two digits.  As a result
of this design decision,  some of these systems could fail to operate or fail to
produce correct  results if "00" is interpreted to mean 1900,  rather than 2000.
These problems are widely  expected to increase in frequency and severity as the
year 2000 approaches, and are commonly referred to as the "Year 2000 problem."  

Assessment.  The Year 2000 problem  could affect  computers,  software and other
equipment used, operated or maintained by the Company.  Accordingly, the Company
is  reviewing  its  internal  computer  programs  and systems to ensure that the
programs  and  systems  will be Year 2000  compliant.  The  Company  has already
upgraded its software programs and has carried out certain tests of its accounts
payable and accounts  receivable  files which are date  sensitive  and found all
systems to operate properly.  The Company believes that its internal  management
information  systems,  billing,  payroll and other information services are Year
2000  compliant.  Furthermore,  the Company  presently  believes that all of its
computer systems will be Year 2000 compliant in a timely manner.  However, while
the  estimated  cost of these  efforts  are not  expected  to be material to the
Company's  financial position or any year's results of operations,  there can be
no assurance to this effect.                                                    

         In  addition,  there can be no assurance  that the computer  systems of
other companies on which the Company's systems rely will be timely modified,  or
that a failure to modify such systems by another company,  or modifications that
are  incompatible  with the  Company's  systems  or  software,  would not have a
material adverse effect on the Company. The Company has had discussions with its
material  vendors and suppliers with respect to the Year 2000 compliance of such
entities.  Based upon such  discussions,  the  Company  believes  that it is not
likely that the  Company's  relationships  with such  entities  will result in a
material  adverse  effect on the Company's  business or results of operations in
connection with Year 2000 compliance.                                           

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 SELECTED FINANCIAL DATA

         The following  table presents  selected  financial data of the Company.
The  information  set forth below should be read in conjunction  with "Pro Forma
Condensed Financial  Statements" contained in this Information Statement as well
as "Management's  Discussion and Analysis of Financial  Condition and Results of
Operations" and the historical  financial  statements and notes thereto included
elsewhere  in  this  Information   Statement.   The  consolidated  statement  of
operations  data set forth  below for each of the two years ended March 31, 1998
and March 31, 1997 and the consolidated balance sheet data at March 31, 1998 are
derived  from,  and are  qualified  by  reference  to, the audited  consolidated
financial  statements contained in the Company 10-KSB annexed hereto as Appendix
F, and should be read in  conjunction  with those  financial  statements and the
notes thereto.  The consolidated  balance sheet data at March 31, 1996, 1995 and
1994 are derived from the audited  consolidated balance sheets of the Company at
those aforementioned dates, which are not included elsewhere in this Information
Statement.  The consolidated  statement of operations data for each of the three
years ended March 31, 1996, 1995 and 1994 are derived from audited  consolidated
financial statements not included elsewhere in this Information  Statement.  The
balance sheet data as of December 31, 1998 and the statement of operations  data
for the nine months ended  December  31, 1998 have been  derived from  unaudited
consolidated  financial  statements  included in the Company's Form 10-QSB as of
December  31,  1998  annexed  hereto as  Appendix  G. The  historical  financial
information may not be indicative of the Company's future performance.          

                                                        [Enlarge/Download Table]


                                        Year Ended March 31, (1)                                                     
                                                                                                        Nine Months  
                             1994            1995             1996               1997         1998     ended 12/31/98
                             ----            ----             ----               ----         ----     --------------

                                                                                                                     
Net Sales                 $   4,744,554   $  7,126,391    $    6,258,243  $  7,343,624  $  10,217,911  $   9,451,604 
Income Before                                                                                                        
   Cumulative Effect of                                                                                              
   an Accounting Change         233,092        364,797       (1,993,700)       342,451       711,310        345,104  
Cumulative Effect of                                                                                                 
Accounting Change                                                                                                    
(Note A)                        950,000            ---               ---           ---           ---            ---  
Income (Loss) from                                                                                                   
   Continuing Operations      1,183,092        364,797       (1,993,700)       342,451       711,310        345,104  
Earnings Per Share                                                                                                   
   Basic                           0.35           0.10            (0.54)          0.07          0.15           0.06  
   Diluted                         0.32           0.10            (0.54)          0.07          0.14           0.05  
Total Assets                  3,885,587      4,337,929         3,558,171     4,682,373     6,375,432      9,259,000  
Long-Term Obligations                 0              0          (72,833)      (30,398)             0        500,000  
Dividends Declared                    0              0                 0             0             0              0  


1  Balance Sheet data is at March 31 of each year and at December 31, 1998.     

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Note A                                                                    

   Effective  April 1, 1993,  the Company  adopted SFAS No. 109.  Adopting  this
   accounting  standard  permitted the Company to increase net income for fiscal
   1994 by $950,000, by accruing the anticipated future benefits of applying the
   Company's  available net operating  loss carry forwards  against  anticipated
   future taxable income on which tax would otherwise be payable.  In connection
   with the  Company's  adoption  of SFAS No.  109,  the  Company  considered  a
valuation allowance to be unnecessary.                                    

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INFORMATION WITH RESPECT TO SOLCOM

Description of Business                                                         

General                                                                         

         SolCom,   founded  in  1992,  is  a  developer  of  remote   monitoring
technology. Originally approved by the Internet Engineering Task Force (IETF) in
1992,  Remote  MONitoring,  or  RMON,  is  a  standard  protocol  for  users  to
proactively  manage  multiple local area networks  (LANs) and wide area networks
(WANs) from a central site. RMON 1 identifies errors,  alerts  administrators to
network  problems  and  baselines  networks in  addition  to its remote  network
analyzer  capabilities.  RMON's  recent  enhancement,  RMON 2,  enables  network
managers  to  access   higher-level   network-wide   application   and  protocol
information.  RMON 2 also provides enterprise-wide and/or point-to-point traffic
statistics that enable trouble-shooting and network capacity planning.          

         SolCom's  products  provide for traffic  analysis and  monitoring for a
wide range of network media  applications and allow companies to provide network
trouble shooting and traffic and protocol  analysis of distributed  remote sites
from a central  location.  SolCom  provides a wide range of media via  dedicated
hardware with all  information  being delivered and available via Graphical User
Interfaces (GUI) that are available for Microsoft  Windows and NT and a range of
UNIX platforms.                                                                 

Financial Information About Industry Segments                                   

  See SolCom's financial statements attached as Appendix E hereto.

Principal Products and Markets                                                  

         SolCom has an expanding  base of both end-users and resellers in Europe
and the United States.  SolCom has also developed a strong  "Original  Equipment
Manufacturer"  (OEM)  relationship  with an industry  leading network  equipment
supplier who manufactures SolCom products under license. SolCom is headquartered
in Livingston,  Scotland with a sales and marketing subsidiary,  SolCom Systems,
Inc., in Reston, Virginia.                                                      

         SolCom's   typical   end-user   customer  profile  consists  of  large,
knowledge-based  organizations  with  multiple  distributed  sites  over a large
geographical  area.  The SolCom  product  range is  developed  to allow  network
managers of companies that have large distributed LANs and WANs to control their
distributed sites from a central site.                                          

Existing Products                                             

         Hardware Products.  The SolCom range of hardware  (generically referred
to as "RMON  probes")  are  devices  that are  distributed  to LANs and WANs and
perform data collection and consolidation functions. Each RMON probe connects to
a specific media type, e.g., Ethernet,                                          

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Token Ring or FDDI.  SolCom  currently  produces 18 different  products that are
capable of monitoring the complete range of LAN/WAN media types.                

         SolCom  provides an extensive range of RMON probes to monitor RMON1 and
RMON2 data  across the full range of LAN/WAN  media.  Used in  conjunction  with
"Information   Consolidation"  management  packages,  the  network  manager  has
complete overview of the operational functionality of the network. The following
are descriptions of SolCom's RMON probe products:                               

o        RMON Engine                                          

         With full  RMON1/RMON2  support  and  powerful  hardware  this  product
         simplifies  network  management  in  mixed  LAN/WAN  environments.  The
         chassis can be  customized  via three slots that may be populated  with
         combinations  of a wide range of  network  interface  cards.  Interface
         cards  are now  available  for  many  popular  LAN  and WAN  topologies
         including ATM and Frame Relay. As network environments evolve, managers
         will find they can keep pace  simply by  altering  the  combination  of
interface cards in the RMON Engine.                           

         All of the data  gathered  by the RMON  Engine  may be  retrieved  by a
         management  station via the SLIP port or the 10/100 Mbps Ethernet port,
both of which are built into the engine.                      

o        FDDI RMON Probe                                      

         With 20 group  RMON-style  implementation,  the FDDI  probe is an ideal
         solution for monitoring heavily loaded segments.  Available for single-
         and dual-attach connections,  the probe comes with 16MB memory standard
(upgradeable to 64 MB), and optional SLIP port.               

o  Token Ring RMON Probe                                      

         The Token Ring RMON probe  monitors 4M and 16M bps Token Ring LANs, and
         is an ideal solution for monitoring heavily loaded Token Ring networks.

 o  4-port 10/100 (Fast) Ethernet + (Multi-segment Fast Ethernet
Environment)                                            

         With up to 128 MB of memory and full RMON support, the four-port 10/100
         Ethernet  probe  provides 10 MB or 100MB  Ethernet  monitoring  on each
         port. This proactive,  centralized  solution pinpoints potential faults
and provides the reactive power of an analyzer.               

        o  4-port Ethernet + RMON Probe   (Multi-segment Ethernet environment)

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         The  SolCom  four-port  Ethernet  probe  is  designed  for  wire  speed
         monitoring of multi- segment Ethernet  networks.  This high performance
         RMON (1& 2  compliant)  is an ideal  solution  for  monitoring  heavily
loaded distributed Ethernet segments.                         

       o        Ethernet + RMON Probe  (Heavily loaded Ethernet environment)

         Designed  for full wire speed  monitoring  of  Ethernet  networks,  the
         SolCom  Ethernet+  probe  has  full  RMON  support,   plus  SolCom  MIB
         extensions.  It is an ideal  solution  for  monitoring  heavily  loaded
distributed Ethernet segments.                                

         Software  Products.  In order to utilize  SolCom's  hardware  products,
SolCom has developed a "Graphical Use Interface" that operates over a variety of
platforms, including Windows 95, Windows NT and UNIX.                           

         SolCom believes that its combination of software and  hardware-products
provides a unique set of  capabilities  for network  managers  within the SolCom
target market and brings the following  technical and business benefits to these
companies.                                                                      

Key Technical Benefits:                                       

o        Quick resolution of user problems                    
o        Easy access to information                           
o        Control of multiple WANs and LANs                    
o        Proactive and reactive analysis                      
o        Scaleable solutions                                  
o        Low cost entry                                       
o        Standards based                                      

Key Business Benefits:                                        

o        Less user down time                                  
o        Rapid response to network user problems              
o        Fewer remote site visits                             
o        Better use of technical expertise                    
o        Reduced network administration                       
o        Improved network design                              

RMON 2 Business Benefits                                      

         Enhanced  management  information  can  be  obtained  from  the  latest
addition  to  the  IETF  RMON  Specification,   the  RMON  2  (RFC  2021).  This
specification enhances the type and quality of information that can be delivered
to both the chief  information  officer  and network  manager of any  enterprise
organization.                                                                   

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         RMON 2 will allow organizations to police internet usage, provide usage
statistics  by both the host and  conversation  at the network and  applications
layers.  Network  managers  will be able to determine not only the identity of a
network  user but which  resources  such  users  are  utilizing  and with  which
applications.                                                                   

         Network managers with a properly  implemented RMON solution can deliver
business  benefits  to any  organization  by  delivering  information  that  can
maximize uptime and user  productivity by ensuring  minimum down time and lowest
response times. RMON delivers these benefits by providing  information,  through
network  monitoring,  that can allow the network manager to take proactive steps
to  ensure  that the  network  performs  properly  and in the event of a network
failure,  identify the fault  source as quickly as possible.  Since many network
faults are intermittent in nature,  the continuous  monitoring  provided by RMON
increases the likelihood that network faults can be detected and corrected, with
the additional benefit of carrying out such tasks at remote sites.              

         The  following  are some of the benefits  that the SolCom RMON products
provide in connection with a wide variety of media types and applications:      

                                                        [Enlarge/Download Table]


                         Business Benefits                                                     
                                                (Questions you can         RMON Groups         
Benefits             Description                answer)                    Used                
--------             -----------                ------------------         ------------        

                                                                                               
Link and         Host and Conversation       Are you paying too         RMON 1 History,        
Network Usage    Statistics:                 much for under utilized    RMON 2 User            
                 Are your links under        networks?  Are busy        History, Protocol      
                 utilized or over utilized,  networks interfering       Distribution.          
                 who is causing the usage,   with your ability to                              
                 who is hogging the          carry out work in a                               
                 bandwith, which             timely manner?  Can                               
                 protocols are the most      "chatty" protocols on                             
                 bandwidth hungry, what      your network be                                   
                 times of the day are your   reconfigured to lessen                            
                 networks under strain       usage?  Can retiming of                           
                 and when are they quiet?    batch jobs (e.g.                                  
                                             backups) save                                     
                                             resource?                                         

Internet Usage   Host and Conversation       What resources are         RMON 2 Network         
                 Statistics:                 most targeted on your      Layer Host Table,      
                 Who are the biggest         network and by whom?       RMON 2 Network         
                 users of the Internet or    Information on usage       Layer Matrix Table,    
                 your Intranet?  Where are   that can be used to        Network Layer and      
                 they going?                 assign costs by either     Application Layer      
                                             department or user.        Top N Tables           

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                         Business Benefits                                                     
                                                (Questions you can         RMON Groups         
Benefits             Description                answer)                    Used                
--------             -----------                ------------------         ------------        

Policing Policy  Host and Conversation       Have the ability to        RMON 2 Network         
                 Statics:                    track non valid use of     Layer Host Table,      
                 What are users doing on     the Internet, Job          RMON 2 Network         
                 the Internet?               Searches, Shopping         Layer Matrix Table,    
                                             Malls and                  Network Layer and      
                                             Pornography.  Ensure       Application Layer      
                                             users are working, not     Top N Tables           
                                             surfing.                                          

Security         Host Statistics: Who is     Search for non-valid IP    RMON 2 Network         
                 on your net and do they     addresses and see what     Layer Host and         
                 have access rights?         resource they have         Matrix Tables          
                                             been trying to access.                            

Planning         Network and                 A properly planned and     All statistical groups.
                 Application Layer           implemented network is                            
                 Information: Use the        the most cost effective                           
                 various statistics to       network.  This can only                           
                 properly plan for changes   be obtained by having                             
                 in network usage, either    accurate information to                           
                 increased numbers of        begin with and                                    
                 users, change of            monitoring changes and                            
                 application type or both.   implementation.                                   

Fault Finding    Tracking and                Technical Support          All statistical groups,
                 Pinpointing Faults:         responds to faults         enhanced filtering     
                 Enhanced information        quicker, downtime and      using RMON 2           
                 delivered by RMON 2         lost user productivity is  Network layer and      
                 ensures that fault finding  minimized.  User           Application layer      
                 is more seamless.           confidence is high.        information.           

New/In-Process Research & Development Products and Markets    

         Modular  Products.  Modular products fall under the NetworX  technology
definition as described below.  Modular products has been categorized and valued
separately  due to the nature of the  Modular  product's  lifecycle  and expense
margins.                                                                        

         NetworX  Products.  During the last 12 months,  SolCom has continued to
develop,  and in late 1999 it is  expected  that it will begin to  introduce,  a
range of  products  that  enhances  SolCom's  ability  to  provide  large  scale
enterprise  management  solutions.  SolCom is developing "NetworX" products that
will provide network  managers the ability to monitor,  evaluate and control all
aspects of their network from a single, remote point.                           

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         NetworX  is  being   developed  by  SolCom  as  the  industry's   first
comprehensive  management tool.  NetworX will be the industry's first integrated
platform for proactive,  remote, secure management and monitoring of voice, data
and video networks. It uses Dial up, Telnet or SNMP connections so that managers
can monitor,  evaluate  and control all aspects of their  network from a single,
remote point.  Network managers will have the unique capability of being able to
remotely  monitor and  proactively  react to alarms  received  from any piece of
legacy equipment or triggered by Remote MONitoring  ("RMON") traffic monitoring.
(i.e., based on a user-configured set of circumstances ION can remotely reboot a
router, send out SNMP requests to restart a link, reconfigure a PBX etc.).      

         The  capability is extremely  flexible and  customizable,  allowing the
user to automatically do repetitive tasks.  This  self-healing  capability alone
results in substantial time and cost savings. The powerful feature set includes:
flexible,  high density RMON 1 and 2 traffic  monitoring  for LAN, VLAN, WAN and
ATM  networks;  remote  element  management  via  expandable  serial  ports  and
environmental control through an expandable Real World Interface.  IN and OUT of
band,  multi  level,  secure  access  is  via  2  PCMCIA  slots  for  modem/ISDN
connections  in  addition  to  2x10/100  Ethernet  ports.  The full  feature set
positions  NetworX  as  a  Proactive,  Remote,  Intelligent,  Integrated  Secure
Management Solution.  The NetworX product range brings the following benefits to
the network managers:                                                           

o  Cost savings                                                     
o less equipment required                                     
         o less  travel  time  to  and  from  remote  sites  o  less  technician
intervention o ability to manage multiple remote elements     

o  Flexibility                                                      
o customizable product                                        
o capability to evolve with the network and legacy equipment  
o can be integrated with standards based network software     

o  Time savings                                                     
o reduced network downtime                                    
o increased user productivity                                 
         o more  effective  planning of deployment  network  equipment o onboard
         flash for remote software o utilizes dial up capabilities o technicians
         can  remotely  log on for a real time view o  information  overload for
managers is prevented                                         

         Sentinel III Products. Sentinel products offer a range of comprehensive
site management tools for centralized  remote  maintenance of large  distributed
voice  and data  network.  All  Sentinel  products  will  feature  alarm & Fault
Management,  PBX Toll Fraud Detection,  Environmental  Monitoring and control as
well  as  Security  Access  Management.  Sentinel  III  is an  intelligent  port
controller  that  will  secure  remote  access to voice  and data  network  node
maintenance ports. The                                                          

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technology will combine RMON and Sentinel  network device  management,  allowing
control of a network, as well as a comprehensive  picture of its activities.  It
is expected to be a low cost integrated platform for proactive,  remote,  secure
management and monitoring of voice,  data and video  networks.  Sentinel III has
all the security features of Sentinel and Sentinel  Slimline,  combined with the
RMON Monitoring  capabilities  of NetworX.  Sentinel III technology will provide
the following benefits when incorporated into SolCom products:                  

       o     Multiple remote elements and network segments controlled from
one platform                                    
o     Effective network planning                            
o     Reduced downtime                                      
      o     Integration of legacy equipment and standards based software
o     Automatic resolution of predefined problems           

                ASIC Products.  Application Specific Integrated Circuit ("ASIC")
products  incorporate  all the  hardware  and  software  required  to carry  out
specific tasks on a single  computer  chip.  This has the potential to lead to a
substantial   increase  in  processing  speed  and  reduction  in  the  cost  of
manufacturing.  Designing ASIC systems will require SolCom to experience a steep
learning curve while the engineers become familiar with this technology.  SolCom
is attempting to position itself so that it has ASIC design capability  in-house
and that the increase in ASIC processing speed is incorporated  into its product
range.  SolCom expects the ASIC to provide  increases in processing speed in the
magnitude of 10 times greater speed as compared with SolCom's current  offerings
as well as significantly lower its build costs. The ASIC technology will provide
the following benefits when incorporated into SolCom products:                  

o     Very high packet processing speeds                    
o     Significantly lower build costs                       

Development Stage of Research & Development Efforts                             

          Modular products have been in development since early fiscal year 1999
and  $230,928  will have been spent on Modular  products at the time of closing.
Another  $57,732 will need to be spent in order to release the Modular  products
by their  expected  release  date of April  1999.  The  Sentinel  III product is
expected to be released  in the market in June 1999.  To date,  SolCom has spent
$67,354 on  research  and  development  and  expects to spend  $15,395  prior to
release.  Management has projected  revenues for Sentinel III beginning in 2000.
As of March 31, 1999,  $250,172 will have been spent on research and development
for the NetworX products.  Another $45,395 of research and development  expenses
has been budgeted to complete these products.  NetworX  products are expected to
be  commercially  released in June of 1999 but management has projected  NetworX
products to start  generating  revenues in fiscal year 2000. ASIC based products
are less complete than NetworX.  As of the acquisition only $105,842 in research
and  development  expenses  will have been  spent  and ASIC  products  will need
another $350,000 in order to become  technologically and commercially  feasible.
ASIC is  expected  to be  launched  in the first  half of  fiscal  year 2001 and
management has projected revenues beginning in fiscal year 2001.                

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          The Company's  management  expects that all the IPR&D projects will be
          successfully  completed  within the time frame  described  above.  The
          following points describe the developments  needed to be completed for
the IPR&D projects:                                         

Modular Project                                             

        o     ensuring that the cards operate as expected when fitted to the
RMON Engine                                     
        o     that the products reach the expected performance levels during
testing                                         

NetworX Project                                             

      o     hardware development is complete with all associated drivers
     o     new operating system running with completed developed code,
ported to NetworX                               
and launched                                    
o     Daughter cards completed with all associated drivers  
o     software needs to be completed for the Daughter cards 
  o     Daughter cards need to be tested in the NetworX platform

Sentinel III                                                

o     complete hardware development                         
          o     associated software drivers need to be completed and operational

ASIC Project                                                

   o     engineers need to complete their familiarization with the
technology.                                     
o     find a chip manufacturer to work with                 
        o     cards need design verified and have to be tested both with the
         NetworX motherboard and the new NetworX operating  system
o     design will need many  refinements                    
o     chip will need to be  manufactured                    
    o     testing and verification that will meet performance levels

          Since future  revenues are  primarily  generated  from the products in
          development,  should these projects not be  successfully  developed or
          completed,  the  negative  impact  on  SolCom's  future  results  from
operations would be significant.                            

Marketing and Distribution                                                      

          Original   Equipment   Manufacturer   (OEM).   SolCom  has   attracted
substantial OEM and "re-badge"  opportunities and approximately 50% of its gross
income is  presently  derived  from such  opportunities.  SolCom  has  developed
relationships  with certain  significant  participants in the network management
markets and the  introduction  of its latest  products is likely to expand these
opportunities.  In the nine months ended March 31, 1998,  SolCom  realized gross
revenue of (pound)534,000 ($881,000) from OEM sources.                          

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          European  Market.  SolCom sells to corporate  end-users via a reseller
channel.  These resellers  typically have an established  customer base to which
they introduce the SolCom products and to which they usually sell  complementary
tools.  SolCom has established  relationships of this type in the UK and Germany
and has  recognized  the need to  expand  the  same  throughout  Europe.  SolCom
currently  has 11  authorized  business  partners  with whom it has  established
contractual  relationships  and 4  unauthorized  resellers  who are carrying the
product to establish market viability before  formalizing the  relationship.  In
the nine  months  ended  March  31,  1998,  SolCom  realized  gross  revenue  of
(pound)330,000 ($544,000) from this market.                                     

          United States  Market.  SolCom has had a presence in the United States
since 1994  through an agency  relationship  with  EQSOR,  and since 1996 SolCom
Systems,  Inc.,  a  wholly-owned  subsidiary  of  SolCom,  has  had 5 full  time
employees  providing sales and marketing functions with a particular emphasis on
the US federal  government.  The US office has  established a number of reseller
relationships  with both commercial and federal  contractors and has established
presence on 3 GSA  contracts.  In the nine months ended March 31,  1998,  SolCom
realized gross revenue of (pound)168,000 ($277,000) from this market. SolCom has
identified the US, which accounts for 55% of the global market for its products,
as the key to SolCom's future growth.                                           

          For a more  detailed  discussion of the  financial  information  about
SolCom's foreign and domestic operations and export sales,  reference is made to
SolCom's financial statements attached hereto as Appendix E.                    

Competition                                                                     

          Both the network  management  market in general  and the niche  market
targeted by SolCom  specifically  (i.e.,  RMON) are highly  competitive.  SolCom
believes that it is well positioned in this market with key differentiation from
competitors,  including  overall coverage and media spread of the RMON products;
the  performance  of the  SolCom  product  set;  the port  densities  and  price
performance  ratios of SolCom  products and SolCom's fault finding  capabilities
together with short- and long-term reporting capabilities.                      

         SolCom's principal competitors include NetScout Inc.,  Hewlett-Packard,
Inc.,  Technically  Elite,  Inc.,  Visual Networks,  Inc., Sync Research,  Inc.,
Net2Net Corporation,  Desktalk Systems,  Inc. and Concord  Communications,  Inc.
Additional general  competitors  include 3Com Corp. and Bay Networks Inc., which
have internal embedded RMON solutions.                                          

Sources and Availability of Raw Materials                                       

          SolCom designs its hardware products utilizing readily available parts
from major manufacturers, which are obtainable through multiple suppliers and it
intends  to  continue  this  approach.  While  SolCom  does not  anticipate  any
significant price increases or supply interruption, there can be no assurance of
this.                                                                           

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Working Capital and Inventory                                                   

          SolCom derives its working capital from share capital and revenue from
sales. SolCom maintains a low inventory of finished products,  although in order
to support its product range,  inventories of components and  sub-assemblies are
maintained at a relatively high level. As a general practice customer  purchases
are built to order.  SolCom  does not have a return  policy,  although it honors
returns  and  replacement  of  defective  merchandise.  The  level  of  returned
inventory  is not material to SolCom's  business.  SolCom  customarily  provides
30-day payment terms to its customers. Management believes these practices to be
consistent with industry practices.                                             

Dependence on Particular Customers                                              

          SolCom has one large OEM vendor, Hewlett-Packard,  Inc., that accounts
for approximately 50% of its business and contributes  significantly to SolCom's
business and operations.  SolCom has in place 3-year  extendible  contracts with
the OEM client but it is SolCom's  intention to decrease its  dependence on this
customer through the growth of its own channel business.                        

Intellectual Property, Licenses and Labor Contracts                             

          SolCom  holds no patents on any of its  technologies  but does license
some technology from third parties.  These third party licenses are not critical
to SolCom's  operations.  SolCom has made significant efforts to ensure that its
products are  difficult  to copy or compete  with in the market but  competitive
products  of a  similar  nature  have been  introduced  to the  market.  None of
SolCom's logos or style have been  trademarked or copyrighted.  None of SolCom's
employees  are in any labor  union and  SolCom  believes  it has a  satisfactory
relationship with each such employee.                                           

Employees                                                                       

          As of March 31, 1998, SolCom and its subsidiary employed 32 employees,
all but two of whom are full time. As of that date, there were 13 engineers, two
in customer support, one internal information  technology person, one in quality
assurance,  four in  sales,  three in  marketing,  three in  production,  two in
finance and three in administration.                                            

Description of Property                                                         

          SolCom  currently  leases 4,000 square feet of space at 1 Meikle Road,
Livingston,  Scotland at a rent of  (pound)43,000  ($71,000) per year.  SolCom's
wholly-owned  subsidiary,  SolCom  Systems  Inc.,  leases 436  square  feet in a
managed office facility at 1801 Robert Fulton Drive, Reston, Virginia, at a rent
of $3,817 per month.                                                            

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Legal Proceedings                                                               

    SolCom is not a party to any material pending legal proceedings.

Market Price of and Dividends on SolCom's Common Equity and Related Stockholder 
Matters                                                                         

          There is no established United States or foreign public trading market
for any of SolCom's common equity securities.  As of the date hereof,  there are
twenty  (20)  record  holders of the share  capital  of  SolCom.  SolCom has not
declared or paid any dividends on its common stock.                             

Changes in and  Disagreements  with  Accountants  on  Accounting  and  Financial
Disclosure                                                                      

          SolCom has had no changes of, or  disagreements  with, its accountants
within the most recent two fiscal years.                                        

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 SELECTED FINANCIAL DATA

          The following table presents  selected  financial data of SolCom.  The
information  set forth  below  should  be read in  conjunction  with "Pro  Forma
Condensed  Financial  Statements",  "Management's  Discussion  and  Analysis  of
Financial  Condition and Results of  Operations"  and the  historical  financial
statements  and notes  thereto  annexed  hereto as Appendix E. The  Consolidated
Statement  of  Operations  data set forth  below for each of the two years ended
March 31,  1998 and the  consolidated  balance  sheet data at March 31, 1998 are
derived  from,  and are  qualified  by  reference  to, the audited  consolidated
financial statements included in this Information Statement,  and should be read
in conjunction with those financial statement and the notes thereto.            

                                                        [Enlarge/Download Table]


SolCom Systems Ltd.                                                                                                                 
Consolidated Figures 1993-1998                                                                                                      
(1998  figures are for 9 months ended 31 March 1998)                                                                                
(Balance  Sheet data is at March 31 of each respective year)                                                                        
(Estimated Conversion Rate as of January 10, 1999 =                                                                                 
1.6 U.S. dollars per U.K. pound sterling)                                                                                           

                                                                                              NINE MONTHS                           
                                                                                              ENDED                                 
                                                   UK FORMAT                                  DECEMBER 31,      US GAAP FORMAT      
                        1993           1994     1995       1996       1997         1998           1998        1997         1998     
                       ---------- ---------- --------- ----------- ----------- ------------- ------------ -----------  -------------
                        (pound)     (pound)   (pound)     (pound)    (pound)       (pound)     (pound)        (pound)      (pound)  

                                                                                                                                    
Total Sales              61,891     399,789   524,615    788,450     972,141    1,028,145     1,403,000   1,003,000     1,031,000   
Profit/(Loss)           (48,292)    (30,279)   18,299     14,868    (513,563)    (406,110)     (950,996)   (557,000)     (439,000)  

Profit/(Loss) per share  (26.80)      (0.94)    0.57       0.45      (0.02)        (0.01)         (0.03)      (0.02)       (0.01)   
Total Assets             18,419     197,000   286,000    767,000     818,000    1,012,000       937,000     645,000       624,000   

Long Term Liabilities     7,407      17,296    13,655     47,867     106,947       18,336        52,000     106,000        18,000   

Preference Shares                    30,000    30,000     30,000      30,000       30,000        30,000      30,000        30,000   

Reserve for Preference                5,100    15,300     25,500      35,700       46,212        56,312          --            --   
Dividend & Dividend on                                                                                                              
Redemption                                                                                                                          

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 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
 RESULTS OF OPERATIONS

          The following  discussion  and analysis  should be read in conjunction
with SolCom's  financial  statements  and notes thereto and the other  financial
information  included  elsewhere in this Information  Statement.  Except for the
historical  information  contained  herein,  the discussions in this Information
Statement   contain   forward-looking   statements   that   involve   risks  and
uncertainties.  SolCom's  actual  results  could  differ  materially  from those
discussed herein.                                                               

         SolCom's  financial  statements for the fiscal year ended June 30, 1996
have been  audited and were  prepared in  accordance  with U.K.  GAAP.  SolCom's
financial  statements  for the  fiscal  year ended  June 30,  1997,  and for the
nine-month fiscal year ended March 31, 1998, have been audited and were prepared
in accordance with both U.K. and U.S. GAAP.  SolCom's  financial  statements for
the nine-month  period ended December 31, 1998 were prepared in accordance  with
both U.K. and U.S. GAAP, but are unaudited.                                     

Overview                                                                        

          SolCom  designs,   develops  and  markets   high-performance,   remote
monitoring devices for network  applications.  SolCom expects that substantially
all of its revenue for the foreseeable  future will be derived from the sale and
license of its remote monitoring devices and network management  software in the
corporate and government markets.                                               

          SolCom's  future  financial  performance  will  depend  in part on the
successful development,  introduction and customer acceptance of new products in
the  future.  The  success  of new  products  depends  on a number  of  factors,
including proper selection of such products, successful and timely completion of
product  development,  judging product demand  correctly,  market  acceptance of
SolCom's new products, securing production capacity for manufacturing of devices
and SolCom's ability to offer new products at competitive  prices. Many of these
factors are outside the control of SolCom.                                      

          There can be no  assurance  that SolCom  will be able to identify  new
product  opportunities  successfully,  will  develop  and  bring to  market  new
products or will be able to respond effectively to new technological  changes or
product  announcement  by others.  A failure in any of these  areas would have a
material adverse effect on SolCom's business,  financial condition and operating
results.                                                                        

          SolCom  expects  that its  products  will be  subject  to  significant
pricing  pressures  in the future.  In addition,  SolCom  expects to continue to
increase its operating expenses for personnel and new product development. Yield
or other  production  problems  or  shortages  of supply may  increase  SolCom's
manufacturing  costs.  If SolCom does not achieve  increased  levels of revenues
commensurate  with  these  increased  levels  of  operating  expenses,  SolCom's
operating  results  will  be  materially  adversely  affected.  There  can be no
assurance  as to the  level of sales or  earnings  experienced  by SolCom in any
given period in the future.                                                     

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          SolCom's operating results are expected to be subject to quarterly and
other fluctuations due to a variety of factors,  including increased competitive
pressures,  fluctuations  in  manufacturing  yields,  availability  and  cost of
products from SolCom's  suppliers,  the timing of new product  announcements and
introductions by SolCom, its customers or its competitors, changes in the mix of
products sold, the gain or loss of significant customers, increased research and
development   expenses  associated  with  new  product   introductions,   market
acceptance  of  SolCom's  products  and new or  enhanced  versions  of  SolCom's
products, product obsolescence, the timing of significant orders, and changes in
pricing policies by SolCom, its competitors or its suppliers. SolCom's operating
results also could be adversely affected by economic conditions  generally or in
various  geographic  areas where  SolCom or its  customers  do  business,  other
conditions  affecting the timing of customer orders,  or order  cancellations or
rescheduling.  Many of the  factors  listed  above are  outside  the  control of
SolCom, are difficult to forecast and could materially affect SolCom's quarterly
or annual operating results.                                                    

Results of Operations                                                           

         Revenue.  SolCom's revenue is derived principally from the sale of RMON
devices and accompanying software.  SolCom recognizes revenue from product sales
to customers upon shipment.                                                     

          SolCom's revenues in 1996, 1997 and 1998 were  (pound)758,000  ($1.174
million), (pound)1.003 million ($1.655 million) and (pound)1.269 million ($2.094
million),   respectively.   The   increases   in  revenue   from  1996  to  1997
((pound)183,000  ($304,000)) and 1997 to 1998  ((pound)298,000  ($495,000)) were
principally   attributable  to  increases  in  royalty  revenue  ((pound)489,000
($812,000)  over the two-year  period.  The increase from 1997 to 1998 (27%) was
greater  than  SolCom's  market  growth  of  20%  but  lower  than  management's
expectations. Management attributes this to a delay of approximately 6 months in
fully implementing SolCom's RMON 2 technology to its full product range, as well
as the departure of SolCom's  European sales manager.  RMON 2 has now been fully
implemented  and the sales  manager has been replaced  successfully.  The RMON 2
delay  also  affected  other  vendors  and  while the  delay  affected  SolCom's
financial  performance,  it  is  not  expected  to  result  in  any  substantial
competitive disadvantage on a going-forward basis.                              

          SolCom  obtains  significant  revenue  from  royalties on its products
which have been licensed to third parties pursuant to OEM contracts with certain
customers.   Royalty  revenues  in  1996,  1997  and  1998  were  (pound)149,231
($231,308),  (pound)332,  830 ($549,170) and  (pound)645,336  ($1.065  million),
respectively.  Royalty  revenues  increased 137% from 1996 to 1997, and 94% from
1997 to 1998. The increases were principally due to a broadening of the range of
SolCom's licensed products.  Management expects this growth to continue over the
next 12 months.                                                                 

          SolCom  believes  that it is in a strong  market  and  extremely  well
positioned to show strong  growth over the next 12 months.  The need for network
management  products  is  increasing  and there  is, as yet,  no clear or strong
leader in the field.                                                            

         SolCom had a net profit in 1996 of  (pound)14,868  ($23,045).  SolCom's
net loss for 1997 and  1998 was  (pound)557,000  ($919,000)  and  (pound)665,000
($1.081 million), respectively.                                                 

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          Cost of Revenue.  Cost of revenue  consists  primarily of purchases of
materials and contract  manufacturing costs, shipping costs, and write-downs for
excess or obsolete  inventory.  SolCom's cost of revenue in 1996,  1997 and 1998
was  (pound)205,758  ($318,925),  (pound)193,000  ($318,450) and  (pound)276,000
($455,400),  respectively.  Cost of  revenue  increased  43%  from  1997 to 1998
principally  as a result of the expansion in sales.  As a percentage of revenue,
cost of revenue was 26% in 1996,  19% in 1997 and 22% in 1998.  The  decrease in
cost of revenue from 1996 to 1997 resulted from a change in the overall  product
base,  with  revenue  from  royalties  and  services  (for which  gross  margins
typically  approach  100%)  accounting  for 37% in 1997 as compared  with 29% in
1996.                                                                           

          Cost of revenue and the  corresponding  gross  profit or loss could be
affected in the future by various factors,  including  changes in the proportion
of total  revenue  contributed  by  royalties,  the  sales  volume  of  SolCom's
products, competitive pressures and inventory write-downs.                      

          Research and Development  Expenses.  Research and development expenses
consist primarily of salaries and benefits, non-recurring engineering and design
services,  cost  of  development  tools  and  software,  cost  of  manufacturing
prototypes  and  consultant  costs.  For  the  purpose  of U.K.  GAAP  financial
statements,  SolCom has capitalized  certain product  development  expenditures.
Financial  statements  prepared in accordance with U.S. GAAP do not include such
capitalization.                                                                 

          SolCom's research and development expenses in 1996, 1997 and 1998 were
(pound)112,298   ($174,062),   (pound)201,619   ($332,671)  and   (pound)299,935
($494,893),  respectively.  Research and development expenses increased 91% from
1996 to 1997 and 49% from 1997 to 1998. The increase in research and development
expenses  over  these  periods  was  primarily  due  to  the   development   and
implementation of RMON 2 ((pound)124,000 ($206,000)) and the introduction of new
hardware products including the RMON Engine  ((pound)68,000  ($113,000)) and the
range  of  WAN  and  ATM  probes  ((pound)85,000  ($141,000)).  In  addition,  a
substantial  portion of the research and  development  expenses  relating to the
last  two  fiscal  years  ((pound)129,000   ($214,000))  can  be  attributed  to
in-process research and development  products which are expected to be completed
in fiscal 2000. SolCom  anticipates that it will continue to devote  substantial
resources to research and  development  and that these expenses will increase in
absolute amounts in 1999 and 2000.                                              

          Marketing and Sales  Expenses.  Marketing and sales  expenses  consist
primarily  of  salaries,  benefits,  commissions  and  bonuses  earned by sales,
marketing and administrative personnel,  promotional and trade show expenses and
travel expenses.                                                                

          SolCom's  marketing  and sales  expenses for 1996,  1997 and 1998 were
(pound)91,243   ($141,247),    (pound)132,705   ($218,963)   and   (pound)99,634
($164,396),  respectively.  Marketing and sales expenses increased 55% from 1996
to 1997 and decreased 25% from 1997 to 1998. The decrease was primarily due to a
reallocation of SolCom's resources to research and development.                 

          General  and  Administrative  Expenses.   General  and  administrative
expenses consist primarily of salaries, benefits and bonuses earned by executive
and administrative personnel and fees for professional and legal services.      

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          SolCom's general and  administrative  expenses for 1996, 1997 and 1998
were (pound)345,884 ($536,120), (pound)940,295 ($1.551 million) and (pound)1.173
million ($1.936  million),  respectively.  General and  administrative  expenses
increased 189% from 1996 to 1997 and 25% from 1997 to 1998. These increases were
primarily due to expansion of the business in connection  with broadening of the
product  range,  the  introduction  of RMON 2 and  opening  of the office in the
United States..                                                                 

         Interest Expense and Interest Income.  SolCom has no material  interest
expense or interest income.                                                     

Liquidity and Capital Resources                                                 

          Since inception,  SolCom has financed its operations primarily through
private sales of stock. As of December 31, 1998, SolCom had no available cash or
cash  equivalents.  Losses  in 1997  and  1998  ((pound)557,000  ($925,000)  and
(pound)665,000  ($1,104,000),  respectively)  translated into cash deficits from
operations of (pound)489,000 ($812,000) in 1997 and (pound)242,000 ($402,000) in
1998,  the  principal  difference  in 1998  being  an  increase  ((pound)325,000
($540,000)) in accounts payable and accrued expenses. In addition, cash used for
investment in property and equipment amounted in the two years to (pound)157,000
($261,000) and  (pound)39,000  ($65,000),  respectively.  In addition to cash on
hand at  June  30,  1996  ((pound)350,000  ($581,000)),  financing  of the  cash
requirement  in 1997 was achieved by securing both an overdraft  ((pound)132,000
($219,000))  and  a  term  loan  ((pound)247,000  ($410,000)),   both  from  the
Clydesdale  Bank,  although this was off-set by scheduled  repayments under term
loans  and  capital  leases  of  (pound)76,000  ($126,000).  In  1998,  the bank
overdraft  was reduced by  (pound)116,000  ($193,000)  and there were  scheduled
repayments  under term loans and capital  leases of  (pound)130,000  ($216,000),
which together with the cash  requirements  for  operations and investment  were
financed  by  the  issue  of  ordinary  shares  which  generated  (pound)521,000
($865,000).                                                                     

          To date,  SolCom's  investing  activities have consisted  primarily of
purchases  of property  and  equipment.  Although  SolCom  spent  (pound)157,000
($259,050) on capital  expenditures  in 1997, a 223% increase over 1996,  SolCom
spent only (pound)39,000  ($64,350) on capital  expenditures in 1998, a decrease
of 75%.  This was due  primarily  to a decrease in  available  cash  principally
resulting from a significant  increase in staffing,  the opening of a new office
in  Livingston,  Scotland and the  establishment  of a branch  office in Reston,
Virginia,   all  of  which  occurred  in  1998.  Of  the  total   investment  of
(pound)248,000 ($412,000) over the three-year period,  (pound)166,000 ($276,000)
was sent on computer and development  equipment and (pound)82,000  ($136,000) on
office  equipment  and  furnishings.   SolCom  needs  to  increase  its  capital
expenditures in order to further expand its research and development initiatives
and to grow its employee  base as the business  grows.  The timing and amount of
future  capital  expenditures  will be controlled by the Company and will affect
SolCom's future growth.                                                         

          Subsequent  to  consummation  of  the  Transaction,  SolCom's  capital
resources will be provided by the Company.  In the event the  Transaction is not
consummated,  SolCom's  current  cash and cash  equivalents  would  not  provide
sufficient  liquidity  to fund  operations  without  additional  debt or  equity
financing,  and  SolCom  would  need to raise  additional  capital  through  the
issuance of debt or equity securities.  Although  management  believes that such
financing  would be available  from existing or new investors or lenders,  there
can be no assurance that SolCom would                                           

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be able to raise  additional  financing  or that it would be  available on terms
satisfactory to SolCom, if at all. If such financing were not available,  SolCom
would need to reevaluate its operating plans.                                   

Year 2000 Compliance                                                            

          SolCom  believes  that its internal  management  information  systems,
billing, payroll and other information services are Year 2000 compliant.  SolCom
has already  carried  out certain  tests of its  accounts  payable and  accounts
receivable  files  which are date  sensitive  and found all  systems  to operate
properly.  SolCom  has  reviewed  its  product  line and found  that none of its
products are date sensitive.  Accordingly,  SolCom currently  estimates that its
costs  associated  with Year 2000  compliance  will not have a material  adverse
effect on SolCom's business, financial condition or results of operations.      

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 ITEM 2 - ADOPTION OF 1998 STOCK OPTION PLAN AND
1998 U.K. SUB-PLAN

          The  following  is a summary of the  Company's  1998 Stock Option Plan
(the "Plan"),  substantially  in the form annexed  hereto as Appendix C, and the
Company's  1998 U.K.  Sub-Plan (the  "Sub-Plan"  and together with the Plan, the
"Plans"), substantially in the form annexed hereto as Appendix D.               

Eligibility.  Options may be granted under the Plan to key employees  (including
directors and officers who are key employees)  and to consultants  and directors
who are not  employees  of the Company.  Options  under the Sub-Plan may only be
granted to those individuals who are employees,  consultants and/or directors of
SolCom and who reside in the U.K. Although options under the Plan may be granted
to such  individuals,  it is the Company's  intention to grant options under the
Plan only to individuals who are not employees,  consultants and/or directors of
SolCom  and who do not  reside in the U.K.  The Plan  provides  for the grant of
"incentive  stock  options"  ("ISOs")  within the  meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"),  and non-qualified stock
options not  constituting  ISOs ("NQSOs").  The aggregate market value of Common
Stock for which an eligible  employee  may be granted  ISOs under the Plan which
are exercisable during any calendar year is $100,000.                           

Stock Subject to the Plan.  The  aggregate  number of shares of Common Stock for
which options may be granted under the Plans is 3,000,000, subject to adjustment
in the future as described below. It is currently  estimated that  approximately
500,000 options will be granted in connection with the Sub-Plan. Such shares may
consist either in whole or in part of authorized  but unissued  shares of Common
Stock or Common Stock held by the Company in its treasury.  Common Stock related
to the unexercised  portion of any terminated,  expired,  canceled or terminated
option  will be made  available  for  future  option  grants  under  the Plan or
Sub-Plan, as applicable.                                                        

Administration.  Both of the Plans are administered by the Board of Directors of
the Company  which,  to the extent it  determines,  may delegate its powers with
respect  to the  administration  of the Plans to a  committee  of the Board (the
"Committee")  consisting of not less than two (2)  directors,  each of whom is a
"non-employee  director" within the meaning of Rule 16b-3 (or any successor rule
or regulation)  promulgated under the Exchange Act. Unless otherwise provided in
the  by-laws  of the  Company,  a  majority  of  the  members  of the  Committee
constitute  a quorum,  and the acts of a majority of the members  present at any
meeting at which a quorum is  present,  and any acts  approved in writing by all
members without a meeting, will be the acts of the Committee.                   

Differences  between Plan and Sub-Plan.  In order to comply with the U.K. Inland
Revenue,  the  Plan  and the  Sub-Plan  differ  in  certain  material  respects,
including without limitation, the following:                                    

          1.  Certain  powers  reserved  for  the  Committee  in  the  Plan  are
          prohibited in the Sub- Plan,  including the Committee's  discretion to
          determine  the fair market value of a share of Common  Stock;  whether
and under what conditions to restrict the sale or other     

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          disposition  of the shares of Common Stock  acquired upon the exercise
          of an Option and if so whether and under what  circumstances  to waive
          such  restriction;  whether to accelerate  the date of exercise of any
          option or  installment;  whether  shares of Common Stock may be issued
          upon the exercise of an option as partly  paid,  and, if so, the dates
          when future  installments  of the exercise  price shall become due and
          the amounts of such installment; and with the consent of the optionee,
          to cancel or modify an option, provided that the modified provision is
          permitted to be included in an Option  granted  under the terms of the
Plan.                                                       

          2. In  connection  with the  exercise  of stock  options,  installment
          payments and payments with shares of Common Stock is prohibited in the
Sub-Plan.                                                   

          3.  The  Sub-Plan  does not  differentiate  between  "incentive  stock
options" and "non-qualified stock options."                 

Terms and  Conditions  of Options.  Each option  granted under the Plans will be
evidenced by an appropriate  contract (the "Option Contract") which will contain
such terms and conditions not  inconsistent  with the Plans as may be determined
by the Board or Committee in its discretion.                                    

          An  option  (or  any   installment   thereof),   to  the  extent  then
exercisable,  will be exercised by giving  written  notice to the Company at its
principal office, stating which option is being exercised, specifying the number
of  shares of  Common  Stock as to which  such  option  is being  exercised  and
accompanied by payment in full of the aggregate  exercise price therefor (or the
amount due on  exercise  if the Option  Contract,  in the case of the Plan only,
permits installment payments) (a) in cash and/or a certified check or (b) in the
case of the Plan  only  and not the Sub-  Plan,  with the  authorization  of the
Committee,  with cash, a certified  check and/or  previously  acquired shares of
Common  Stock,  having an  aggregate  fair market  value on the date of exercise
equal to the aggregate exercise price of all options being exercised;  provided,
however, that in no case may shares be tendered if such tender would require the
Company  to  incur a  charge  against  its  earnings  for  financial  accounting
purposes.                                                                       

          An optionee will not have the rights of a shareholder  with respect to
the shares of Common  Stock to be received  upon the exercise of an option until
the date of  issuance of a stock  certificate  to him for such shares or, in the
case of uncertificated  shares,  until the date an entry is made on the books of
the Company's transfer agent representing such shares;  provided,  however, that
until such  stock  certificate  is issued or until such book entry is made,  any
optionee  using  previously  acquired  shares of Common  Stock in  payment of an
option  exercise price shall  continue to have the rights of a shareholder  with
respect to such previously acquired shares.                                     

          The exercise price of shares of Common Stock under any Option Contract
granted  under  the  Plans  is  determined  in the  discretion  of the  Board or
Committee, except that the exercise price of an ISO cannot be less than the fair
market  value of the Common  Stock  subject to such option on the date of grant,
or, in the case of an optionee owning more than 10% of the combined voting power
of all classes of stock of the Company,  less than 110% of the fair market value
of the Common Stock subject to such ISO on the date of grant.                   

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          In no case may a fraction of a share of Common  Stock be  purchased or
issued under the Plans.                                                         

          Nothing in the Plans or in any option granted in connection  therewith
will confer on any optionee any right to continue as an employee,  consultant or
director of the Company or of any of its  subsidiaries,  or interfere in any way
with any  right  to  terminate  such  relationship  at any  time for any  reason
whatsoever without liability to the Company.                                    

          Except as may otherwise be expressly provided in the applicable Option
Contract,  an optionee who ceases to be an employee,  consultant  or director of
the Company for any reason may exercise such option,  to the extent  exercisable
on the date of such termination,  at any time within three months after the date
of  termination,  but not  thereafter  and in no event after the date the option
would  otherwise  have  expired;  provided,  however,  that if  such  optionee's
employment,  consultancy or  directorship is terminated for cause or without the
consent of the Company, such option shall terminate  immediately.  Except as may
otherwise  be  expressly  provided  in the  applicable  Option  Contract,  if an
optionee  dies (a) while he is employed by, or a  consultant  to, the Company or
any of its  subsidiaries  (b) within three months after the  termination  of his
employment  or  consulting   relationship   with  the  Company  or  any  of  its
subsidiaries  (unless such  termination  was for cause or without the consent of
the Company) or (c) within one year following the termination of such employment
or consulting  relationship by reason of his disability,  the options granted to
him as an employee of, or consultant to, the Company or any of its subsidiaries,
may be exercised,  to the extent  exercisable  on the date of his death,  by his
legal  representative,  at any  time  within  one  year  after  death,  but  not
thereafter  and in no event  after  the date the  option  would  otherwise  have
expired.  Except as may otherwise be expressly provided in the applicable Option
Contract,  any optionee  whose  employment or consulting  relationship  with the
Company or its  subsidiaries  has  terminated  by reason of his  disability  may
exercise such options, to the extent exercisable upon the effective date of such
termination, at any time within one year after such date, but not thereafter and
in no event after the date the option would otherwise have expired.             

          No option  granted  under the Plans  may be  assigned  or  transferred
except by will or by the applicable laws of descent and  distribution;  and each
such option may be exercised during the optionee's lifetime only by the optionee
or his legal  representative.  Except as otherwise provided,  options may not be
assigned, transferred,  pledged, hypothecated or disposed of in any way (whether
by  operation  of law or  otherwise)  and  will  not be  subject  to  execution,
attachment or similar process and any attempted  assignment,  transfer,  pledge,
hypothecation or disposition shall be null and void ab initio and of no force or
effect.                                                                         

Adjustment  with  respect  to  Options.  In  the  event  of  any  change  in the
outstanding  Common  Stock  of  the  Company  be  reason  of a  stock  dividend,
recapitalization,  merger in which the  Company  is the  surviving  corporation,
spinoff, split-up,  combination or exchange of shares or the like, which results
in a change in the number or kind of shares of Common Stock which is outstanding
immediately prior to such event, the aggregate number and kind of shares subject
to the  Plans,  the  aggregate  number  and  kind  of  shares  subject  to  each
outstanding  option  and the  exercise  price  thereof  shall  be  appropriately
adjusted by the Board of Directors,  whose  determination will be conclusive and
binding on all parties thereto. Such adjustment may provide                     

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for the  elimination  of  fractional  shares that might  otherwise be subject to
options without payment therefor.                                               

          In the event of (a) the liquidation or dissolution of the Company, (b)
a  merger  in  which  the  Company  is  not  the  surviving   corporation  or  a
consolidation, or (c) a transaction (or series of related transactions) in which
(i) more than 50% of the  outstanding  Common Stock is  transferred or exchanged
for other  consideration  or (ii) shares of Common Stock in excess of the number
of shares of Common Stock outstanding  immediately preceding the transaction are
issued (other than to shareholders of the Company with respect to their stock in
the Company),  any  outstanding  options shall  terminate upon the earliest such
event, unless other provision is made therefor in the transaction.              

Term and  Amendment.  The Plans will  terminate on June 11, 2008,  unless sooner
terminated by the Board. The Board may also amend the Plans (subject, in certain
instances, to shareholder approval or, in the case of the Sub-Plan,  approval of
the U.K. Inland Revenue).  The rights of optionees under options  outstanding at
the time of the  termination  or  amendment  of the Plans will not be  adversely
affected  (without  the  written  consent  of the  optionee)  by  reason  of the
termination  or amendment and will continue in accordance  with the terms of the
option (as then in effect or thereafter amended).                               

Compliance with Securities Laws. It is a condition to the exercise of any option
granted pursuant to either of the Plans that either (a) a registration statement
under the Act, with respect to the shares of Common Stock to be issued upon such
exercise shall be effective and current at the time of exercise, or (b) there is
an  exemption  from  registration  under the Act for the  issuance  of shares of
Common  Stock upon such  exercise.  Nothing in the Plans  should be construed as
requiring the Company to register shares subject to any option under the Act.   

          The  Committee  may require the optionee to execute and deliver to the
Company   representations   and  warranties,   in  form,   substance  and  scope
satisfactory to the Committee,  which the Committee  determines are necessary or
convenient to facilitate the  perfection of an exemption  from the  registration
requirements  of the  Act,  applicable  state  securities  laws or  other  legal
requirements,  including without limitation, that (a) the shares of Common Stock
to be issued upon the exercise of the option are being  acquired by the optionee
for the optionee's own account,  for investment  only and not with a view to the
resale or distribution thereof, and (b) any subsequent resale or distribution of
shares of Common  Stock by such  optionee  will be made only  pursuant  to (i) a
registration statement under the Act which is effective and current with respect
to the shares of Common Stock being sold or (ii) a specific  exemption  from the
registration  requirements  of the Act,  but in  claiming  such  exemption,  the
optionee,  prior to any offer of sale or sale of such  shares  of Common  Stock,
shall  provide  the  Company  with  a  favorable  written  opinion  of  counsel,
satisfactory to the Company in form, substance and scope and satisfactory to the
Company  as to the  applicability  of such  exemption  to the  proposed  sale or
distribution.                                                                   

          In addition,  if at any time the Committee determines that the listing
or  qualification  of the shares of Common  Stock  subject to such option on any
securities exchange, NASDAQ, or under any applicable law, or that the consent or
approval of any governmental agency or regulatory body is necessary or desirable
as a condition to, or in connection with, the granting of an option             

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or the  issuance of shares of Common  Stock  thereunder,  such option may not be
granted  or  exercised  in  whole or in part,  as the case may be,  unless  such
listing, qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Committee.                         

Federal Income Tax Consequences                                                 

          The  following  is  a  general  summary  of  the  Federal  income  tax
consequences  relating to ISOs and NQSOs under the Plans.  This  description  is
based on  current  law  including  cases,  administrative  rulings,  and  final,
temporary and proposed regulations, all of which are subject to change (possibly
with  retroactive  effect).  It should be  understood  that this  summary is not
exhaustive,  that  final  regulations  have  not yet  been  issued  for all Code
provisions  regarding  ISOs, and that special rules not  specifically  discussed
herein may apply in certain situations.  In addition,  this description does not
apply to optionees who are not citizens or residents of the United States.      

          ISOs  Exercised  With Cash. No taxable income will be recognized by an
optionee upon the grant or exercise of an ISO. The  optionee's  tax basis in the
shares  acquired  upon on the  exercise of an ISO with cash will be equal to the
exercise price paid by him for such shares.                                     

          If the shares  received  upon  exercise of an ISO are disposed of more
than one year after the date of transfer of such shares to the optionee and more
than two years from the date of grant of the option, the optionee will recognize
long-term  capital  gain or loss on such  disposition  equal  to the  difference
between the selling price and the  optionee's  basis in the shares,  and neither
the Company nor SolCom will not be entitled to a  deduction.  Long-term  capital
gain is  generally  subject to more  favorable  tax  treatment  than  short-term
capital gain or ordinary income.                                                

          If the shares  received  upon the  exercise of an ISO are  disposed of
prior  to the  end of the  two-years-from-grant/one-year-after-transfer  holding
period (a "disqualifying  disposition"),  the excess (if any) of the fair market
value of the shares on the date of transfer of such shares to the optionee  over
the  exercise  price (but not in excess of the gain  realized on the sale of the
shares) will be taxed as ordinary  income in the year of such  disposition,  and
the  Company  (or,  in the case of an  optionee  who is an  employee  of SolCom,
SolCom)  generally  will be entitled to a deduction  in the year of  disposition
equal to such amount. Any additional gain or any loss recognized by the optionee
on such disposition will be short-term or long-term capital gain or loss, as the
case may be, depending upon the period for which the shares were held.          

          NQSOs  Exercised With Cash. No taxable income will be recognized by an
optionee upon the grant of an NQSO.  Upon the exercise of an NQSO, the excess of
the fair market  value of the shares  received at the time of exercise  over the
exercise price therefor will be taxed as ordinary  income,  and the Company (or,
in the case of an optionee who is an employee of SolCom,  SolCom) will generally
be entitled to a corresponding deduction. The optionee's tax basis in the shares
acquired upon the exercise of such NQSO will be equal to the exercise price paid
by him or her for such shares plus the amount of ordinary income so recognized. 

          Any  gain  or  loss   recognized  by  the  optionee  on  a  subsequent
disposition  of  shares  purchased  pursuant  to an NQSO will be  short-term  or
long-term capital gain or loss, depending                                       

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upon the period  during  which such shares were held,  in an amount equal to the
difference between the selling price and the optionee's tax basis in the shares.

          Exercises of Options Using Previously  Acquired Shares.  If previously
acquired shares are surrendered in full or partial payment of the exercise price
of an option  (whether an ISO or an NQSO),  gain or loss  generally  will not be
recognized  by the  optionee  upon the exercise of such option to the extent the
optionee  receives shares which on the date of exercise have a fair market value
equal to the fair market value of the shares  surrendered  in exchange  therefor
("Replacement  Shares"). If the option exercised is an ISO or if the shares used
were  acquired  pursuant to the exercise of an ISO, the  Replacement  Shares are
treated as having been acquired pursuant to the exercise of an ISO.             

          However,  if an ISO is  exercised  with shares  which were  previously
acquired  pursuant  to the  exercise  of an ISO but which  were not held for the
required two-years-from-grant/one-year-  after-transfer holding period, there is
a disqualifying  disposition of such previously  acquired shares.  In such case,
the optionee would recognize ordinary income on such  disqualifying  disposition
equal to the difference between the fair market value of such shares on the date
of  exercise  of the prior ISO and the amount  paid for such  shares (but not in
excess of the gain  realized).  Special rules apply in determining  which shares
are  considered to have been  disposed of and in allocating  the basis among the
shares. No capital gain is recognized.                                          

          The optionee will have an aggregate  basis in the  Replacement  Shares
equal to the basis of the shares  surrendered,  increased by any ordinary income
required to be recognized on the disposition of the previously  acquired shares.
The optionee's  holding period for the Replacement Shares generally includes the
period during which the surrendered shares were held.                           

          Any shares  received by the optionee on such exercise in excess of the
Replacement  Shares will be treated in the same manner as a cash  exercise of an
option  (either  an ISO or NQSO,  depending  upon the  nature of the  underlying
option) for no consideration.                                                   

          Alternative  Minimum  Tax.  In  addition  to the  Federal  income  tax
consequences described above, an optionee who exercises an ISO may be subject to
the alternative  minimum tax, which is payable only to the extent it exceeds his
regular tax liability. For this purpose, upon the exercise of an ISO, the excess
of the fair market value of the shares over the exercise  price is an adjustment
which increases the optionee's  alternative minimum taxable income. In addition,
the optionee's  basis in such shares is increased by such amount for purposes of
computing the gain or loss on disposition of the shares for alternative  minimum
tax purposes. If the optionee is required to pay an alternative minimum tax, the
amount of such tax  attributable  to  deferral  preferences  (including  the ISO
adjustment)  is allowable  as a tax credit  against the  optionee's  regular tax
liability  (net of other  non-refundable  credits) in subsequent  years.  To the
extent the credit is not used, it is carried forward.                           

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ITEM 3 - APPROVAL OF THE REINCORPORATION

          Pursuant to the Reincorporation,  the Company will merge with and into
Ion  Networks,  Inc.,  a  Delaware  corporation  ("Ion"),  pursuant  to  and  in
accordance  with that certain  Agreement and Plan of Merger dated as of December
15, 1998 by and between the Company and Ion (the "Merger Agreement"). The Merger
Agreement is annexed  hereto as Appendix I. The separate  corporate  identity of
the  Company  will  cease  upon  such  merger  and all  properties,  rights  and
obligations  of the  Company  will  immediately  inure to Ion.  The  Company may
reconsider the  Reincorporation  in the event that more than one (1%) percent of
the Shareholders exercise dissenters' rights.                                   

          Reasons for the Reincorporation. The Board of Directors of the Company
believes  that the proposed  Reincorporation  would create a more  favorable and
flexible corporate  structure through which the Company will have the ability to
carry out its business purposes.                                                

          Approval  by the Board of  Directors.  The Board of  Directors  of the
Company  believes  that  the  Reincorporation  is in the best  interests  of the
Company and the Shareholders and has unanimously approved the Reincorporation.  

          Approval of the  Shareholders.  The requisite  number of  Shareholders
have approved the Reincorporation pursuant to the Written Consents. The Company,
as the sole shareholder of Ion, has approved the Reincorporation.               

          Conduct  of  Business   Following   Reincorporation.   The   Company's
operations  will  not  be  affected  by  the   Reincorporation.   Following  the
consummation of the Reincorporation,  the Company's business and operations will
continue  unchanged  except that the  Company  will be  operating  as a Delaware
corporation.                                                                    

          Effect on the Company's Financial Statements.  The consummation of the
Reincorporation  will not have a  material  effect  on the  presentation  of the
financial statements of the Company.                                            

          Effect  on  Shareholders.  The  Shareholders  will  not be  materially
affected  by  the   Reincorporation.   Each  share  of  Common   Stock  will  be
automatically  canceled and converted into an identical share of common stock of
Ion. Each share of common stock of Ion shall have  substantially the same rights
and preferences as the shares of Common Stock.                                  

Differences between Delaware and New Jersey Corporate Law   

          Disadvantages  to Changing  the State of  Incorporation.  The Delaware
General  Corporation Law (the "DGCL") generally  provides many advantages to the
controlling  stockholders  of a Delaware  corporation at the expense of minority
stockholders.  In addition,  the DGCL provides less  protection than the laws of
the State of New  Jersey  to  stockholders  desiring  added  protection  against
takeover transactions with major stockholders, particularly with respect        

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to the timing of such a transaction and the minimum price per share that must be
received by stockholders of a corporation incorporated in New Jersey.           

                New  Jersey  law  also  provides  dissenting  stockholders  more
opportunities  to receive  the fair value of their  shares  when they  object to
corporate  transactions,  providing  a  longer  list of  transactions  to  which
appraisal rights can apply.  Delaware permits  appraisal rights only in the case
of certain  mergers or  consolidations.  Finally,  Delaware  law  provides  more
expansive  indemnification  protection for corporate officers and directors than
does New Jersey law. This  difference  means that there are fewer  opportunities
for  the  assets  of New  Jersey  corporations  to be  available  for  depletion
resulting from  reimbursements of the costs of judgments and litigation expenses
incurred by corporate officers and directors.                                   

          Significant  Differences Between the Delaware and New Jersey Corporate
Laws.  Although it is impractical to note all the differences  between the NJBCA
and the DGCL,  the  following  is a brief  summary  of  significant  differences
between the rights which a  stockholder  of the Company  presently has under New
Jersey law and the rights such stockholder would have under Delaware law.       

1.         Stockholder Voting Rights            

                New Jersey  requires  the  affirmative  vote of a majority  of a
corporation's outstanding shares entitled to vote in order to authorize a merger
or consolidation and the affirmative vote of two-thirds (2/3) of a corporation's
outstanding  shares  entitled to vote in order to authorize a  dissolution.  See
NJBCA ss.14A:10-3 and 14A:12-4.                                                 

                Except  in   certain   limited   situations   when  no  vote  of
stockholders is required,  Delaware law requires the affirmative  vote of only a
majority  of the  outstanding  shares  entitled  to vote to  authorize  any such
action. See DGCL ss.251 and 275.                                                

2.          Dissenters' Appraisal Rights        

                New Jersey law  provides  that upon strict  compliance  with the
applicable statutory  requirements and procedures,  a dissenting stockholder has
the right to receive  payment of the fair value of his shares if he objects  to:
(i) most types of mergers; (ii) consolidations;  or (iii) dispositions of assets
requiring stockholder approval. See ss. 14A:11-1.                               

                Delaware law provides that appraisal rights do not apply: (i) to
a  stockholder  of the  surviving  corporation  in a merger if  approval  by the
stockholders of such surviving corporation is not required; or (ii) with certain
limitation and qualifications, to any class of stock which is either listed on a
national  securities exchange or held of record by more than 2,000 stockholders.
See DGCL ss.262.                                                                

          Effect on  Capitalization/Certificate  of  Incorporation/By-Laws.  The
capitalization  of Ion will be  identical to the  capitalization  of the Company
following the  Reincorporation.  The certificate of incorporation and by-laws of
the  Company  will  remain   substantially   similar  to  the   certificate   of
incorporation and by-laws of Ion following the Reincorporation.                 

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          Certain  Federal  Income Tax  Consequences.  The following  discussion
addresses   certain   material   federal   income   tax   consequences   of  the
Reincorporation  to the  Shareholders  who hold their  shares as capital  assets
(within the meaning of Section 1221 of the Code). The discussion is based on the
current  provisions  of the  Code,  applicable  Treasury  Regulations,  judicial
authority  and  administrative  rulings  and  practice.  It does not address all
aspects  of  federal  income   taxation  that  may  be  relevant  to  particular
Shareholders  in light of their specific  circumstances,  or to certain types of
Shareholders  subject to special  treatment  under the federal  income tax laws,
including,  without limitation,  insurance companies,  tax-exempt organizations,
foreign persons, financial institutions or broker-dealers,  and Shareholders who
acquired  their Common Stock  pursuant to the exercise of employee stock options
or in other compensatory transactions. This discussion also does not address the
state,  local,  foreign,  estate,  gift or other federal tax consequences of the
Reincorporation.  There can be no assurance  that the Internal  Revenue  Service
will not take a contrary view to any expressed  herein.  No rulings have been or
will be  requested  from the  Internal  Revenue  Service with respect to the tax
consequences  of  the  Reincorporation.   Moreover,  legislative,   judicial  or
administrative changes or interpretations may be forthcoming that could alter or
modify  the  statements  and  conclusions   set  forth  herein,   possibly  with
retroactive effect.                                                             

          A Shareholder not exercising  appraisal  rights will not recognize any
gain or loss as a result of the Reincorporation. The tax basis of the Ion common
stock received by the  Shareholder  will be equal to the tax basis of the Common
Stock  exchanged  therefor,  and the holding period of the Ion common stock will
include   the  holding   period  of  the  Common   Stock   surrendered   in  the
Reincorporation.                                                                

          A Shareholder  who exercises his appraisal  rights with respect to the
Common Stock and receives payment therefor will generally recognize capital gain
or loss measured by the  difference  between the amount of cash received for the
Common  Stock  and the  Shareholder's  basis in the  Common  Stock,  unless  the
redemption is essentially equivalent to a dividend within the meaning of Section
302 of the Code (a "Dividend  Equivalent  Transaction").  The resulting  capital
gain or loss, if any, will be long-term  capital gain or loss if the Shareholder
held the Common  Stock for more than twelve  months at time the Common  Stock is
redeemed pursuant to the Shareholder's exercise of the appraisal rights.        

          The  determination  of whether a  Shareholder's  exercise of appraisal
rights  is  a  Dividend   Equivalent   Transaction  is  made  by  comparing  the
Shareholder's  proportionate  interest in the Company after the  Reincorporation
with the Shareholder's  proportionate interest prior to the Reincorporation.  In
making this comparison,  there must be taken into account any shares  considered
to be owned by the Shareholder by reason of the constructive ownership rules set
forth in Section 318 of the Code. A redemption  involving a  Shareholder  owning
(both directly and by application of the foregoing constructive ownership rules)
a minority interest in the Company generally will not be deemed to be a Dividend
Equivalent  Transaction if the Shareholder exercises no control over the affairs
of the Company and experiences a reduction in his proportionate  interest in the
Company as result of the exercise of the appraisal rights.                      

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          THE FEDERAL  INCOME TAX  CONSEQUENCES  SET FORTH ABOVE ARE FOR GENERAL
INFORMATION  ONLY.  EACH  SHAREHOLDER  IS  URGED TO  CONSULT  HIS OR HER OWN TAX
ADVISOR TO DETERMINE THE PARTICULAR TAX  CONSEQUENCES TO SUCH SHAREHOLDER OF THE
REINCORPORATION (INCLUDING THE APPLICABILITY AND EFFECT OF FOREIGN, STATE, LOCAL
AND OTHER TAX LAWS).                                                            

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          If you have any questions  regarding this Information  Statement,  the
Transaction,  the  Plans or the  Reincorporation,  please  contact  Mr.  John F.
McTigue, the Company's Chief Financial Officer, at:                             

MicroFrame, Inc.
21 Meridian Avenue
Edison, New Jersey 08820
(732) 494-4440

                                  By Order of the Board of Directors

                   /s/ Stephen B. Gray

               Stephen B. Gray
                                     President and Chief Executive Officer

March 11, 1999                                                                  

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 INDEX OF APPENDICES

APPENDIX A   Share Purchase Agreement, as amended                               
APPENDIX B   Fairness Opinion                                                   
APPENDIX C   1998 Stock Option Plan                                             
APPENDIX D   1998 U.K. Sub-Plan                                                 
APPENDIX E   Financial Statements of SolCom                                     
APPENDIX F   MicroFrame, Inc. Form 10-KSB for the period ended March 31, 1998   
APPENDIX G   MicroFrame, Inc. Form 10-QSB for the period ended December 31, 1998
APPENDIX H   New Jersey Business Corporation Act ss.14A:11-1 and ss.14A:11-2    
APPENDIX I   Agreement and Plan of Merger                                       

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APPENDIX A

SHARE PURCHASE AGREEMENT

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SHARE PURCHASE AGREEMENT

AGREEMENT,  by  and  among  MICROFRAME,  INC.,  a New  Jersey  corporation  (the
"Buyer"), each of the persons whose names and addresses are set forth in columns
1 and 2 of Schedule 1 annexed  hereto (each,  a "Seller" and  collectively,  the
"Sellers"),  and  SOLCOM  SYSTEMS  LIMITED,  a  company  incorporated  under the
Companies Act 1985 of the United  Kingdom (the "U.K.") and having its registered
office at SolCom House, Meikle Road, Kirkton Campus, Livingston (the "Company").

WHEREAS,  the Sellers are the  registered  holders and,  save in the case of the
trustees  whose names are set forth on Schedule 1 ("the  Trustees") and Anderson
Strathern  Nominees Limited,  and any other person registered in the register of
members of the Company as a/c holder or nominee or bare trustee  ("Other Nominee
Holders")  beneficial  owners of all of the ordinary  shares of 1 pence each, in
the capital of the Company in issue at the date hereof (the  "Ordinary  Shares")
all of the  ordinary  shares in issue and held by the  Sellers on Closing  being
hereinafter referred to as "the Shares";                                        

WHEREAS, the Company, together with the Subsidiary (as defined in Section 3.4 of
this Agreement),  are in the business of providing  computer network  management
for data communications networks (the "Business");                              

WHEREAS,  the Buyer desires to purchase from the Sellers, and the Sellers desire
to  sell to the  Buyer,  all of the  Shares  on the  terms  and  subject  to the
conditions set forth below,  and the parties desire to engage in various related
transactions, as hereinafter set forth.                                         

WHEREAS,  there are 30,000 cumulative  redeemable  preference shares of (pound)1
each in the  capital of the  Company and the  registered  holder and  beneficial
owner  thereof has on the date hereof  entered into a separate  agreement in the
agreed  terms with the  Company  and the Buyer  whereby  after  subdivision  and
conversion of the redeemable  preference shares immediately prior to Closing the
Buyer  will  acquire  731428  ordinary  shares  of 1 pence  each  and  2,268,572
preference shares of 1 pence each in the capital of the Company from such holder
("the LIFE Agreement").                                                         

WHEREAS the Sellers have undertaken to procure that immediately prior to Closing
a third party (or whom failing  certain  Sellers) will subscribe for such number
of  ordinary  shares of 1 pence  each in the  capital  of the  Company  as shall
provide the Company  with the Funding as referred to in Section  7.18 hereof all
in terms of this Agreement.                                                     

WHEREAS  the  Company has issued to certain  Sellers  (pound)150,000  in nominal
amount of convertible  unsecured  loan stock ("CULS") which is convertible  into
ordinary  shares of 1 pence in the capital of the Company on or prior to Closing
and which is redeemable in accordance with the loan stock instrument executed by
the Company on July 23 1998.                                                    

WHEREAS the Company is party to:- (i) an Investment Agreement among the Company,
the  Executive  Directors  (as therein  defined) and the  Investors  (as therein
defined)  dated  March  17,  1993 (the  "Main  Investment  Agreement");  (ii) an
Investment Agreement among the Company, the Lothian                             

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Investment  Fund for Enterprise  Limited  ("LIFE") and the Directors (as therein
defined) dated December 21, 1993 ("the LIFE Investment  Agreement") and (iii) an
Investment  Agreement  among the Company and the Investors (as therein  defined)
dated  June 28,  1996 ("the  Third  Investment  Agreement")  and has at the date
hereof  entered into three  agreements in the forms set out in Exhibit J whereby
the Main  Investment  Agreement,  the LIFE  Investment  Agreement  and the Third
Investment Agreement respectively will terminate on the Closing Date.           

INTERPRETATION

(A)      In this Agreement, unless otherwise specified or  the context otherwise
requires:-                                                    

(aa)        reference  to  this  Agreement  or  the  Agreement shall include the
Recitals and the Schedules and Exhibits;                

(aa)        reference to a Section is to a Section of this Agreement;           

(aa)        reference  to  the  Schedules or part thereof is to the Schedules to
this Agreement or to a part thereof;                    

(aa)        words importing any gender shall include the other genders;         

(aa)        words  importing natural persons shall include corporations and vice
versa;                                                  

(aa)        words importing  the singular only shall include the plural and vice
versa;                                                  

(aa)        words importing  the whole shall be treated as including a reference
to any part thereof;                                    

(aa)        any word or  expression  the  definition  of which is  contained  or
            referred  to in the  Companies  Acts as  hereinafter  defined or the
            Income  and  Corporation  Taxes Act 1970  ("Taxes  Act 1970") or the
            Income and Corporation  Taxes Act 1988 ("Taxes Act 1988") all of the
            UK shall be construed as having the meaning thereby attributed to it
            (the  definition  in the  Companies  Acts to prevail  where the same
            expression is defined in the  Companies  Acts and the Taxes Act 1970
and/or the Taxes Act 1988); and                         

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(aa)        reference  to any  statute,  regulation,  directive,  treaty or part
            thereof  shall be  construed  as  reference  thereto  as  amended or
            re-enacted  from time to time and shall be  construed  as  including
            references  to any  provision  of which they are  re-enactments  and
            shall be construed as including references to any order, instrument,
            regulation or other  subordinate  legislation  made pursuant thereto
            provided that nothing in the  provisions  set out above shall permit
            any  extension or increase in the liability of the Sellers or any of
            them  under  this  Agreement  or  permit  the  creation  of any such
            liability which would not otherwise have been created where there is
            an amendment or re-enactment  enacted or coming into force after the
date of this Agreement.                                 

(B)         Where any of the Warranties (as such term is hereinafter defined) is
            qualified  by  the   expression  "to  the  best  of  the  knowledge,
            information  and belief of the  Executive  Directors"  that Warranty
            shall be deemed to include additional statements that the knowledge,
            information  and  belief or  awareness  of any one of  William  Hugh
            Evans,  Peter  Atholl  Wilson  and Peter  MacLaren  (the  "Executive
            Directors")  shall  be the  knowledge,  information  and  belief  or
            awareness of all the  Executive  Directors  together and that it has
            been made after  reasonable  enquiry only of the Company  and/or the
            Subsidiary's advisers,  insurers,  employees and major customers and
            suppliers  (major in this context meaning 10% by volume to or by the
            Company in the 12 months preceding the date of this Agreement), into
            the subject  matter of the Warranty.  Where any of the Warranties is
            qualified by the expression  "so far as the Executive  Directors are
            aware"  that  Warranty   shall  be  deemed  to  include   additional
            statements  that  the  actual  knowledge  of any  of  the  Executive
            Directors  shall  be  the  actual  knowledge  of all  the  Executive
            Directors together but without having made any enquiry of any nature
whatsoever.                                             

(C)         In  construing  this  Agreement  the eiusdem  generis rule shall not
            apply and accordingly the  interpretation of general words shall not
            be  restricted  by being  preceded by words  indicating a particular
            class of acts,  matters or things or being  followed  by  particular
examples.                                               

(D)         In this  Agreement  the  headings to Sections and  sub-sections  are
            inserted for convenience  only and shall not affect the construction
of this Agreement.                                      

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(E)         As used in this  Agreement:  (a) the term  "person"  shall  mean and
            include an  individual,  a partnership,  a joint venture,  a limited
            liability  company,  a  corporation,   a  trust,  an  unincorporated
            organization  and a government or any department or agency  thereof;
            and (b) the term  "affiliate"  or  "Affiliate"  in  relation  to the
            Subsidiary  or the Buyer  shall have the  meaning  set forth in Rule
            12b-2 of the General  Rules and  Regulations  promulgated  under the
            Securities  Exchange  Act of  1934,  as  amended,  of the  USA or in
            relation to any individual shall mean any spouse, brother, sister or
            lineal  ascendant or descendant  and in relation to a company (other
            than  the  Subsidiary)  shall  mean  any  subsidiary  or  subsidiary
            undertaking  or holding  company of such  company as these terms are
            defined in the Companies Acts; and (c) the term Companies Acts shall
            mean the Companies  Acts 1985 and 1989, the Business Names Act 1985,
            the Companies Consolidation (Consequential Provisions) Act 1985, the
            Company  Directors  Disqualification  Act  1986,  and  Part V of the
Criminal Justice Act 1993, together and all of the UK.  

(F)         In this Agreement the expression "Third Party Shares" shall mean the
            ordinary  shares  of 1 pence  each  in the  capital  of the  Company
            referred to in the fourth and fifth  recitals  hereof to be acquired
            by a third  party or  third  parties  who is or are not a Seller  or
            Sellers   and  the   expression   "Investor   SPA"  shall  mean  any
            agreement(s) entered into by the Company with a third party or third
            parties who is or are not a Seller or Sellers  after the date hereof
            for the  subscription of shares in the Company as referred to in the
            fifth recital  hereof and the  expression  "Termination  Agreements"
            shall mean the deeds of release of certain investment  agreements in
            the form annexed as Exhibit J and referred to in the recitals hereof
            and the expression "A & S Deed of Adherence"  shall mean the deed of
            adherence in the form annexed as Exhibit K, and "Retrocession" shall
            mean the retrocession of certain life policies by Lothian Investment
     Fund for Enterprise Limited in the form annexed as Exhibit L.

 SECTION 1
 PURCHASE AND SALE OF THE SHARES

1.1      Sale and Purchase of Shares                                            

         At the closing provided for in Section 2 (the "Closing"),  and upon the
         terms and  subject to the  conditions  of this  Agreement,  each Seller
         shall  sell to the Buyer all of the  Shares  registered  in the name of
         such Seller on Closing,  and the Buyer shall purchase all of the Shares
registered in the name of each Seller.                        

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1.2      Delivery of MicroFrame Shares                                          

1.2.1    The  aggregate  consideration  for the sale of the Shares shall be that
         number of shares of common  stock  (the  "Common  Stock")  par value of
         $.001 per  share of the Buyer  (the  "MicroFrame  Shares")  as shall be
calculated at Closing in accordance with the following formula

a           x     5,800,000                                   
---------                                                     
a + b + c                                                     

         where 'a' equals  the number of Shares  held by Sellers in issue in the
         capital of the Company at the Closing  Date;  and 'b' equals the number
         of ordinary shares of 1 pence each in the capital of the Company at the
         Closing Date subject to options to subscribe  and 'c' equals the number
       of Third Party Shares in issue at the Closing Date ("Consideration").

         Without  prejudice  to  the  provisions  of  Section  8 in  respect  of
         condition 8 (r) (i) not being satisfied in the event that the condition
         set  forth  in  Section  8 (r)  (ii) is not  satisfied  for any  reason
         whatsoever the parties  explicitly agree and acknowledge that the Buyer
         shall have the option in its sole discretion  either (i) not to proceed
         to  Closing  with no  liability  to the  Buyer or the  Sellers  or (ii)
         proceed to Closing in which event the aggregate  consideration  for the
         sale of the Shares  shall be  reduced  by a number  equal to 15% of the
Consideration.                                                

1.2.2    The MicroFrame Shares shall be allocated to and amongst the Sellers pro
         rata to their holdings of Shares at the Closing Date.  Where any Seller
         shall  have  a  fractional  entitlement  to  a  MicroFrame  Share  such
         fractional  entitlement  shall be rounded  upwards to the nearest whole
number of MicroFrame Shares.                                  

1.2.3.   At the Closing the Buyer shall cause the MicroFrame  Shares (except for
         the Escrowed MicroFrame Shares, as such term is defined in Section 1.4)
         as shown in the Closing  Share  Allocation  List referred to in Section
         7.28 to be delivered to the  Sellers'  Representatives  as such term is
         hereinafter defined which delivery shall constitute a good discharge to
the Buyer in respect thereof.                                 

1.3      Issuance and Delivery of Shares                                        

         Each  Seller  has  delivered  to  the  Sellers'  Representatives  share
         certificates  representing  the  number of  Ordinary  Shares  set forth
         opposite  such  Seller's  name  on  Schedule  1,  together  with  share
         transfers  duly executed in blank,  in proper form for transfer,  to be
         held in custody by the Sellers'  Representatives  pending Closing.  The
         Sellers'  Representatives  shall hold these  documents  in their  joint
         custody until and unless the Closing occurs,  at which time (subject to
         satisfaction  or waiver in accordance  with the terms of this Agreement
         of the  conditions  precedent  set out in  Sections 8 and 9) they shall
deliver such certificates                                     

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         and such transfers to the Buyer,  provided that, in the event that this
         Agreement  is  terminated  prior to the  Closing  for any  reason,  the
         Sellers' Representatives shall return the certificates and transfers to
         the  solicitors  acting  for the  appropriate  Sellers  forthwith.  The
         Ordinary  Shares to be sold pursuant to this Agreement shall be sold by
         each  Seller  to the  Buyer  free and  clear of any and all  Liens  (as
defined in Section 5.1).                                      

1.3.1    At Closing the relevant  Sellers  shall deliver to the Buyer's UK Legal
         Advisers  share  transfers  duly  executed  in blank in proper form for
         transfer  together with covering share  certificates  in respect of the
         Shares (for the purposes of this Section  1.3.1 other than the Ordinary
         Shares).  The Shares (for the purposes of this Section 1.3.1 other than
         the Ordinary  Shares) to be sold  pursuant to this  Agreement  shall be
        sold by such Sellers to the Buyer free and clear of any and all Liens.

1.4      Escrowed MicroFrame Shares                                             

         At  Closing,  the Buyer  shall  deliver to Dundas & Wilson CS,  Saltire
         Court,  Edinburgh EH1 2ET (the "Escrow Agent"),  stock  certificates in
         respect of MicroFrame  Shares on behalf of the Sellers as set out under
         Escrowed  MicroFrame  Shares  in  the  Closing  Share  Allocation  List
         referred to in Section 7.28 calculated as follows:-the  total number of
         Escrowed  MicroFrame Shares shall equal 50 per cent of the total number
         of  MicroFrame  Shares  issued as  Consideration  (or shall be as close
         thereto  as  practicable  taking  into  account  the  rounding  upwards
        referred to below) and shall be contributed by the Sellers as follows:

(i)            As to 400,000 MicroFrame Shares from Peter Atholl Wilson         

(ii)           As to 400,000 MicroFrame Shares from William Hugh Evans          

(iii)          As to 200,000 MicroFrame Shares from Peter MacLaren              

         and each Seller (including the Executive Directors) shall be obliged to
         contribute  such  Sellers'  Pro Rata  Share (as  defined  below in this
         Section) of the balance of Escrowed  MicroFrame Shares which require to
         be delivered to the Escrow Agent (and where  fractions arise they shall
         be rounded upwards). For the purposes of this Section each Seller's Pro
         Rata Share shall mean a fraction  (a) the  numerator of which is (i) in
         the case of a Seller who is not an Executive Director, the total number
         of  MicroFrame  Shares  issued to that Seller and (ii) in the case of a
         Seller who is an Executive  Director,  the total  number of  MicroFrame
         Shares issued to that Executive Director minus the number of MicroFrame
         Shares set out opposite such Executive  Director's name above;  and (b)
         the denominator of which is the aggregate  number of MicroFrame  Shares
         issued  by  the  Buyer  to  the  Sellers  (less  1,000,000   MicroFrame
         Shares).which  Escrowed  MicroFrame  Shares shall be held by the Escrow
         Agent on deposit and in custody and  released  in  accordance  with the
         terms of that  certain  escrow  agreement  by and among the Buyer,  the
Sellers, the                                                  

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         Sellers' Representatives and the Escrow Agent substantially in the form
         annexed hereto as Exhibit A (the "Escrow  Agreement").  Notwithstanding
         the deposit and escrow of certain MicroFrame Shares each of the Sellers
         shall continue to be entitled to vote, attend meetings and receive from
         the Buyer all materials in respect of their Escrowed  MicroFrame Shares
as holders of common stock of the Buyer.                      

 SECTION 2
 TIME AND PLACE OF THE CLOSING

The closing of the transactions  contemplated  herein (the "Closing") shall take
place at the offices of Semple Fraser, 10 Melville Crescent, Edinburgh, Scotland
on a date as  soon as  practicable  following  the  satisfaction  or  waiver  in
accordance  with the  terms of this  Agreement  of all  conditions  set forth in
Sections  8 and 9  herein,  but in no  event  after  December  31  1998,  unless
otherwise agreed by the Buyer and the Sellers  Representatives  on behalf of the
Sellers.  The time and date upon which the Closing occurs is herein  referred to
as the "Closing Date."                                                          

 SECTION 3
 WARRANTIES OF THE SELLERS

The Sellers hereby warrant to the Buyer, as of the date hereof,  as follows (the
relevant  warranties  as set out in this  Section  3 being  referred  to as "the
Warranties")  subject to matters fairly disclosed in the letter from the Sellers
to the Buyer  (including the contents and matters  apparent from the face of the
documents  annexed to that  letter)  disclosing  matters for the purpose of this
Section 3 and  delivered to and accepted in writing by or on behalf of the Buyer
immediately prior to the Buyer's execution hereof (the "Disclosure  Letter") and
subject  as  hereinafter  set out in  particular  to  Sections  4 and 11 of this
Agreement.                                                                      

In the Warranties the expression  "significant"  shall, except where the context
otherwise  requires,  mean  that  if  the  statement  to  which  the  expression
significant  is  attributable  had not been so  qualified,  breach or failure to
comply with that absolute  statement  would result in a loss or liability to the
Company or the  Subsidiary  (and ignoring for these  purposes the  provisions of
Section 4 hereof) of a sum in excess of $20,000.                                

3.1      Existence and Qualification                                            

         The Company is a company duly  incorporated  and validly existing under
         the laws of  Scotland,  with full power and  authority  to conduct  its
         business and to own and operate its assets and  properties as conducted
and operated.                                                 

3.2      Capitalization                                                         

         The authorized share capital of the Company is (pound)657,500, of which
         only the Ordinary Shares and 30,000  cumulative  redeemable  preference
shares of (pound)1 each (the "Preference Shares") are         

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         currently  issued.  All of the Ordinary Shares or, at the Closing Date,
         the Shares are duly authorized, validly allotted and issued, fully paid
         or credited as fully paid.  Save as set out in this Agreement there are
         no agreements,  commitments or  arrangements in force providing for the
         issue  or  allotment  of any  share  or loan  capital  of the  Company,
         including options,  warrants or rights to purchase or subscribe for, or
         any security or instrument  convertible  into or exchangeable  for, any
         share or loan  capital  of the  Company.  The  Company  owns all of the
  issued and outstanding shares of common stock of the Subsidiary.

3.3      Options or Other Rights                                                

         There is no outstanding right, subscription, warrant, call, pre-emptive
         right,  option or other  agreement of any kind to purchase or otherwise
         to receive  from the  Company  any  shares of the  capital or any other
         security of the Company,  and there is no  outstanding  security of any
kind convertible into any share capital of the Company.       

3.4      Subsidiaries                                                           

         Schedule  3.4  sets  forth  (i) the  name,  date  and  jurisdiction  of
         incorporation,  and the  percentage  and number of  outstanding  shares
         owned  at any  time by the  Company,  of each  person,  firm or  entity
         ("person") which the Company  beneficially  owns or owned or has or had
         the power to vote 50% or more of the  securities or shares of any class
         of such  person  (the  "Subsidiary")  and  (ii) the name of each of the
         Company's  affiliates  (other  than the  Subsidiary),  including  joint
         venture affiliates, and the nature of the affiliation. The Company owns
         all of the  shares  of  capital  stock of the  Subsidiary  set forth in
         Schedule  3.4 free and  clear of any  Lien.  All such  shares  are duly
         authorized and are validly issued, fully paid and non-assessable. There
         is no  outstanding  right,  subscription,  warrant,  call,  pre-emptive
         right,  option or other  agreement of any kind to purchase or otherwise
         to receive  from the  Company  any shares of the  capital  stock or any
         other security of, or any proprietary interest in, the Subsidiary.  The
         Company does not directly or  indirectly  own any  investment in any of
         the capital stock or share capital of, or any proprietary  interest in,
any person other than the Subsidiary.                         

3.5      Consents and Approvals; No Violation                                   

         The execution and  performance by the Sellers of this Agreement and the
         consummation  by the Sellers of the  transactions  contemplated  hereby
         will not (a) conflict  with or breach any  provision of the  Memorandum
         and Articles of Association of the Company;  (b) require the Company to
         make any  filing or  registration  with,  or obtain  any other  permit,
         authorization,  consent or approval of, any  governmental or regulatory
         authority;  (c) conflict  with,  violate or breach any provision of, or
         constitute a default (or an event  which,  with notice or lapse of time
         or both, would constitute a default) under, or result in a modification
         of, any of the terms, covenants, undertakings, conditions or provisions
         of, or give rise to a right to terminate or  accelerate or increase the
         amount of  payment  due  under,  any note,  bond,  mortgage,  security,
         charge,  indenture, deed of trust, license,  franchise,  permit, lease,
sublease, contract,                                           

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         agreement,  or other instrument,  commitment or obligation to which the
         Company is a party, or by which it or any of its respective  properties
         or assets may be bound;  (d) result in the  creation of any Lien on any
         of the  properties  or assets of the  Company;  (e)  violate any order,
         writ, injunction,  interdict, decree, judgement, or ruling of any court
         or governmental  authority,  applicable to the Company or the assets of
         the  Company;  or (f) violate any  statute,  law,  rule or  regulations
         applicable to the Company or to the securities,  properties,  assets or
business of the Company.                                      

3.6      Material Contracts                                                     

(a)          The Company has not entered  into and is not bound by any  Material
Contracts (as defined below).                         

(b)          "Material  Contracts"  ( if any ) means  any  Contract ( as defined
below):-                                              

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             (i) that provides for aggregate  future  payments by the Company of
             more than  $10,000;  (ii) that was  entered  into other than in the
             ordinary and usual course of business;  (iii) that has an unexpired
             term  exceeding  one year and may not be  terminated  in accordance
             with  its  terms  upon  less  than  90  days  notice   without  any
             obligation,  liability,  penalty or premium  (other  than a nominal
             cancellation  fee or charge);  (iv) that was entered  into with any
             Seller, any officer, director or any employee of the Company or any
             member of the family or any  affiliate of the  foregoing;  (v) that
             constitutes a collective  bargaining  recognition  or other similar
             agreement;  (vi)  that  constitutes  or  contains  a  guarantee  or
             indemnity by or otherwise  imposes upon the Company  liability  for
             the obligations or liabilities of another;  (vii) that involves the
             borrowing  or lending of money;  (viii) that  involves an agreement
             with any bank, finance company or similar organization for the sale
             of any  products  of the  Company  on  credit or the  provision  of
             services  on  credit;  (ix)  that  involves  the  sale by or to the
             Company of  products or  services  on  consignment;  (x) that is or
             contains a power of attorney;  (xi) that  contains any provision or
             term for  renegotiation  or  redetermination  of price;  (xii) that
             restricts  the Company  from  carrying on its business as presently
             conducted  anywhere in the world or which  otherwise  restricts the
             ability of the Company,  or any affiliate  thereof to engage in any
             other  business  anywhere in the world;  (xiii) that  contains  any
             warranty  terms or  undertakings  in addition to the  warranties or
             undertakings normally and usually given by a person employed in the
             same or similar business as the Company in connection with the sale
             of its products or the provision of its services; (xiv) pursuant to
             which the Company may hold any interest which has a value in excess
             of $20,000  owned or claimed by the  Company in or to any  Tangible
             Property  (as  defined  in Section  3.9);  (xv) that  provides  for
             maintenance  or management of any Properties (as defined in Section
             3.10(a));  or (xvi)  that is a  contract  for  hire or  rent,  hire
             purchase or purchase by way of credit sale or  periodical  payment.
   There are no Material Contracts which are not in writing.

(c)          The term  "Contract"  means and includes any  contract,  agreement,
             commitment,  mortgage, security, charge, debt instrument,  security
             agreement, license, guarantee, lease, sublease, charter, franchise,
             power of  attorney,  agency  and  other  agreement  or  arrangement
             constituting a binding obligation of the Company, whether or not in
writing.                                              

(d)          The Contracts (other than Material Contracts (if any)) to which the
             Company is a party,  do not  involve  the payment by the Company of
             more than $10,000 per year, individually or $50,000 per year in the
aggregate to the Company or the Business.             

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(e)         There is not,  and there has not been  claimed or to the best of the
            knowledge,  information  and  belief  of  the  Executive  Directors,
            (having  made  no  enquiry  of the  other  parties  to any  Material
            Contract)  alleged  by any  person,  with  respect  to any  Material
            Contract,  any existing significant default, or event of default, or
            event that with notice or lapse of time or both would  constitute  a
            significant  default or event of default on the part of the  Company
            or, so far as the Executive  Directors are aware, on the part of the
            other party or parties thereto.  The Material  Contracts are in full
            force and  effect  and  constitute  the  legal,  valid  and  binding
            obligations  of the Company.  No other party to a Material  Contract
            has asserted the right, and to the best of the knowledge information
            and belief of the Executive Directors (having made no enquiry of the
            other  parties to any  Material  Contract)  no basis  exists for the
            assertion of any right,  to  renegotiate  or  unilaterally  vary the
terms or conditions of any Material Contract.           

3.7      Financial Statements                                                   

3.7.1    The  Company  has  delivered  to   the   Buyer  the following financial
statements:-                                                  

(a)           The financial statements of the Company for the year ended June 30
              1997 and for the nine months  ended March 31 1998 (the "March 1998
              Accounts")  audited  in  accordance  with  UK  generally  accepted
              auditing  standards and  complying  with the  requirements  of the
              Companies  Acts and with all relevant  statements of UK accounting
              practice and financial  reporting standards and generally accepted
              accounting principles ("GAAP") consistently applied, and certified
              by Grant  Thornton,  giving a true and fair  view of the  state of
              affairs  of the  Company  at March  31 1998  and June 30 1997,  as
      appropriate, and of its losses for the periods then ended.

(b)           The  unaudited  financial  statements  of the  Subsidiary  for the
              periods  ended  June 30 1997 and  March 31 1998  (the  "Subsidiary
              March 1998 Accounts"),  prepared in accordance with the accounting
              policies adopted by the Company consistently applied and generally
accepted accounting principles of the UK.           

(c)           Consolidated  financial  statements  prepared in  conformity  with
              generally  accepted  accounting  principles in the USA  comprising
              consolidated  balance  sheets of the Company and its Subsidiary as
              at March 31 1998  and  June 30 1997 and the  related  consolidated
              statements of operations, shareholders' deficit and cash flows for
              the nine  months  ended  March 31 1998 and the year  ended June 30
1997.                                               

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              These   financial   statements  are  audited  in  accordance  with
              generally  accepted  auditing  standards  in the USA and have been
              certified by Grant  Thornton and are prepared in  accordance  with
              and in a form  meeting  the  requirements  of  the  provisions  of
        Regulations S - X of the Securities Act of 1933, as amended.

3.8      Absence of Undisclosed Liabilities                                     

         The Company does not have any material  liabilities which would require
         to be disclosed in its audited financial  statements in accordance with
         generally  accepted  accounting  principles  of the UK other than those
         that (i) are set forth or adequately reserved against in the March 1998
         Accounts;  or (ii) were  incurred  since March 31,  1998 (the  "Balance
   Sheet Date") in the normal ordinary and usual course of business.

3.9      Tangible Property                                                      

         The  plant,  machinery,   equipment,   hardware,  software,  furniture,
         leasehold improvements,  fixtures,  vehicles,  structures,  any related
         capital  items and other  tangible  property of the Company used in the
         Business as operated by the Company  (the  "Tangible  Property")  is in
         good operating condition and repair for its intended purpose,  ordinary
         wear and tear excepted,  and to the best of the knowledge,  information
         and belief of the  Executive  Directors  the Company  has not  received
         intimation that it is in violation of any existing law or any building,
         zoning,   health,  safety  or  other  ordinance,   code  or  regulation
applicable to the Company and by which the Company is bound.  

3.10     Property                                                               

a)            The Property  briefly  described in Schedule 3.10 ("the Property")
              comprises  all the  freehold,  feuhold  and  leasehold  land ("the
              expression  "land" being deemed  herein to include  buildings  and
              other  fixed  structures)  owned,  used or occupied by the Company
              save for the Office Suites at 1801 Robert Fulton Drive,  Reston VA
              22091 (the "Reston  Property").  (For the avoidance of doubt,  the
 Reston Property is not covered by this Section 3.10);

b)            Save  as  disclosed,  the  Company  has no  actual  or  contingent
              obligations  or liabilities in relation to any lease of land apart
from the Property and the Reston Property.          

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c)            To the  best  of the  knowledge,  information  and  belief  of the
              Executive  Directors,  in respect that the Property is  leasehold,
              when the Lease was granted the then Landlords  were infeft,  there
              were no unduly  onerous  or  unusual  conditions  or  restrictions
              contained  in the title  deeds which  would  prevent or  adversely
              affect to a  significant  extent the Company from  carrying on the
              business  currently carried on at the Property.  The Company is in
              physical  and actual  occupation  of the  Property on an exclusive
              basis and there are no, and at the Closing  Date the Company  will
              not have (1)  granted  or agreed to grant  any  assignations,  sub
              leases,  charges or subsidiary  rights of occupation in respect of
              the  Property or (2) in any way or for any purpose  have or agreed
              to  dispose  of,  encumber  or  otherwise  deal with the  Tenant's
              interest in or part with or share  occupation  of the  Property in
whole or in part.                                   

d)            All rents and other sums  properly  due,  and  demanded  under the
              lease of the  Property  have  been paid to date and to the best of
              the knowledge,  information and belief of the Executive  Directors
              the Company has not  received  any notice of  irritancy  or of any
              breach  for which the  Company  is  responsible  as tenants of the
              Property  of any of  the  terms  of  the  lease  documentation  as
              aftermentioned.  Nor is the  Company  aware of any  breach  of the
      Landlords' obligations under the said lease documentation.

e)            In respect  that the  Property is  leasehold  it is held under the
              lease documentation brief details of which are set out in Schedule
              3.10 and, save as disclosed by the said lease  documentation,  the
              lease  documentation  has not been and prior to the  Closing  Date
              will not be amended or varied. There are no rent reviews which are
              or will at the Closing Date be in the course of being  determined.
              Further there are no Tenant's  consent  applications  which are or
              will  at the  Closing  Date be  outstanding  or in the  course  of
consideration.                                      

f)            In so far as the Executive Directors are aware the Company has not
              received any  enforcement  or other  notices  advising them of any
              actual or  impending  actions  or  proceedings  in  respect of the
Property.                                           

g)            The  Company  is not  engaged  in any  litigation  or  arbitration
              proceedings  in  connection  with the  Property  and so far as the
              Company is aware no  circumstances  exist which are likely to give
rise to any.                                        

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h)            To the  best  of the  knowledge,  information  and  belief  of the
              Executive   Directors   the   Property  is  not  affected  by  any
              outstanding  disputes,  notices  or  complaints  which  affect the
              Company's  use  and/or  continued  use of  the  Property  for  the
              purposes  for which they are now used,  namely for the purposes of
              engineering design,  software  development,  sales,  marketing and
              administration  and manufacturing  and stockholding.  In so far as
              the Executive  Directors are aware there are no matters  affecting
              the  Property  which  would  prevent or  materially  restrict  the
              Company from carrying on the  businesses  currently  carried on at
the Property in any material respect.               

3.11     Intangible Property                                                    

3.11.1   The Company has not  registered any trade marks,  trade names,  service
         marks, copyrights,  design rights, logos, jingles, advertising slogans,
         patents,  franchises,  permits or similar rights authorisations or made
         any applications  therefor. The Company uses both the Company names and
         related  logos and devices (if any)  "SolCom" and "SolCom  Systems" and
         the mark and related logos and devices (if any) "LANmaster" in relation
         to its Business and products.  These are not  registered  nor has there
been any attempt to register them.                            

3.11.2   The Company uses or has ownership of the copyright  and/or design right
         (as  appropriate)  in the following  products  and/or drawings of or in
relation to the same:                                         

(a)      Software                                             
1.       RMON Utilities Version 3.06.       
2.       Web Reporter.                      

(b)      Hardware and Firmware                                

1.       LRE - Single Port Ethernet Probe.  
2.       LRE4 - 4 Port Ethernet Probe.      
          3.       LRE100 - Single Port 100 Mbps Ethernet Probe.
       4.       LRE100/4 - 4 Port 100 Mbps Ethernet Probe.
5.       LRT-Single Port Token Ring Probe.  
6.       LRT-FDDI Probe.                    
            7.       LRENG-E-RMON Engine with 4 Port Daughter Cards.
               8.       LRENG-TR-RMON Engine with 2 Port Token Ring Cards.
          9.       LRENG-E100FD-RMON Engine with Full Duplex 100
Ethernet Daughter Cards.  
            10.      LRENG-WAN-V-RMON Engine with V-Series WAN Card.
       11.      LRENG-WAN-TI-RMON Engine with TI WAN Card.
       12.      LRENG-WAN-E1-RMON Engine with E1 WAN Card.
         13.      LRENG-ATM-OC3-RMON Engine with OC3 ATM Card.

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         14.      LRENG-ATM-UTP-RMON Engine with UTP ATM Card.
         15.      LRENG-ATM-DS3-RMON Engine with DS3 ATM Card.
       16.      LRENG-WAN-T3-RMON Engine with E3 ATM Card.
       17.      LRENG-WAN-T3-RMON Engine with T3 WAN Card.
           18.      LRENG-WAN-HSSI-RMON Engine with HSSI WAN Card.

3.11.3   All documents,  reports and other written  information  produced by the
         Company are the  copyright  of the Company,  including  all the manuals
  prepared by the Company in respect of the products listed above.

3.11.4   In  addition,  the  Company in  carrying  out its  business,  purchases
         components  from third  parties which  incorporate  third party Rights,
         which the Company  incorporates  into the Company's  products which are
then sold or licensed on to the Company's customers.          

3.11.5   The  Company licences  technology  to  Hewlett  Packard  under  the HPT
Agreement.                                                    

3.11.6   The Company  licences  technology from GulfBay Network Systems Inc (now
known as Red Point).                                          

3.11.7   The Company does from time to time enter into reseller  arrangements in
respect of its products.                                      

3.11.8   The Company also  licenses  the Hewlett  Packard  Multiport  Token Ring
         Daughter  Card design and  Hewlett  Packard  Full Duplex Fast  Ethernet
Daughter Card design from Hewlett Packard.                    

3.11.9   The  Company  has  not  been  sued  or to the  best  of the  knowledge,
         information and belief of the Executive Directors, been threatened with
         suit, or action for infringement, violation or breach of any Rights. To
         the best of the  knowledge  information  and  belief  of the  Executive
         Directors  there is not the existence of any basis whereby any Right or
         License  could be claimed,  opposed or attacked by any other  person or
         might cease to be valid and  enforceable.  The Company has  received no
         intimation  of any  infringement,  violation  or breach of any Right or
Licences or any of them by any other person.                  

3.12     Title to Assets                                                        

3.12.1   Other than assets and properties disposed of, or subject to purchase or
         sales  orders,  in the ordinary and usual course of business  since the
         Balance Sheet Date, the Company owns all of its assets and  properties,
         including,  without  limitation,  all  of  the  assets  and  properties
         reflected on or in the March 1998 Accounts, in each case free and clear
         of  any  Lien  or  other  encumbrance  whatsoever,   except  for  Liens
         specifically  and  expressly  set forth or  disclosed in the March 1998
Accounts.                                                     

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3.12.2   The Company is supplied  with or sold  components  by third parties for
         incorporation  into the Company's products in terms of, inter alia, the
following agreements:                                         

(aa)          Purchase agreement with XP plc attached as Disclosure Document 46;

(aa)          Purchase agreement with Macro Group Limited (letter setting out   
terms attached as Disclosure Document 195);         

(aa)          Purchase agreement with Advanced Crystal Technology (fax setting  
out terms attached as Disclosure Document 189); and 

(aa)          Purchase  Agreement with Micro Call Limited (fax setting out terms
attached as Disclosure Document 48).                

         The Company  purchases  components from third parties which the Company
         incorporates into the Company's  products which are sold or licensed to
the Company's resellers or end user customers.                

3.12.3   The Company  uses both the "Token  Ring" and "FDDI"  technology  in its
         products.  Where any of the assets used or possessed by the Company are
         supplied  under  retention of title terms all sums due to the suppliers
         thereof  are  reflected  in the  books of  account  of the  Company  as
creditors.                                                    

3.13     Complete Business; Assets                                              

         The  personal  property,  intangible  assets and other  rights owned or
         leased by or licensed to the Company,  in the aggregate,  represent all
         of such assets which are  necessary to conduct the Business as operated
         by the  Company  in the  manner in which it has been  conducted  by the
         Company.  No part of the Business is conducted by or through any person
or entity other than the Company and the Subsidiary.          

3.14     Debtors                                                                

         All debts  reflected  on or in the March 1998  Accounts,  and all debts
         arising  subsequent to the Balance Sheet Date,  have arisen out of arms
         length  transactions  entered  into in the ordinary and usual course of
         business of the  Company.  All items that were  required  by  generally
         accepted accounting principles of the UK to be reflected as debts on or
         in the March 1998 Accounts are so reflected and are collectible in full
         in the  aggregate  to the  extent  not  reserved  for in the March 1998
         Accounts  in   accordance   with  UK  generally   accepted   accounting
         principles.  Debts which shall have arisen after the Balance Sheet Date
         are  collectible  in full  subject to a  provision  not  exceeding  the
         equivalent  provision  made  in the  March  1998  Accounts  and are not
 subject to any set-off, counter claim, credit or return policy.

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3.15     Absence of Certain Changes                                             

Since the Balance Sheet Date the Company has not:             

(a)         altered its  Memorandum of Association or Articles of Association or
            merged  with  or  into  or  consolidated   with  any  other  person,
            subdivided,  consolidated or in any way  reclassified  any shares of
            its share capital or changed or agreed to change in any manner or in
            any way the rights of its issued  share  capital or any part thereof
            or the  character or scope of its business or the manner in which it
is conducted;                                           

(b)         issued  or sold  or  purchased,  or  issued  options  or  rights  to
            subscribe to, or entered into any contracts or  commitments to issue
or sell or purchase, any shares in its share capital;   

(c)         entered into or amended any  employment or service  agreement or any
            terms and  conditions  of  employment,  entered  into or amended any
            agreement with any trade union or labour association or organisation
            representing  any  employee,  adopted,  entered into, or amended any
employee benefit plan or scheme;                        

(d)         incurred any indebtedness for borrowed money whatsoever;            

(e)         declared  or paid  any  dividends  or  declared  or made  any  other
            distributions  of any kind to its shareholders or made any direct or
            indirect redemption,  cancellation, purchase or other acquisition of
any shares in its issued share capital;                 

(f)         collected  its debts other than in the  ordinary and usual course of
            business  consistent  with past practice or deferred  payment of its
            creditors  other than in the  ordinary  and usual course of business
            consistent  with past practice,  or changed its policies either with
       respect to the collection of debts or the payment of creditors;

(g)         waived  any right of value to its  business,  made any change in its
            accounting  methods,  practices,  procedures or policies or made any
            change in depreciation or amortization  policies or rates adopted by
            it or made any change in the type or timing of  lodgement of its tax
elections;                                              

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            changed  to a  significant  extent  any  of its  business  policies,
            including,  without  limitation,  advertising,  marketing,  pricing,
            purchasing,  distribution,  personnel, sales, returns, its budget or
            product acquisition  policies, or the type, nature or composition of
its products or services;                               

(h)         made any wage or salary, bonus or commission  increase,  or increase
            in any other direct or indirect  compensation or benefit,  for or to
            any of its officers, directors,  employees,  consultants,  agents or
            other  authorized  representatives,  or  made  any  accrual  for  or
commitment or agreement to make or pay the same;        

(i)         made  any  loan  or  advance  in  excess  of  $2,000  to  any of its
            shareholders, officers, directors, employees, consultants, agents or
            other authorized representatives (other than travel advances made in
            the ordinary and usual course of  business),  or made any other loan
           or advance other than in the ordinary and usual course of business;

(j)         made any payment or commitment  to pay any severance or  termination
            pay  or  terminal  payment  to  any  of  its  officers,   directors,
           employees, consultants, agents or other authorized representatives;

(k)         except in the ordinary and usual course of business (i) entered into
            any lease  (as  lessor or  lessee)  or  sublease  (as  sublessor  or
            sublessee);  (ii) sold,  abandoned or made any other  disposition or
            disposal  of any of its  assets  or  properties  with a value in the
            aggregate  in excess of $7,500  or any  interest  therein;  or (iii)
        granted or suffered any Lien on any of its assets or properties;

(l)         except in the  ordinary  and usual  course of  business  incurred or
            assumed any debt, obligation or liability known or which ought to be
            known  (whether  absolute or contingent and whether or not currently
due and payable) of an amount in excess of $10,000;     

(m)         suffered or  experienced  any damage,  destruction or loss adversely
            affecting the assets, properties,  business,  operations,  condition
            (financial or otherwise) of the Company taken as a whole, whether or
not covered by insurance;                               

(n)         made any  significant  change in the type,  nature,  composition  or
            quality of its products or services,  or made any significant change
            in  product  or  service   specifications  or  prices  or  terms  of
distribution of such products or services;              

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(o)         terminated  or  failed to  renew,  or to the best of the  knowledge,
            information  and belief of the  Executive  Directors,  received  any
            intimation to terminate or fail to renew,  any contract or agreement
            that is  significant  to the assets,  business or  operations of the
Company;                                                

(p)         except in the ordinary  and usual  course of business,  entered into
            any agreement or other  transaction  significant  to the business or
operations of the Company;                              

(q)         entered into any agreement, arrangement or understanding, whether in
            writing or otherwise,  to take any action  described in this Section
3.15.                                                   

3.16     Litigation                                                             

         There are no  proceedings,  investigations,  inquiries  or  actions  or
         administrative or arbitration proceedings (collectively, "Proceedings")
         by or against the  Company in process or to the best of the  knowledge,
         information  and  belief  of  the  Executive   Directors   having  made
         reasonable  enquiry only of their  professional  advisers and employees
         pending  or  threatened  against  the  Company,   or  the  transactions
         contemplated by this Agreement,  nor are there any judgements,  decrees
         or orders either naming the Company or enjoining the Company, as party.

3.17     Insurance                                                              

         Schedule 3.17 sets forth a list and brief  description  (specifying the
         insurer and the policy number or covering note number,  describing each
         pending  claim  thereunder  of more  than  $10,000,  setting  forth the
         aggregate amounts paid out under each such policy up to the date hereof
         and the aggregate limit, if any, of the insurer's liability thereunder)
         of  all  policies  of  fire  liability,  product  liability,  workmen's
         compensation,  employer's liability,  business  interruption,  personal
         accident,  vehicular  and other  insurance  held by or on behalf of the
         Company.  To the best of the knowledge,  information  and belief of the
         Executive Directors all such policies are in full force and effect. The
         premiums thereunder are paid up to date. The Company is not in material
         default  with respect to any  provision  or term  contained in any such
         policy and has not failed to give any notice or present any claim under
         any such  policy in due and timely  fashion.  There are no  outstanding
         unpaid  claims  under any such  policies.  The Company has  received no
         notice of  cancellation  or non-renewal  of any such policy.  There has
         been no material inaccuracy in any application for any such policies or
         to the best of  knowledge,  information  and  belief  of the  Executive
         Directors  any similar state of facts which  constitutes  the basis for
         termination,   cancellation,  non-renewal  or  avoidance  of  any  such
policies of insurance.                                        

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3.18     Employee Benefit Plans                                                 

(a)           Company.                                                          

(b)           The Company is not a party to and has no obligation to provide and
              does not participate in or contribute to any scheme or arrangement
              for the  provision of any pension,  retirement,  death,  sickness,
              disability,  accident or  healthcare  benefits,  allowances or any
              other similar benefits to or for the benefit of any of its present
              or  former  officers,  employees  or  any  of  their  families  or
dependants.                                         

(c)           The Company has  complied  with all PAYE and NIC  requirements  in
              respect of the salary  sacrifice  contributions  for the following
              employees Evans, Wilson, Gwynn, Ramsay and Struthers ("Pensionable
              Employees).  The Pensionable  Employees have agreed to allow their
              remuneration  to be reduced by the amount of monthly  premiums set
              out  in  the  Disclosure   Letter  and  the  Company  has  paid  a
              corresponding  amount to the personal pension  arrangements of the
              Pensionable  Employees  set  out in  the  Disclosure  Letter.  The
              Pensionable  Employees  are the only  employees in respect of whom
such arrangements are in place.                     

(d)           The Company's profit related pay scheme has at all times since its
              implementation  been operated in accordance  with the rules of the
              scheme and the provisions of all applicable taxation  legislation,
              any alteration in its terms has been notified  pursuant to section
              177B(3)  of  Taxes  Act  1988,  at no  time  has the  scheme  been
              de-registered and full details of the scheme have been provided to
the Buyer.                                          

Environmental Matters                                                           

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(a)           In this Section 3.19 the following  words shall have the following
              meanings  unless the  context  otherwise  requires:-  "Activities"
              means  any  activity,  operation  or  process  carried  out by the
              Company at the  Property.  "Environment"  means any and all living
              organisms (including man),  ecosystems,  property and the media or
              air (including air in buildings,  natural or man-made  structures,
              below or above  ground) water  (including  water within drains and
              sewers),  controlled  waters (as  defined  in  section  30A of the
              Control of Pollution Act 1974) and land (including under any water
              and whether above or below surface); "Environmental Consent" means
              any   consent,   approval,   permit,   licence,   order,   filing,
              authorisation,  exemption, registration,  permission, reporting or
              notice  requirement and any related  agreement  required under any
              Environmental Law;  "Environmental  Laws" means all international,
              European  Union,  national,  federal,  state  or  local  statutes,
              bylaws, orders,  regulations subordinate legislation or common law
              and all orders,  and equivalent  controls  having the force of law
              concerning  the  protection  of human  health  the  protection  or
              prevention  of  harm  to the  Environment  which  are  binding  in
              relation to the Property;  "Hazardous Substance" means any natural
              or artificial  substance material or waste (whether solid, liquid,
              gas, noise, ion, vapour,  electromagnetic or radiation)  regulated
              by any  Environmental  Laws or which is capable of causing harm to
or have a deleterious effect on the Environment     

(b)           As far as the Executive  Directors are aware the Company holds all
              Environmental  Consents necessary for the Activities.  The Company
              has  not  received  any  notice  of and  so  far as the  Executive
              Directors  are aware there are no  circumstances  that may lead to
              the  revocation,  modification  or  suspension  of,  or  that  may
              prejudice  or require  significant  expenditure  for the  renewal,
              extension, grant or transfer of any current Environmental Consents
in relation to the Property.                        

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(c)           To the  best  of the  information,  knowledge  and  belief  of the
              Executive Directors the Company has not received (i) notice of any
              breach  of  or  (ii)  any  notice  or  information  which  implies
              liability or any potential  liability under any Environmental Laws
              in so far as relating to the Property  and/or the  Activities.  To
              the best of the knowledge  information and belief of the Executive
              Directors,  there are no civil or  criminal  proceedings  or suits
              pending against the Company in relation to the Property and/or the
              Activities   arising   from  a  breach  by  the   Company  of  any
              Environmental Law and so far as the Executive  Directors are aware
              there are no  circumstances  of which they are aware  prior to the
              Closing Date which may lead to such  proceedings  or suits against
the Company whether before or after the Closing.    

(d)           To the  best  of the  knowledge,  information  and  belief  of the
              Executive  Directors,  there has not been any  disposal,  storage,
              release, leakage,  migration,  spill, discharge, entry, deposit or
              emission of any Hazardous Substance into the Environment caused by
              the Activities and in so far as the Executive  Directors are aware
              no  third  party  has  deposited  or  disposed  of  any  Hazardous
Substance at or under the Property.                 

3.20     Deliveries of Documents; Corporate Records                             

(a)           The copies of all documents, instruments, agreements and contracts
              annexed to the Disclosure  Letter are accurate copies and complete
copies.                                             

(b)           The  only  directors  of the  Company  and the  Secretary  are the
    persons whose names are listed as such in Schedule 3.20.

(c)           The Register of Members and other  statutory  books of the Company
              are up to date,  contain a true and accurate record of the matters
              with which they should  deal,  and the minute books of the Company
              have been properly kept, contain a true and accurate record of the
              business conducted at the meetings to which they relate. No notice
              or allegation  that any of the foregoing is incorrect or should be
             rectified has been received by the Company or any of the Sellers.

(d)           All  charges  and  securities  granted  by the  Company  have,  if
              relevant, been registered in accordance with the provisions of all
applicable legislation.                             

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(e)           All  documents  of title  relating  to  individual  assets  of the
              Company  having a value in excess of $10,000 and an executed  copy
              of all  significant  written  agreements to which the Company is a
party, are in the possession of the Company.        

3.21     Tax Matters                                                            

(a)           There has not been any transaction, arrangement, event or omission
occurring after the Balance Sheet Date:-            

             (i)         which has given rise or will give  rise:  (a) to income
                         or gains being  deemed to arise to, or  supplies  being
                         deemed to be made by, the Company for taxation purposes
                         where  the  benefit  does not  actually  accrue  to the
                         Company,  or (b) to  any  Taxation  (as  such  term  is
                         hereinafter  defined)  otherwise  being  assessable  or
                         chargeable  on the Company when the relevant  income or
                         gains do not in fact accrue to or the relevant supplies
          are not in fact made by, the Company; or

             (ii)        the  taxation  treatment of which is to the best of the
                         knowledge  information  and  belief  of  the  Executive
                         Directors or may become the subject of any dispute with
any taxation authority.       

(b)          The Company has not within the last six years:-                    

             (i)         been the  subject  of an  investigation  by the  Inland
                      Revenue or any other relevant taxation authority; or

             (ii)        been  the  subject  of any  discovery  notified  to the
                         Company  by the Inland  Revenue  or any other  relevant
taxation authority;           

             and to the best of the  knowledge  information  and  belief  of the
             Executive  Directors there are no facts or matters which are likely
to or may lead to any such investigation or discovery.

(c)          The March 1998  Accounts  make  proper  provision  or  reserve,  in
             accordance with the principles set out in the notes included in the
             March 1998 Accounts,  for all Taxation for which the Company was at
             the  Balance  Sheet  Date  liable  to pay or would be liable to pay
within 3 months of the Balance Sheet Date:-           

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             (i)         on or in respect  of or by  reference  to any  profits,
                         gains or income of the Company for any period  ended on
      or before the Balance Sheet Date; or

             (ii)        on or in  respect of any  distribution  paid or made by
                     the Company on or before the Balance Sheet Date; or

             (iii)       in respect of any act, event, omission,  transaction or
                         other  matter  which  occurred  or  took  place  or was
                         entered  into on or before the  Balance  Sheet Date and
                         for which a provision should be made in accordance with
proper accounting practice.   

(d)          The March 1998  Accounts  make full and  sufficient  provision  for
deferred taxation in accordance with SSAP 15.         

(e)          No  transaction  has been entered into or event  occurred since the
             Balance  Sheet Date in  consequence  of which the Company  could be
             liable to  Taxation  and/or a penalty  pursuant to any of Taxes Act
        1988 sections 34 to 37; 703 to 709; 770 to 774; or 776 to 787.

(f)          The Company has not carried out or been engaged in any  transaction
             or  arrangement  such  that  the law  provides  that  there  may be
             substituted  for the  amount or value or the  actual  consideration
             given or  received or to be given or  received)  by the Company any
different amount or value for taxation purposes.      

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(g)          No  application  has been made  relating to the Company  within the
             period of six years  preceding the date hereof under the provisions
of any of:-                                           

             Taxation of Capital Gains Act 1992 ("TCGA") section 139(5) (company
reconstruction or amalgamation);                      

Taxes Act 1988 section 215 (demergers);               

Taxes Act 1988 section 225 (purchase of own shares);  

  Taxes Act 1988 section 707 (transactions in securities);

Taxes Act 1988 section 765 (migration of companies);  

Taxes Act 1988 section 776(11) (transactions in land);

TCGA section 138 (reconstructions or amalgamations);  

(h)          The Company has properly and  punctually  submitted to all relevant
             taxation  authorities  (whether  of the U.K.  or the United  States
             ("U.S."))  all  returns,  given all notices and  supplied all other
             information  which  it is  required  by law to make  and  made  all
             appropriate  claims for reliefs and  allowances,  applications  and
computations.                                         

(i)          All such returns,  information,  notices, claims,  applications and
             computations  are true,  complete and accurate  computations in all
             significant respects,  give disclosure of all significant facts and
             circumstances  and are not the  subject of any  question or dispute
             notified to the  Company  and are not to the best of the  knowledge
             information and belief of the Executive  Directors likely to become
             the subject of any question or dispute with any taxation authority.

(j)          All  payments by the Company to any person which ought to have been
             made under  deduction of Taxation have been so made and the Company
             has  (if  required  by  law  to do so)  accounted  to the  relevant
taxation authority for the Taxation so deducted.      

(k)          The  Company  is not  liable  as agent or lessee  for any  taxation
liability of another person.                          

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(l)          No  UK  taxation  authority  has  agreed  to  operate  any  special
             arrangement  (being an  arrangement  which is not based on a strict
             and  detailed   application  of  the  relevant  legislation  or  on
             generally  published  statements of practice or generally published
            extra-statutory concessions) in relation to the Company's affairs.

(m)          There are set out in Schedule 3.21 details of all matters  relating
             to  Taxation  in respect  of which the  Company  (whether  alone or
             jointly with any other person) has an  outstanding  entitlement  or
obligation:-                                          

             (i)           to make any claim  (including a supplementary  claim)
                           for relief from Taxation the making of which has been
                   assumed in preparing the March 1998 Accounts;

             (ii)          to make any election  for one type of relief,  or one
                           basis,  system or method of  Taxation  as  opposed to
                           another  the  making  of which  has been  assumed  in
        preparing the March 1998 Accounts;

             (iii)         to make  any  appeal  (including  a  further  appeal)
        against an assessment to Taxation;

             (iv)          to  make  any  application  for  the  postponement of
payment of Taxation; or   

             (v)           to  submit  any  return  or  provide  particulars  or
            information to any taxation authority.

(n)          The  Company  has  complied  with all  notices  served on it by any
    taxation authority and no such notice remains outstanding.

(o)          The Company has duly and punctually  paid all Taxation which it has
             become  liable to pay and it has not within the period of six years
             preceding  the date hereof been liable to pay any penalty,  fine or
surcharge in connection with Taxation.                

(p)          The Company has not since the Balance  Sheet Date made or agreed to
             make any distributions within the meaning of Taxes Act 1988 section
209 (meaning of "distribution").                      

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(q)          The Company has not issued any share  capital or securities as paid
             up other than by receipt of new consideration within the meaning of
Taxes Act 1988 section 254.                           

(r)          No balancing charge under Capital  Allowances Act 1990 ("CAA 1990")
             (or other legislation  relating to any capital allowances) would be
             made on the Company on the  disposal of any pool of assets (that is
             to say all those  assets  expenditure  relating  to which  would be
             taken into  account in computing  whether a balancing  charge would
             arise on a disposal of any of those  assets) or of any asset not in
             such a pool,  on the  assumption  that a  disposal  is  made  for a
             consideration  equal to the book value  shown in or adopted for the
        purpose of the March 1998 Accounts for the assets in the pool.

(s)          To  the  best  of  the  knowledge  information  and  belief  of the
             Executive  Directors  all  expenditure  incurred  by the Company or
             which it may incur under any subsisting commitment on the provision
             of machinery or plant on or before June 30 1997 has  qualified  and
             expenditure  on or after that date will qualify (if not  deductible
             as a trading  expense  of a trade  carried on by the  Company)  for
             writing  down  allowances  under  CAA 1990 Part II  (machinery  and
plant) if a claim is made.                            

(t)          Since the Balance  Sheet Date  nothing has  happened as a result of
             which:  there may be made  against the  Company a balancing  charge
             under CAA 1990;  or any disposal  value may be brought into account
             under CAA 1990 section 24 (writing  down  allowances  and balancing
             adjustments);  or there may be any recovery of excess relief within
             CAA 1990  Sections  46 or 47  (recovery  of  excess  relief);  or a
             relevant  event  occurs  within the meaning of CAA 1990 section 138
(scientific research).                                

(u)          There is not any dispute  between the Company and any other  person
             as to the entitlement to capital allowances under sections 51 to 59
             of CAA 1990 and so far as the  Executive  Directors are aware there
             is no circumstance and there are no circumstances  which could give
             rise to, any dispute between the Company and any other person as to
             the entitlement to capital allowances under CAA 1990 sections 51 to
59 (fixtures).                                        

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(v)          The Company  has not made any  election  under CAA 1990  section 37
             (short life assets) so far as the Executive Directors are aware nor
             has been taken to have made an election under sub-section (8)(c) of
that section.                                         

(w)          The book value  shown in or adopted  for the  purposes of the March
             1998  Accounts as the value of each of the assets of the Company on
             the  disposal of which a chargeable  gain or  allowable  loss could
             arise does not exceed the amount  deductible  under TCGA section 38
             (expenditure:  general)  (excluding  any  indexation  allowance) in
respect of each such asset.                           

(x)          The  Company  does not have an  interest  in any  assets  which are
             wasting assets within TCGA section 44 (wasting assets) and which do
not qualify for capital allowances.                   

(y)          The Company  has not made nor is entitled to make any claims  under
             any of TCGA  sections  152,  153,  165,  172,  175, 242, 243 or 247
             insofar as such claims affect or would affect the  chargeable  gain
             or allowable loss which would arise on a disposal by the Company of
any of its assets.                                    

(z)          The  Company  has not made nor is it  entitled to make any claim or
             election under either of TCGA section 24 (assets lost or destroyed)
             or TCGA  section  161(3)  (appropriations  to or from  stock).  The
             Company has not,  since the Balance  Sheet Date,  appropriated  any
        asset forming part of its trading stock for any other purpose.

(aa)         The Company  has not since the  Balance  Sheet Date been a party to
             any  depreciatory  transactions for the purpose of TCGA section 176
             (transactions in a group) or so far as the Executive  Directors are
             aware which could be treated as a  depreciatory  transaction  under
TCGA section 177 (dividend stripping).                

(bb)         The Company has not been a party to any value shifting arrangements
   under any of TCGA sections 29, 30 or 34 (value shifting).

(cc)         The  Company  has not made nor is  entitled to make any claim under
             TCGA section 280  (consideration due after time of disposal) to pay
by instalments tax on chargeable gains.               

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(dd)         The  Company  has  not   disposed  of  or  acquired  any  asset  in
             circumstances  falling  within  TCGA  sections  17 or 19 and is not
           entitled to any capital loss to which TCGA Section 18(3) applies.

(ee)         No  reorganisation  of the share capital of the Company  within the
 provisions of TCGA sections 126 to 130 has taken place.

(ff)         No capital gain  chargeable to  corporation  tax will accrue to the
             Company on the  disposal of any debt owed to the Company  where the
             disposal  proceeds  equal the  value of the debt in the March  1998
Accounts.                                             

(gg)         No allowable loss which might accrue on the disposal by the Company
             of any share in or  security of any company is liable to be reduced
             by the application of TCGA section 176, Taxes Act 1988 sections 421
and 422.                                              

(hh)         The Company is a registered  and taxable person for the purposes of
             the Value Added Taxes Act 1994 ("VATA  1994") and has complied with
             and observed in all significant respects the terms of all statutory
             provisions,  directions,  conditions,  notices and agreements  with
             H.M.  Customs and Excise  relating to value added tax.  The Company
             has maintained and obtained accounts,  records,  invoices and other
             documents  (as the case may be)  appropriate  or requisite  for the
             purposes  of value  added  tax  which  are  complete,  correct  and
up-to-date in all significant respects.               

(ii)         The Company:-                                                      

             (i)           is not,  nor in the two  years  prior  to the date of
                           this Agreement has been, in arrears with any payments
                           or  returns  or  notifications  under  any  statutory
                           provisions,   directions,   conditions   or   notices
                           relating  to  value  added  tax,  or so  far  as  the
                           Executive   Directors   are   aware   liable  to  any
                           forfeiture  or penalty or interest or surcharge or to
                           the  operation of any penalty,  interest or surcharge
provision;                

             (ii)          has not been  required  by H M Customs  and Excise to
give security;            

             (iii)         is not,  and has not  agreed  to  become,  an  agent,
                           manager  or  factor  for the  purposes  of VATA  1994
                           section  47  (agents  etc) of any  person  who is not
     resident in the United Kingdom;

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             (iv)          has  not  since  the  end  of  the  last   prescribed
                           accounting  period  made,  and  to  the  best  of the
                           knowledge  information  and  belief of the  Executive
                           Directors  will  not  make  prior  to  Closing,   any
            supplies that are exempt supplies; and

             (v)           has not received a notice under VATA 1994 paragraph 2
                           Schedule 6 (valuation - special cases) directing that
                           the value of goods  supplied  by the Company be taken
    to be their open market value.

(aa)         The Company has not since the Balance Sheet Date been, and will not
             prior to Closing be,  treated as having made any supply of goods or
             services for the purposes of value added tax where no supply has in
fact been made by the Company.                        

(kk)         The  Company  does  not  use  any  schemes  made  under  any of the
             following  regulations:  Value Added Tax  (Supplies  by  Retailers)
             Regulations 1972 (special  schemes for retailers);  Value Added Tax
             (Cash  Accounting)  Regulations 1987 (cash accounting  scheme);  or
             Value  Added  Tax  (Annual  Accounting)  Regulations  1988  (annual
accounting scheme).                                   

(ll)         The Company has never received a surcharge  liability  notice under
             VATA 1994  section 59 (default  surcharge)  or a penalty  liability
         notice under VATA 1994 section 64 (persistent misdeclarations).

(mm)         There is set out in Schedule  3.21 with  express  reference to this
             warranty a true, accurate and complete list of all land,  buildings
             and civil  engineering  works in which the Company has an interest,
             stating  in  respect  of each,  and each part of each,  such  land,
building or work:-                                    

                           whether an  election  to waive  exemption  under VATA
                    1994 paragraph 2(1) Schedule 10 has been made;

                           whether it is or was  intended for use of a dwelling,
                           for a  relevant  residential  purpose  or a  relevant
charitable purpose;       

                           whether it is or was a freehold  building or freehold
                           civil  engineering  work that was completed for value
                           added tax purposes less than three years prior to the
              date of this Agreement, and if so, when;

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                           whether it is or was a building or work  subject to a
                           developmental    tenancy,    development   lease   or
                           developmental  licence as defined in Note 1 to Item 1
     of Schedule 9 to VATA 1994; and

                           whether it is a freehold  building or freehold  civil
                           engineering  work  that  has not been  completed  for
value added tax purposes. 

(nn)         The  Company  is not  required  to pay  amounts on account of value
             added tax under any order made under VATA 1994 section 28 (payments
on account).                                          

(oo)         The  Company  is  a  close  company within the terms of section 414
Taxes Act 1988.                                       

(pp)         The Company has no liability to Taxation  under the  provisions  of
Taxes Act 1988 sections 418 to 422 (close companies). 

(qq)         The Company has never made any  transfer of the kind  described  in
    TCGA 1992 section 125 (transfers of assets at undervalue).

(rr)         All  National  Insurance  Contributions  and  sums  payable  by the
             Company to the Inland  Revenue under the PAYE system up to the date
             hereof have been paid and to the best of the knowledge  information
             and belief of the Executive Directors the Company has made all such
             deductions  and  retentions  as should have been made under section
 203 Taxes Act 1988 and all regulations made thereunder.

(ss)         The Company  has  received  no notifications or notices under Taxes
            Act 1988 section 166 (benefits in kind: notices of nil liability).

(tt)         The Company  does not operate any scheme  approved  under Taxes Act
             1988  section  202  (charities:   payroll   deduction   scheme)  or
             registered under Taxes Act 1988 Part V, Chapter III (profit-related
pay).                                                 

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(uu)         No officer or employee of the Company is a beneficiary or potential
             beneficiary  of a  qualifying  employee  share  ownership  trust as
             defined in FA 1989 Schedule 5 (employee share ownership trusts).The
             Company  implemented  a share scheme  which was approved  under the
             Taxes Act 1988  Schedule  9 on June 5, 1997 and at all times  since
             approval,  all conditions have been  fulfilled,  such that approval
             could not be withdrawn.  The options granted under this scheme have
             been  notified  to the Buyer and these  have been  validly  granted
under the terms of the scheme.                        

(vv)         Since the  Balance  Sheet Date the  Company  has not  received  any
             payment  to  which  Taxes  Act  1988  sections  601 to 603  applies
(pension scheme surpluses: payments to employers).    

(ww)         All sums payable under the existing  arrangements  for remunerating
             any person who is or has been an officer or employee of the Company
             or a  dependant  of any  such  person  and  for  rewarding  persons
             rendering  services to the Company are  deductible for the purposes
of Taxes Act 1988 section 74 or 75 (deductions).      

(xx)         So far as the Executive  Directors are aware there is no instrument
             which is necessary to establish the Company's title to any right or
             asset  which is liable to stamp duty in the U.K. or  elsewhere  but
             which has not been duly stamped or which would  attract  stamp duty
if brought within the relevant jurisdiction.          

(yy)         To  the  best  of  the  knowledge  information  and  belief  of the
             Executive  Directors  the  Company has duly paid all stamp duty and
             stamp  duty  reserve  tax to which  it is,  has been or may be made
             liable and there is no  liability to any penalty in respect of such
duty or tax.                                          

(zz)         The  Company  is and always  has been  resident  only in the UK for
             taxation  purposes.  The  Company is not liable to  Taxation in any
             jurisdiction  other than the UK. The Company  has never  carried on
             any trade,  business or other activities  outside the UK other than
             the export of its goods and/or  services in the ordinary and normal
      course of its business or other than through the Subsidiary.

(aaa)        The  Company has not issued any shares on the basis that such issue
             entitles or is intended to entitle the  subscribers to relief under
Taxes Act 1988 Section 289.                           

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(bbb)        The  Company  has  not  issued  any  share  capital  to  which  the
             provisions  of Taxes Act 1988  Section 249 or TCGA  Section  141(1)
      could apply nor does the Company own any such share capital.

(ccc)        Within the period of three  years  ending  with the date hereof and
             within the  context of section  768 of the Taxes Act 1988 there has
             been no major  change  in the  nature  or  conduct  of any trade or
             business  carried  on by the  Company  nor  has  the  scale  of the
             activities  in any trade or  business  carried on by the Company at
             any  time  become  small or  negligible  for the  purposes  of that
section.                                              

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3.22     Compliance with Laws; Permits, Etc                                     

(a)          The Company is in compliance  with,  and no default or violation or
             breach exists under,  any and all laws  applicable to it (including
             directives, rules, regulations, codes, guidance notes, injunctions,
             interdicts,  judgements,  orders,  decrees and rulings  thereunder)
             including but without  limitation  those of the European  Community
             (collectively,  "Laws and  Requirements of Laws") (except where the
             failure  to be in such  compliance  will not (i)  have  significant
             adverse effect on the Company, (ii) prevent the continued operation
             of the  Business as operated by the Company  following  the Closing
             Date in the manner heretofore  conducted and with no less scope and
             extent without the incurrence of any additional significant expense
             by the  Company,  or (iii)  subject  the  Company to any penalty or
             enforcement or equivalent action as a result thereof).  Since March
             31, 1995, no  investigation  has been conducted by any governmental
             authority which has resulted in assessment of any monetary  penalty
             or sum levied or imposed  on the  Company in excess of $1,000.  The
             Company has (but  excluding  for the  purposes of this Section 3.22
             (a) any of the  following  relating  to  Taxation)  duly  filed all
             reports  and  returns  required  by  law  to be  filed  by it  with
             governmental   authorities;   and  obtained  all   governmental  or
             regulatory    permits,    certificates,     licenses,    approvals,
             registrations and authorizations  ("Permits") which are required by
             law by it in  connection  with  and  related  to its  business  and
             operations  (except  where the  failure to have made such filing or
             have such Permit will not (i) have a significant  adverse effect on
             the Company,  (ii) prevent the continued  operation of the Business
             following the Closing Date in the manner  heretofore  conducted and
             with no  less  scope  and  extent  without  the  incurrence  of any
             significant additional expense by the Company, or (iii) subject the
             Company or the Buyer to any penalty or  enforcement  or  equivalent
             action as a result thereof). The Company is in compliance with such
             Permits in all  material  respects,  all of which are in full force
             and  effect,  and to the  best of the  knowledge,  information  and
             belief of the Executive Directors no proceedings for the suspension
             or cancellation  of any of them is pending or threatened.  Schedule
             3.22 contains a complete list or  description  of all such Permits,
             including the expiration  dates  thereof,  and any Permits that are
             not  transferable  or which  would  cease to be in full  force  and
             effect as a result of the transactions  herein  contemplated are so
             designated   on  such   Schedule.   The  Company  has  made  timely
application for renewals of all such Permits.         

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(b)          Since March 31 1995 the Company has not made any illegal payment to
             officers or employees of any governmental or regulatory body or its
             own officers or employees, or made any illegal payment to customers
             for the sharing of fees or to customers or suppliers  for rebate or
             discount  of  charges  or made any such  payment  to  customers  or
             suppliers  outside the ordinary and normal  course of business,  or
             engaged in any other  reciprocal  practices  which are illegal,  or
             made any illegal  payment or given any other illegal  consideration
             to  purchasing  agents or other  representatives  of  customers  in
respect of sales made or to be made by the Company.   

3.23     Conflicts                                                              

         None  of  the  Executive  Directors  nor  any  affiliate  of any of the
         foregoing  (a) has any direct or  indirect  interest  in (i) any entity
         that does any business with, or directly  competes with, the Company or
         (ii)  the  Business  as  operated  by  the  Company,  or  (b)  has  any
         contractual   relationship   with  the  Company   other  than  being  a
         shareholder of the Company or other than such  relationship  as relates
         to being an  employee  of the  Company or officer  or  director  of the
         Company or affiliate  thereof or other than being the holder of options
to subscribe for shares in the share capital of the Company.  

3.24     Suppliers and Customers                                                

         Schedule  3.24  sets  forth  the  twenty  (20)  largest   suppliers  by
         expenditure  of the Company  (the "Major  Suppliers")  and fifteen (15)
         largest customers by turnover to the Company (the "Major Customers") of
         the  Company  for the nine (9) months  ended  March 31,  1998.  No such
         supplier or customer has  cancelled or otherwise  modified or so far as
         the Executive Directors are aware intends to cancel or otherwise modify
         its  agreement  with the  Company or  decrease  or limit its  services,
         supplies  or  materials  to the Company or its usage or purchase of the
         services or  products of the Company and to the best of the  knowledge,
         information  and belief of the Executive  Directors (but having made no
         enquiry of any such  customer or supplier) the change of control of the
         Company  resulting from the acquisition of the Shares by the Buyer will
         not  entitle  any such  supplier  or  customer  to  terminate  any such
agreement with the Company.                                   

3.25     Labour Matters                                                         

(a)          No employee  of the Company is covered by nor is the Company  party
         to  a collective bargaining agreement or recognition agreement.

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(b)           Since March 31 1995 there has been, no strike, lockout, picketing,
              work  stoppages or other labour  troubles or  industrial  disputes
              with  respect to the  Company  and,  to the best of the  knowledge
              information  and  belief  of  the  Executive  Directors,  no  such
              strikes, picketing, lockouts, work stoppages or labour troubles or
    industrial disputes are threatened or currently pending.

(c)           There does not currently  exist, and to the best of the knowledge,
              information  and belief of the  Executive  Directors  there is not
              currently threatened, any grievance proceeding, or complaint by or
on behalf of an employee.                           

(d)           The Company is in compliance in all significant  respects with all
              provisions  of  all  applicable   laws,   regulations,   policies,
              procedures  and  contractual  obligations  relating to employment,
              employment  practices,  wages, hours,  discrimination,  safety and
              health of employees,  workers compensation,  withholding of wages,
              and terms and  conditions of  employment.  All personnel  manuals,
              handbooks,   policy  and  procedure  manuals   applicable  to  the
           employees of the Company have been made available to the Buyer.

(e)           Set  forth  in  Schedule  3.25  is a  list  of all  persons  whose
             employment was terminated by the Company in the last three years.

(f)           The Company is not liable for any severance pay or other  payments
              to any  employee  or former  employee  due to the  termination  of
              employment  and will not have any  liability  under any benefit or
              severance  plan,  policy,  practice,  program or  agreement,  as a
result of the transactions contemplated hereunder.  

3.26     Bank Accounts                                                          

         Schedule  3.26  sets  forth  the  names  and  locations  of all  banks,
         depositories and other financial  institutions in which the Company has
         an account,  including any brokerage  account,  or safe deposit box and
         the names of all persons  authorized  to draw thereon or to have access
thereto.                                                      

3.27     Creditors                                                              

         Schedule  3.27 sets forth a true and correct and  complete  list of all
         trade creditors of the Company as of June 30, 1998 in excess of $10,000
to any one payee.                                             

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3.28     Officers, Directors and Key Employees                                  

         Schedule  3.28  sets  forth  (i)  the  name,  title  and  total  annual
         compensation  or  remuneration  of each  officer  and  director  of the
         Company  and (ii) the  name,  title and total  annual  compensation  or
         remuneration  of each other employee or consultant of the Company whose
         current annual rate of compensation or remuneration  (including bonuses
         and  commissions)  exceeds  $  50,000  and  (iii)  all  wage or  salary
         increases  or bonuses or  commissions  received by such  persons  since
         March 31, 1997,  and any  commitment or agreement by the Company to pay
         such increases or bonuses or commissions.  Included in Schedule 3.28 is
         a copy of any written employment,  consultancy , commission,  severance
         or similar arrangement with any such person and of terms and conditions
         of employment,  which documents set forth the entire  understanding  of
         the Company,  on the one hand, and such person, on the other hand, with
         respect to the employment,  engagement and/or severance of such person.
         None of such  persons  has  indicated  to the  Company or to any of its
         officers  or  directors  any  intention  on the part of such  person to
         terminate such person's  relationship with the Company. No negotiations
         for any  increase  in the  remuneration  or  benefits of any officer or
         employee of the  Company are in process.  No employee of the Company is
         currently on  maternity  leave or  authorized  medical  leave.  No past
         employee  of the  Company  has a right to  return to work or has or may
have a right to be reinstated or re-engaged.                  

Insolvency                                                                      

(a)             No order has been made,  petition  presented or meeting convened
                for the purpose of  considering a resolution  for the winding up
of the Company;                                 

(b)             No petition has been presented for an administration order to be
made in relation to the Company;                

(c)             No  receiver  has been  appointed  in respect of the whole or in
                part of any of the property,  assets and/or  undertaking  of the
Company;                                        

(d)             No  composition  in  satisfaction  of the debt of the Company or
                scheme  of   arrangement   of  its  affairs  or   compromise  or
                arrangement  between it and its creditors  and/or members of any
                class  of  its  creditors  and/or  members  has  been  proposed,
sanctioned or approved.                         

(e)             The Company is not unable to pay its debts within the meaning of
 Section 123 of the Insolvency Act 1986 of the UK.

3.30     Grants                                                                 

         The  Company has not done or agreed to do anything as a result of which
either:-                                                      

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(a)            any  investment  or other  grant paid to the Company is or may be
     liable to be refunded or repaid in whole or in part; or

(b)            any such investment or other grant for which application has been
    made by the Company may not be paid or may be reduced.

3.31            Computer System                                                 

                (a)            Details  of  all  hardware  leases  and  software
                               licences  granted to the  Company in  relation to
                               the  computer  software  and  equipment  used  or
                               operated  by the  Company  in its  business  (the
                               "Computer  System")  and all  escrow  agreements,
                               maintenance  agreements and facilities management
                               services  agreements  in  respect of the same and
                               any  computer   bureaux  and  disaster   recovery
                               agreement to which the Company is a party are set
   out in Schedule 3.31.

                (b)            Subject to the terms of all applicable agreements
                               the Company has full use of its  Computer  System
                      and is legally entitled to use the same.

                (c)            The change of control of the Company contemplated
                               by this  Agreement  will not affect the continued
                               right  of the  Company  to have  full  use of its
                               Computer System as envisaged in Section 3.31 (b).

                (d)            The  continued  right of the Company to have full
                               use  of  its  Computer  System  as  envisaged  in
                               Section  3.31 (b) is not  subject to the grant of
                               any additional rights to third parties permitting
                               them to access and/or use its Computer  System on
     a sole or shared basis.

3.32     Subsidiaries; etc                                                      

         The Subsidiary is a corporation duly organised, validly existing and in
         good standing under the laws of its jurisdiction of  incorporation  and
         has the corporate power and lawful  authority to own, lease and operate
         its assets, properties and business and to carry on its business as now
         being and as heretofore conducted.  The Subsidiary is duly qualified or
         otherwise  authorized as a foreign corporation to transact business and
         is in good standing in each  jurisdiction set forth next to its name on
         Schedule  3.32,   which  is  the  only   jurisdiction   in  which  such
         qualification  or  authorization  is  required.  Except as set forth on
         Schedule 3.32, the  Subsidiary  does not file any franchise,  income or
         other tax returns in any other jurisdiction based upon the ownership or
         use of property therein or the derivation of income therefrom. There is
         no outstanding right,  subscription,  warrant, call, pre-emptive right,
         option or other  agreement  of any kind to  purchase  or  otherwise  to
         receive  from the  Subsidiary  any shares of the  capital  stock or any
        other security of, or any proprietary interest in, the Subsidiary, and

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         there is no  outstanding  security  of any kind  convertible  into such
         capital stock or proprietary interest. The Subsidiary does not directly
         or indirectly  own any  investment in any of the capital stock or share
     capital of, or any other proprietary interest in, any other person.

3.33     Consents and Approvals; No Violation                                   

         The execution and  performance by the Sellers of this Agreement and the
         consummation by the Sellers of the transactions  contemplated hereby do
         not and will not:  (a)  conflict  with or breach any  provision  of the
         Certificate or Articles of Incorporation or By-laws, or other governing
         documents of the  Subsidiary;  (b) require the  Subsidiary  to make any
         filing or registration with, or obtain any other permit, authorization,
         consent or approval of, any governmental or regulatory  authority;  (c)
         conflict  with,  violate or breach any  provision  of, or  constitute a
         default (or an event which, with notice or lapse of time or both, would
         constitute a default) under, or result in a modification of, any of the
         terms,  covenants,  undertakings,  conditions or provisions of, or give
         rise to a right to  terminate or  accelerate  or increase the amount of
         payment due under, any note, bond, mortgage,  indenture, deed of trust,
         license, franchise,  permit, lease, sublease,  contract,  agreement, or
         other instrument, commitment or obligation to which the Subsidiary is a
         party, or by which it or any of its respective properties or assets may
         be bound,  including  without  limitation any fee mortgages  creating a
         Lien on the Real Property (as hereinafter defined) or any part thereof;
         (d)  result in the  creation  of any Lien on any of the  properties  or
         assets of the  Subsidiary;  (e)  violate any order,  writ,  injunction,
         interdict,  decree,  judgement,  or ruling of any court or governmental
         authority,   applicable  to  the   Subsidiary  or  the  assets  of  the
         Subsidiary;  or (f)  violate  any  statute,  law,  rule or  regulations
         applicable to the Subsidiary or to the securities,  properties,  assets
or business of the Subsidiary.                                

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3.34     Subsidiary Material Contracts                                          

(a)           The  Subsidiary  has not  entered  into  and is not  bound  by any
Subsidiary Material Contracts (as defined below).   

(b)           "Subsidiary  Material  Contracts"  (if any) means any Contract (as
              defined below) (i) that provides for aggregate  future payments by
              the  Subsidiary of more than  $10,000;  (ii) that was entered into
              other than in the ordinary  and usual  course of  business;  (iii)
              that  has an  unexpired  term  exceeding  one  year and may not be
              terminated  in  accordance  with its terms  upon less than 90 days
              notice  without  any  obligation,  liability,  penalty  or premium
              (other than a nominal  cancellation fee or charge);  (iv) that was
              entered  into  with  any  Seller,  any  officer,  director  or any
              employee of the  Subsidiary or any member of a Seller's  family or
              any affiliate of the foregoing;  (v) that constitutes a collective
              bargaining  recognition  or  other  labour  agreement;  (vi)  that
              constitutes  or contains a guarantee  or indemnity by or otherwise
              imposes  upon the  Subsidiary  liability  for the  obligations  or
              liabilities of another; (viii) that involves an agreement with any
              bank, finance company or similar  organization for the sale of any
              products of the  Subsidiary on credit or the provision of services
              on credit;  (ix) that involves the sale by or to the Subsidiary of
              products  or services  on  consignment;  (x) that is or contains a
              power of attorney;  (xi) that  contains any  provision or term for
              renegotiation or  redetermination  of price;  (xii) that restricts
              the  Subsidiary   from  carrying  on  its  business  as  presently
              conducted  anywhere in the world or which otherwise  restricts the
              ability of the  Subsidiary or any  affiliate  thereof to engage in
              any other business anywhere in the world; (xiii) that contains any
              warranty  terms or  undertakings  in addition to the warranties or
              undertakings  normally  and  usually  given by the  Subsidiary  in
              connection  with the sale of its products or the  provision of its
              services;  (xiv)  pursuant  to which the  Subsidiary  may hold any
              interest which has a value in excess of $2,500 owned or claimed by
              the  Subsidiary  in or to any  Subsidiary  Tangible  Property  (as
              defined in Section  3.37);  (xv) that provides for  maintenance or
              management of any Real Property (as defined in Section  3.38);  or
              (xvi)  that is a  contract  for hire or  rent,  hire  purchase  or
              purchase by way of credit sale or periodical payment. There are no
   Subsidiary Material Contracts which are not in writing.

(c)           The  term  "Contract"  means  and  includes  any  oral or  written
              contract,  agreement,   commitment,   mortgage,  debt  instrument,
              security agreement,  license, guarantee, lease, sublease, charter,
              franchise,  power of  attorney,  agency  and  other  agreement  or
              arrangement  constituting  a binding  obligation of the Subsidiary
whether or not in writing.                          

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(d)           The Contracts (other than Subsidiary  Material Contracts (if any))
              to which the  Subsidiary  is a party do not involve the payment by
              the  Subsidiary  of more than $20,000 per year in the aggregate or
              $10,000  per year in any  individual  case  and are not  otherwise
              significant, individually or in the aggregate to the Subsidiary or
the Business as operated by the Subsidiary.         

(e)           There is not, and there has not been claimed or to the best of the
              knowledge,  information and belief of the Executive Directors (but
              having  made no  enquiry of the other  parties  to any  Subsidiary
              Material  Contract)  alleged by any  person,  with  respect to any
              Subsidiary Material Contract, any existing significant default, or
              event of  default,  or event that with  notice or lapse of time or
              both would constitute a significant default or event of default on
              the part of the Subsidiary  or, so far as the Executive  Directors
              are aware but without having made any enquiry,  on the part of the
              other  party or  parties  thereto.  Subject  to the  effect of any
              applicable   bankruptcy,    insolvency,   fraudulent   conveyance,
              reorganisation   or  similar  laws  affecting   creditors   rights
              generally the Subsidiary  Material Contracts are in full force and
              effect and constitute the legal, valid and binding  obligations of
              the  Subsidiary  and, so far as the Executive  Directors are aware
              the other parties thereto. No other party to a Subsidiary Material
              Contract  has  asserted  the  right,  and so far as the  Executive
              Directors  are  aware no basis  exists  for the  assertion  of any
              right,  to  renegotiate  the terms or conditions of any Subsidiary
Material Contract.                                  

3.35     [Intentionally blank].                                                 

3.36     Absence of Undisclosed Liabilities                                     

         The Subsidiary  does not have any material  liabilities  which would be
         required to be disclosed in its financial statements in accordance with
         generally accepted accounting  principles other than those that (i) are
         set forth or adequately  reserved  against in the Subsidiary March 1998
         Accounts;  or (ii) were  incurred  since the Balance  Sheet Date in the
ordinary and usual course of business.                        

3.37     Tangible Property                                                      

         The  plant,  machinery,   equipment,   hardware,  software,  furniture,
         leasehold improvements,  fixtures,  vehicles,  structures,  any related
         capital items and other tangible property of the Subsidiary used in the
         Business  as  operated  by the  Subsidiary  (the  "Subsidiary  Tangible
         Property") is in good  operating  condition and repair for its intended
         purpose,  ordinary wear and tear excepted to the best of the knowledge,
         information and belief of the Executive  Directors,  and the Subsidiary
     has not received intimation that it is in violation of any existing

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         law or any building, zoning, health, safety or other ordinance, code or
   regulation applicable to the Subsidiary and by which it is bound.

3.38     Real Property                                                          

(i)           The  Subsidiary  does not own any  real  property.  Schedule  3.38
              contains a true,  correct and complete list and summary of all the
              (i) leases,  subleases,  licenses,  occupancy rights, interests in
              and other agreements,  and all amendments or modifications thereto
              or assignments thereof  (collectively,  "Real Property Documents")
              in relation to any real  property  (the land,  buildings and other
              improvements  covered by the Real Property  Documents being herein
              called the "Real  Property") which the Subsidiary  holds,  uses or
              occupies or has the right to use or occupy,  now or in the future.
              There  is no real  property  of any  kind  whatsoever  used by the
              Subsidiary  except  for  the  Real  Property.   The  Sellers  have
              heretofore  delivered  to the Buyer  true,  correct  and  complete
              copies of all Real Property Documents. Each Real Property Document
              is valid and in full force and effect, all rent and other sums and
              charges  payable by the  Subsidiary  thereunder  are  current,  no
              notice of default,  alleged breach or  termination  under any Real
              Property  Document  is  outstanding,  and,  to  the  best  of  the
              knowledge,  information and belief of the Executive Directors , no
              termination event or condition or uncured default or breach on the
              part of the  Subsidiary  or any other  person  exists  under or in
              relation to any Real Property Document,  and no event has occurred
              and no condition  exists  which,  with the giving of notice or the
              lapse of time or both,  would  constitute such a default or breach
              or  termination  event or  condition.  None of the Sellers has any
              ownership,  economic  or  similar  interest  in any  of  the  Real
              Property or any lease of real property  relating to the Subsidiary
other than as set forth on Schedule 3.38.           

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(ii)          All  certificates,   permits,   licenses,   approvals,   consents,
              authorizations  and  others  (collectively,   the  "Real  Property
              Permits")  (i) of  all  governmental  and  other  authorities  and
              agencies having jurisdiction over the Real Property, and (ii) from
              all insurance companies  ("Insurance  Organizations") and (iii) in
              the case of  leasehold  property  under the terms of the  relevant
              lease or tenancy  agreement,  required  to have been issued to the
              Subsidiary  or the  owner of the Real  Property  or  otherwise  to
              enable the Real Property to be lawfully  occupied and used for all
              of the  purposes  for which it is  currently  occupied,  have been
              lawfully  issued and are in full  force and  effect.  Neither  any
              Seller nor to the best of the knowledge, information and belief of
              the  Executive  Directors,  the  Subsidiary,  has received or been
              informed  by a third party of the receipt by it of any notice from
              any  governmental,  local and other authority having  jurisdiction
              over  the  Real  Property  or  from  any  Insurance   Organization
              threatening a suspension, revocation, modification or cancellation
              of  any  Real  Property  Permit  or of  any  policy  of  insurance
              currently  owned  or  held  by  the  Subsidiary  or in  which  the
              Subsidiary,  and/or any  Seller  have an  interest  (collectively,
              "Insurance  Policies") and, so far as the Executive  Directors are
              aware,  there is no basis for the  issuance  of any such notice or
              the  taking of any such  action.  The  Subsidiary  has not done or
              omitted to do anything  whereby the  Insurance  Policies or any of
              them  have or may  become  void  or  voidable  and  all  requisite
              insurances  are in force and all current  premiums are fully paid.
              Except as set forth on Schedule  3.38, no action by the Subsidiary
              or any Seller is required in order that all Real Property  Permits
              and  Insurance  Policies  will  remain in full  force  and  effect
              following legal completion of the transaction provided for herein.

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(iii)         The Real  Property is in compliance  in all  significant  respects
              with all applicable building, zoning,  subdivision,  environmental
              and other land use and similar laws and codes (collectively, "Real
              Property  Laws"),  and neither the  Subsidiary  nor any Seller has
              received  or is aware of any  notice  of  violation  or  breach or
              claimed  violation  or breach of any Real  Property  Law. The Real
              Property  and  its  continued  use,  occupancy  and  operation  as
              currently  used,  occupied  and  operated  does not  constitute  a
              nonconforming  or unlawful use under any Real Property Law and the
              continued   existence,   use,  occupancy  and  operation  of  each
              improvement,  and the right and ability to repair  and/or  replace
              such improvement in the event of casualty, is not dependent on any
              special  permit,  exception,  approval or variance.  So far as the
              Executive  Directors  are  aware  there  is  not  any  pending  or
              anticipated  change in any Real  Property  Law which  would have a
              material  adverse  effect  upon the  ownership,  alteration,  use,
              occupancy  or  operation  of the  Real  Property  or  any  portion
              thereof. Neither the Subsidiary nor any Seller has received notice
              of any dispute currently  existing with any local  governmental or
              quasi-governmental  authority  having  jurisdiction  over the Real
              Property with respect to any Real Property Law or the  application
thereof to the Real Property.                       

(iv)          Since March 31, 1998, no portion of the Real Property has suffered
              any damage by fire or other cause,  which has not been  completely
              repaired and restored to no less than its former  condition  prior
to such damage.                                     

3.39     Intangible Property                                                    

         There are no  trademarks,  trade  names,  trade dress  rights,  service
         names, service marks,  copyrights,  design rights,  logos,  advertising
         slogans,  patents,  franchises  or  permits or  similar  intangible  or
         intellectual  property  rights,  or  applications  therefor,  including
         registrations and applications for registration thereof  (collectively,
         the  "Subsidiary  Rights")  owned  by the  Subsidiary  or  used  in the
         Business as  operated  by the  Subsidiary  or license  agreements  with
         respect to any Subsidiary Rights as to which the Subsidiary is licensor
         or licensee ("Subsidiary  Licenses").  The Subsidiary has not been sued
         or to  the  best  of  the  knowledge,  information  and  belief  of the
         Executive   Directors  been   threatened   with  suit,  or  action  for
         infringement,  violation  or  breach  of  any  Subsidiary  Rights.  The
         Executive  Directors  are not aware of (i) the  existence  of any basis
         whereby any  Subsidiary  Right or Subsidiary  License could be claimed,
         opposed or attacked by any other  person or might cease to be valid and
         enforceable  or (ii) any  infringement,  violation  or  breach  of such
         Subsidiary  Rights or  Subsidiary  Licenses or any of them by any other
person.                                                       

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3.40     Title to Assets                                                        

         Other than assets and properties disposed of, or subject to purchase or
         sales  orders,  in the ordinary and usual course of business  since the
         Balance  Sheet  Date,  the  Subsidiary  owns  all  of  its  assets  and
         properties,  including,  without  limitation,  all  of the  assets  and
         properties  reflected on or in the  Subsidiary  March 1998  Accounts in
         each case free and clear of any Lien or other  encumbrance  whatsoever,
         except for Liens  specifically  and expressly set forth or disclosed in
the Subsidiary March 1998 Accounts.                           

3.41     Complete Business; Assets                                              

         The  personal  property,  intangible  assets and other  rights owned or
         leased by or licensed to the  Subsidiary,  in the aggregate,  represent
         all such assets as are necessary to conduct the Business in or from the
         US in the manner in which it has been conducted by the  Subsidiary.  No
         part of the Business in the US is conducted by or through any person or
entity other than the Company and the Subsidiary.             

3.42     Accounts and Notes Receivable.                                         

         All accounts  and notes  receivable  reflected on or in the  Subsidiary
         March 1998  Accounts,  and all  accounts  of the  Subsidiary  and notes
         receivable of the  Subsidiary  arising  subsequent to the Balance Sheet
         Date, have arisen out of arms length  transactions  entered into in the
         ordinary and usual course of business of the Subsidiary. All items that
         were required by generally accepted accounting  principles or financial
         reporting standards to be reflected as accounts and notes receivable of
         the Subsidiary on the Subsidiary  March 1998 Accounts are so reflected.
         Such notes,  accounts and other  receivables are collectible in full in
         the aggregate to the extent not reserved for in the  Subsidiary  March,
         1998  Accounts  in each and every  respect  and are not  subject to any
         set-off,  counter claim,  credit or return policy not  specifically and
expressly set out or disclosed in such accounts.              

3.43     Absence of Certain Changes                                             

Since the Balance Sheet Date, the Subsidiary has not:         

(a)          amended its Certificate of  Incorporation or By-laws or any similar
             governing documents or merged with or into or consolidated with any
             other person,  subdivided,  consolidated or in any way reclassified
             any shares of its  capital  stock or changed or agreed to change in
             any  manner  or in any way the  rights of its  outstanding  capital
             stock or the  character  or scope of its  business or the manner in
which it is conducted;                                

(b)          issued  or sold or  purchased,  or  issued  options  or  rights  to
             subscribe to, or entered into any contracts or commitments to issue
or sell or purchase, any shares of its capital stock; 

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(c)          entered into or amended any employment or service  agreement or any
             terms and  conditions  of  employment,  entered into or amended any
             agreement  with any labour  union or  association  or  organisation
             representing  any employee,  adopted,  entered into, or amended any
employee benefit plan or scheme;                      

(d)          incurred any  indebtedness  for borrowed money  whatsoever;        

(e)          declared  or paid any  dividends  or  declared  or made  any  other
             distributions of any kind to its shareholders (other than dividends
             or  distributions  paid by the Subsidiary to the Company),  or made
             any  direct  or  indirect  redemption,  retirement,   cancellation,
           purchase or other acquisition of any shares of its capital stock;

(f)          collected  its accounts  receivable  other than in the ordinary and
             usual course of business  consistent with past practice or deferred
             payment of its  accounts  payable  other than in the  ordinary  and
             usual course of business consistent with past practice,  or changed
             its  policies  either with  respect to the  collection  of accounts
receivable or the payment of accounts payable;        

(g)          waived any right of value to its  business,  made any change in its
             accounting methods,  practices,  procedures or policies or made any
             change in depreciation or amortization policies or rates adopted by
it or made any change in its tax elections;           

(h)          changed  to a  significant  extent  any of its  business  policies,
             including,  without limitation,  advertising,  marketing,  pricing,
             purchasing, distribution,  personnel, sales, returns, its budget or
             product acquisition policies, or the type, nature or composition of
its products or services;                             

(i)          made any wage or salary, bonus or commission increase,  or increase
             in any other direct or indirect  compensation or benefit, for or to
             any of its officers, directors,  employees,  consultants, agents or
             other  authorized  representatives,  or  made  any  accrual  for or
commitment or agreement to make or pay the same;      

(j)          made  any  loan  or  advance  in  excess  of  $5,000  to any of its
             shareholders,  officers, directors, employees,  consultants, agents
             or other  authorised  representatives  (other than travel  advances
             made in the  ordinary and usual  course of  business),  or made any
             other loan or advance  other than in the  ordinary and usual course
of business;                                          

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(k)          made any payment or commitment to pay any severance or  termination
             pay  or  terminal  payment  to  any  of  its  officers,  directors,
             employees, consultants, agents or other authorised representatives;

(l)          except in the ordinary  and usual  course of business:  (i) entered
             into any lease (as lessor or lessee) or sublease  (as  sublessor or
             sublessee);  (ii) sold,  abandoned or made any other disposition or
             disposal  of any of its  assets or  properties  with a value in the
             aggregate  in excess of $7,500 or any  interest  therein;  or (iii)
          granted or suffered any Lien on any of its assets or properties;

(m)          except in the  ordinary  and usual  course of business  incurred or
             assumed any debt,  obligation or liability  known or which ought to
             be  known  (whether  absolute  or  contingent  and  whether  or not
currently due and payable);                           

(n)          suffered or experienced  any damage,  destruction or loss adversely
             affecting the assets, properties,  business, operations,  condition
             (financial  or  otherwise)  of the  Subsidiary,  taken  as a whole,
whether or not covered by insurance;                  

(o)          made any  significant  change in the type,  nature,  composition or
             quality of its products or services,  or made any change in product
             or service  specifications  or prices or terms of  distribution  of
such products or services;                            

(p)          terminated  or failed to renew,  or received any written  threat or
             notice to  terminate  or fail to  renew,  any  Subsidiary  Material
             Contract  or other  agreement  that is  significant  to the assets,
             properties,   business,   operations,   condition   (financial   or
otherwise) of the Subsidiary;                         

(q)          entered into any agreement,  arrangement or understanding,  whether
             in  writing or  otherwise,  to take any  action  described  in this
Section 3.43.                                         

3.44     Litigation                                                             

         Except with respect to Taxes and Tax Returns (as defined in and covered
         by  Section  3.49),  there are no private  or  governmental  law suits,
         proceedings,   claims,   investigations,   inquiries   or   actions  or
         administrative or arbitration proceedings (collectively, "Proceedings")
         by or  against  the  Subsidiary  in  process  or,  to the  best  of the
         knowledge,  information  and belief of the Executive  Directors  having
         made  reasonable  enquiry  only  of  their  professional  advisers  and
         employees,  pending  or  threatened  against  the  Subsidiary,  or  the
transactions  contem-                                         

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         plated by this  Agreement,  nor are there any  judgements,  decrees  or
         orders either naming the  Subsidiary  or enjoining the  Subsidiary,  as
party.                                                        

3.45     Insurance                                                              

         Schedule 3.45 sets forth a list and brief  description  (specifying the
         insurer and the policy  number or covering  note number with respect to
         binders, describing each pending claim thereunder of more than $10,000,
         setting  forth the  aggregate  amounts  paid out under each such policy
         through  the  date  hereof  and the  aggregate  limit,  if any,  of the
         insurer's  liability  thereunder)  of all  policies or binders of fire,
         liability,  product  liability,   workmen's  compensation,   employer's
         liability,  business  interruption,  personal  accident,  vehicular and
         other insurance held by or on behalf of the  Subsidiary.  Such policies
         and  binders  are in full force and effect.  The  Subsidiary  is not in
         default with respect to any  provision  contained in any such policy or
         binder and has not failed to give any notice or present any claim under
         any such  policy  or  binder in due and  timely  fashion.  There are no
         outstanding  unpaid claims under any such policy or binder. To the best
         of the knowledge, information and belief of the Executive Directors the
         Subsidiary has received no notice of cancellation or non-renewal of any
         such policy or binder. There has been and is no significant  inaccuracy
         in  any  application  for  any  such  policies  or to the  best  of the
         knowledge,  information  and  belief  of the  Executive  Directors  any
         similar  state of facts which  constitutes  the basis for  termination,
cancellation, non-renewal or avoidance of any such insurance. 

3.56     Employee Benefit Plans                                                 

(i)          Schedule 3.46 sets forth each employee  benefit plan (as defined in
             section  3(3) of the  Employee  Retirement  Income  Security Act of
             1974, as amended ("ERISA"), presently maintained by, or contributed
             to by the  Subsidiary or by any Seller for the benefit of employees
             of the  Subsidiary  (the  "Benefit  Plans").  For  purposes of this
             Section 3.46, the term "Subsidiary" includes any entity which is or
             at any  relevant  time  was a  member  of a  "controlled  group  of
             corporations" (within the meaning of Section 414(b) of the Internal
             Revenue Code of 1986, as amended (the "Code")) with the  Subsidiary
             or under "common  control" (within the meaning of Section 414(c) of
the Code) with the Subsidiary.                        

(ii)         The Subsidiary and each of the Benefit Plans are in compliance with
             the  applicable  provisions of ERISA,  and those  provisions of the
Code applicable to the Benefit Plans.                 

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(iii)        All premium payments or other  contributions to, and payments from,
             the  Benefit  Plans  which  may have  been  required  to be made in
             accordance  with the Benefit Plans have been timely made.  All such
             premiums  or other  contributions  to the  Benefit  Plans,  and all
             payments  under the Benefit  Plans,  except  those to be made by an
             insurer, for any period ending through March 31, 1998, that are not
             yet,  but will be,  required  to be made are  properly  accrued and
             reflected  on the  Subsidiary  March 31,  1998  Accounts or are set
forth in Schedule 3.46.                               

(iv)         Each of the Benefit Plans  intended to qualify under section 401(a)
             of the  Code  does so  qualify  and  the  Subsidiary  has  received
             favorable  determinations from the Internal Revenue Service to that
             effect. All reports,  returns and similar documents with respect to
             the Benefit Plans required to be filed with any  government  agency
             or distributed to any Benefit Plan  participant  have been duly and
timely filed or distributed.                          

(v)          The  Subsidiary  has  complied  with the  notice  and  continuation
             coverage  requirements  of section 4980B of the Code  ("COBRA") and
             the  regulations  thereunder with respect to each Benefit Plan that
             is, or was during any taxable year of the  Subsidiary for which the
             statute of  limitations  on the  assessment of federal income taxes
             remains open,  by consent or otherwise,  a group health plan within
the meaning of section 4980B(g) of the Code.          

(vi)         At no time has (i) the  Subsidiary or (ii) any other  employer that
             is, or, at any relevant time,  was,  together with the  Subsidiary,
             treated as a "single  employer"  under sections  414(b),  414(c) or
             414(m) of the Code,  incurred any liability which could subject the
             Buyer or the Subsidiary to any liability  under sections 4062, 4063
or 4064 of ERISA.                                     

(vii)        At no time has the Subsidiary or any affiliate thereof contributed,
             or been required to  contribute  to, (i) a  multi-employer  pension
             plan within the meaning of section 3(37) of ERISA or (ii) a defined
    benefit plan within the meaning of section 3(35) of ERISA.

(viii)       The Subsidiary  has not incurred nor is reasonably  likely to incur
             any liability with respect to any plan or arrangement that would be
             included  within the definition of "Benefit Plan" hereunder but for
             the fact that such plan or arrangement  was  terminated  before the
date of this Agreement.                               

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(ix)          The  Subsidiary  does not  maintain  and never has  maintained  or
              contributed,  nor been  required to contribute to any Benefit Plan
              providing  medical,  health  or life  insurance  or other  welfare
              benefits for retired or  terminated  employees,  their  spouses or
              their dependants (regardless of whether retirement has occurred or
will occur in the future).                          

3.47     Environmental Matters                                                  

(a)          The  operations of the  Subsidiary  as heretofore  conducted do not
             violate  in any  significant  respect  any  Environmental  Laws (as
             defined   hereinafter).   The   Subsidiary   has  complied  in  all
             significant respects with all Environmental Laws and the Subsidiary
             has  no  significant   liability  under  any   Environmental   Law.
             "Environmental Laws" means any and all applicable local,  national,
             state or  federal  Permits  and Laws and  Requirements  of Laws (as
             defined in Section  3.50)  relating  to  environmental  protection,
             pollution control or environmental contamination, or the Management
             (as defined in Section 3.47) of Hazardous Substances (as defined in
             Section  3.47) or  Subsidiary  Permits (as defined in Section 3.50)
             and Laws and  Requirements  of Laws with regard to record  keeping,
             notification  and  reporting   requirements   respecting  Hazardous
             Substances,   including,   but  not   limited   to,  the   Resource
             Conservation  & Recovery Act, 42  U.S.C.ss.6901  et seq., as -- ---
             amended  ("RCRA"),   the  Comprehensive   Environmental   Response,
             Compensation and Liability Act, 42 U.S.C.ss.9601 et seq, as amended
             -- ---  ("CERCLA"),  the Federal  Water  Pollution  Control Act, 33
             U.S.C.ss.1251  et seq.,  as amended  ("FWPCA"),  the Safe  Drinking
             Water Act, 21 U.S.C. -- --- ss.349, 42  U.S.C.ss.ss.201,  300f , as
             amended  ("SDWA"),  the Clean Air Act, 42 U.S.C.ss.7401 et seq., as
             amended  ("CAA"),  and the Toxic  Substances -- --- Control Act, 15
             U.S.C.ss.2601  et seq., as amended  ("TSCA"),  and -- --- analogous
state laws.                                           

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(b)          No notice, citation, summons or order has been issued, no complaint
             has been filed, no penalty has been assessed and to the best of the
             knowledge,  information  and belief of the  Executive  Directors no
             investigation  or review is in  process  pending  or, so far as the
             Executive  Directors are aware but without having made any enquiry,
             threatened,  by any  federal,  state,  local,  national  or foreign
             governmental or regulatory agency or authority: (i) with respect to
             any  alleged  violation  or  breach  or  illegal  liability  by the
             Subsidiary  of any  Environmental  Law; or (ii) with respect to any
             alleged failure by the Subsidiary to have any Permit; or (iii) with
             respect to any use,  possession,  generation,  treatment,  storage,
             recycling,  transportation  or arrangement  for  transportation  or
             disposal  deposit  or escape  (collectively,  "Management")  of any
             substance  or  waste   regulated  under  any   Environmental   Laws
             ("Hazardous Substances"),  including, without limitation, hazardous
             substances,  as defined by CERCLA, petroleum products,  radioactive
    materials and asbestos, by or on behalf of the Subsidiary.

(c)          The Subsidiary has not received any request for information, notice
             of claim,  complaint,  demand or notification  that it is or may be
             responsible  or  potentially  responsible or liable with respect to
             any  threatened or actual Release (as  hereinafter  defined) of any
             Hazardous Substance.  No Haz ardous Substance with respect to which
             the Subsidiary exercised or was responsible for Management has come
             to be located at any site which is listed (or, to the  knowledge of
             the Executive Directors,  is proposed for listing) under CERCLA, on
             the Comprehensive Environmental Response Compensation and Liability
             Information  System ("CERCLIS") or on any similar state or national
             list, or which is the subject of federal,  state, national or local
             enforcement or similar actions or other investigations.  No oral or
             written  notification  of a  Release  or  threat  of  Release  of a
             Hazardous  Substance  has  been  filed  by  or  on  behalf  of  the
             Subsidiary  or in relation to any real  property now or  previously
             owned, operated or leased by the Subsidiary.  No such real property
             is listed  (or to the  knowledge  of the  Executive  Directors,  is
             proposed  for listing) on the National  Priority  List  promulgated
             pursuant  to CERCLA,  on CERCLIS  or on any  similar  state list of
sites.                                                

(d)          The  Subsidiary  has not Managed any  Hazardous  Substances  on any
             property  now  or  previously  owned,  operated  or  leased  by the
             Subsidiary  in a manner which is in violation of any  Environmental
             Law, or will give rise to any  liability  or  obligation  under any
Environmental Law against or of the Subsidiary.       

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(e)           No  polychlorinated   biphenyls  ("PCBs")  or  asbestos-containing
              materials  are or have been  present  at any  property  now owned,
              operated or leased by the Subsidiary. With respect to any property
              previously owned, operated or leased by the Subsidiary, no PCBs or
              asbestos-containing  materials  were or had  been  present  at any
              property  at  the  time  such  property  was  disposed  of by  the
Subsidiary.                                         

(f)           There are no underground  storage tanks,  active or abandoned,  at
              any property now owned, operated or leased by the Subsidiary. With
              respect to any property  previously  owned,  operated or leased by
              the Subsidiary, there were no underground storage tanks, active or
              abandoned, at such property at the time such property was disposed
of by the Subsidiary.                               

(g)           No  Hazardous  Substance  has  been  released,   spilled,  leaked,
              discharged,   disposed  of,  pumped,  poured,  emitted,   emptied,
              injected,  leached, dumped or allowed to escape ("Release") by the
              Subsidiary,  anyone else who was an agent,  employee or contractor
              of the  Subsidiary or anyone for whose acts the  Subsidiary may be
              liable,  at,  to, on,  about,  from or under any  property  now or
              previously owned,  operated or leased by the Subsidiary which will
              result in any  significant  liability or  obligation  to or of the
Subsidiary.                                         

(h)           There  are no  environmental  liens  or deed  restrictions  on any
              properties owned or leased by the Subsidiary and no actions by any
              federal,   national,  state,  local  or  foreign  governmental  or
              regulatory  agency or  authority  have been taken or are so far as
              the Executive  Directors  are aware  pending,  or threatened  that
              could subject any of such  properties  to such liens,  require the
              carrying  out of any  remedial  work  or any  interruption  of the
Business as carried on by the Subsidiary.           

(i)           The Sellers have caused to be delivered to the Buyer true, correct
              and complete copies of all environmental  studies,  audits, tests,
              reviews  or  other  analyses,  and  reports  of all  environmental
              inspections and investigations, conducted by, or at the request of
              or with  the  permission  of the  Subsidiary  in  relation  to any
              property  now or  previously  owned,  operated,  or  leased by the
Subsidiary.                                         

(j)           So far as the Executive  Directors are aware there are no facts or
              circumstances concerning existing or previously owned, operated or
              leased  properties or businesses of the Subsidiary that could lead
              to   any   future    environmental    claims,    liabilities    or
              responsibilities  of or against the  Subsidiary or the Buyer under
any Environmental Law.                              

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3.48     Deliveries of Documents; Corporate Records                             

(a)           The minute books and stock books of the Subsidiary  have been made
available to the Buyer.                             

(b)           The only  directors of the  Subsidiary are the persons whose names
are listed in Schedule 3.48.                        

3.49     Tax Matters                                                            

Except as set forth on Schedule 3.49                          

(a)           The  Subsidiary  has duly and timely filed all  foreign,  federal,
              state and local Tax Returns (as hereinafter  defined)  required to
              be filed by it on or before the date hereof  with the  appropriate
              governmental  authority.  All Tax Returns filed by the  Subsidiary
              are true, correct and complete in all significant respects and the
              Subsidiary  has duly and  timely  paid all Taxes  (as  hereinafter
              defined)  required  to be paid by it to the  extent  that the same
              have  become due and  payable on or before the date hereof and has
              adequately  accrued on its books and records any such  amounts for
              which  liability  exists on the date  hereof but which are not due
              and  payable  on or before the date  hereof.  The  Subsidiary  has
              complied  in all  respects  with all  applicable  laws,  rules and
              regulations  relating to the  reporting,  payment,  collection and
              withholding of Taxes and has duly and timely collected or withheld
              and  duly  and  timely  paid  over  to  the  proper   governmental
              authorities  all Taxes required to be so collected or withheld and
paid over.                                          

(b)           The Sellers  have  delivered  to the Buyer  copies of all federal,
              state,  local and foreign Tax  Returns of the  Subsidiary  for all
              periods  ending in  calendar  years  1997 and 1996  together  with
              copies of all  notices,  reports and  correspondence  from any Tax
              authority   relating  to  any  audit,   investigation,   claim  or
              examination  of any  Tax  Returns  or  any  action  or  Proceeding
              relating  thereto.  Set  forth on  Schedule  3.49 is a list of all
              jurisdictions  in which the  Subsidiary  has filed any Tax  Return
since 1993.                                         

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(c)           The  Subsidiary  does not file  and has not at any time  filed,  a
              consolidated  Tax  Return  as a member  of an  "affiliated  group"
              (within  the  meaning of section  1504(a) of the Code of which the
              Subsidiary  is an  includible  corporation  within the  meaning of
              section  1504(b)  of the Code) or as a member  of a similar  group
              under any provision of federal,  state,  local or foreign law. The
              Subsidiary  does not have any  liability  for Taxes of any  person
              under  Treasury  regulations  section  1.1502-6 (or other  similar
              provision  of  federal,   state,  local  or  foreign  law),  as  a
              transferee or successor,  by contract (including,  but not limited
         to, any tax sharing or tax indemnity agreement) or otherwise.

(d)           Schedule  3.49  sets  forth for the  Subsidiary  all  federal  tax
  elections under the Code that are currently in effect.

(e)           Since  1995,  there  has  not  been  nor so  far as the  Executive
              Directors  are aware will there be (i) any material  change in the
              rates or basis of assessment of any Tax or (ii) any Tax deficiency
proposed or threatened against the Subsidiary.      

(f)           No audit, investigation,  litigation, examination, reassessment or
              other  judicial  or  administrative  proceeding  notified  to  the
              Subsidiary  is pending or so far as the  Executive  Directors  are
              aware proposed or threatened  with regard to any Tax Return of the
              Subsidiary  or any  Tax  for  which  the  Subsidiary  is or may be
              liable. All Taxes asserted or proposed of which the Subsidiary has
              received  notice and for which the  Subsidiary is or may be liable
              as a result of any proceeding  described in the preceding sentence
              have been paid or properly  reflected in the Subsidiary March 1998
Accounts.                                           

(g)           No  extension  of time with  respect  to any date on which any Tax
              Return was or is to be filed by the Subsidiary is in force, and no
              waiver or agreement is in force for the  extension of time for the
              assessment,  payment or collection of any Tax of the Subsidiary or
 any Tax for which the Subsidiary is or may be liable.

(h)           The  Subsidiary  is not a "United  States  real  property  holding
             corporation" within the meaning of section 897(c)(2) of the Code.

(i)           There  has  not  been  applied  for,  granted,  or  agreed  to any
              accounting method change for which the Subsidiary will be required
              to take into account any adjustment  under section 481 of the Code
              or any  similar  provisions  of  the  Code  or  the  corresponding
              provision of federal,  state, local or foreign law. The Subsidiary
              has not  requested  or received a ruling  from any Tax  authority.
              There is no power of  attorney  in effect  relating to any Tax for
which the Subsidiary may be liable.                 

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(j)           No  deficiency  for any Tax has been  assessed with respect to the
              Subsidiary which has not been paid or otherwise satisfied in full.
              To the  best  of the  knowledge,  information  and  belief  of the
              Executive  Directors  there are no Liens for Taxes upon the assets
or properties of the Subsidiary.                    

(k)           No  election  under  section  341(f)  of the Code has been made or
              shall be made prior to the Closing Date to treat the Subsidiary as
            a consenting corporation, as defined in section 341 of the Code.

(l)           There is no closing agreement,  within the meaning of section 7121
              of the Code or any analogous  provision of applicable state, local
or foreign law relating to the Subsidiary.          

(m)           The Subsidiary is not a party to any agreement,  plan, contract or
              arrangement that would result,  separately or in the aggregate, in
              the payment of "any excess parachute  payments" within the meaning
of section 280G of the Code.                        

(n)           No  jurisdiction  where the Subsidiary  does not file a Tax Return
              has made a claim that the  Subsidiary  is  required  to file a Tax
Return for such jurisdiction.                       
(o)           The  Subsidiary  has not elected to be treated as a partnership or
              other pass through entity for purposes of foreign,  federal, state
or local law.                                       

(p)           For purposes of this Section, the term "Tax" or "Taxes" shall mean
              all  taxes,  levies,  assessments,  charges  and fees,  including,
              without  limitation,  income,  gross receipts,  excise,  property,
              sales,  use,  ad valorem,  transfer,  profits,  severance,  stamp,
              occupation,  property,  capital,  occupancy,  recording,  license,
              payroll, withholding, employment, unemployment,  estimated, social
              security and franchise or other  governmental  tax, imposed by the
              United States, or any state,  county,  local or foreign government
              or subdivision  or agency thereof on the Subsidiary  and/or any of
              its assets or business  activities or for which the  Subsidiary is
              or may be  liable;  and such  term  shall  include  any  interest,
              penalties,  costs or other  additions to tax imposed in connection
therewith.                                          

(q)           For purposes of these Warranties, the term "Tax Return" shall mean
              any return (including any information  return and amended return),
              declaration,  report,  claim for  refund or  credit,  estimate  or
              statement relating to or regarding Taxes, which is or was required
              to be filed under  federal,  foreign,  state or local law or which
              was actually filed, whether on a consolidated,  combined, unitary,
separate or other basis.                            

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3.50     Compliance with Laws; Permits, Etc                                     

              The Subsidiary is in compliance  with, and no significant  default
              or violation or breach exists under,  any and all laws  applicable
              to it (including directives,  rules, regulations,  codes, guidance
              notes, injunctions,  interdicts,  judgements,  orders, decrees and
              rulings  thereunder)  (collectively,  "Laws  and  Requirements  of
              Laws") (except where the failure to be in such compliance will not
              (i)  have  significant  adverse  effect  on the  Subsidiary,  (ii)
              prevent the continued operation of the Business as operated by the
              Subsidiary  following the Closing Date substantially in the manner
              heretofore conducted and with no less scope and extent without the
              incurrence   of  any   additional   significant   expense  by  the
              Subsidiary,  or (iii)  subject  the  Subsidiary  to any penalty or
              enforcement or equivalent action as a result thereof). Since March
              31, 1995, no investigation  has been conducted by any governmental
              authority which has resulted in assessment of any monetary penalty
              or sum levied or imposed  on the  Subsidiary  in excess of $5,000.
              The Subsidiary has (but excluding for the purposes of this Section
              3.50 (a) any of the following relating to taxation) duly filed all
              reports  and  returns  required  by law  to be  filed  by it  with
              governmental   authorities   and  obtained  all   governmental  or
              regulatory    permits,    certificates,    licenses,    approvals,
              registrations and authorizations  ("Subsidiary Permits") which are
              required  by law  by it in  connection  with  and  related  to its
              business  and  operations  (except  where the failure to have made
              such filing or have such  Permit  will not (i) have a  significant
              adverse  effect on the  Subsidiary,  (ii)  prevent  the  continued
              operation of the Business as operated by the Subsidiary  following
              the Closing Date substantially in the manner heretofore  conducted
              and with no less scope and extent  without the  incurrence  of any
              significant additional expense by the Subsidiary, or (iii) subject
              the  Subsidiary  or the Buyer to any  penalty  or  enforcement  or
              equivalent  action  as a result  thereof).  The  Subsidiary  is in
              significant   compliance  with  such  Subsidiary  Permits  in  all
              significant  respects,  all of which are in full force and effect,
              and to the best of the  knowledge,  information  and belief of the
              Executive   Directors  no   proceedings   for  the  suspension  or
              cancellation  of any of them is  pending or  threatened.  Schedule
              3.50  contains  a  complete  list  or   description  of  all  such
              Subsidiary  Permits,  including the expiration dates thereof,  and
              any Subsidiary  Permits that are not  transferable  or which would
              cease  to  be  in  full  force  and  effect  as a  result  of  the
              transactions   herein  contemplated  are  so  designated  on  such
              Schedule.  The Subsidiary has made timely application for renewals
of all such subsidiary Permits.                     

              Since  March 31 1995  the  Subsidiary  has not  made  any  illegal
              payment to officers or employees of any governmental or regulatory
              body or its own officers or employees, or made any illegal payment
              to customers  for the sharing of fees or to customers or suppliers
              for  rebating or rebate or  discount of charges,  or made any such
              payment to customers or suppliers  outside the ordinary and normal
              course of  business  or engaged in any other  principal  practices
              which are illegal or made any  illegal  payment or given any other
              illegal    consideration    to   purchasing    agents   or   other
              representatives  of  customers  in  respect of sales made or to be
made by the Subsidiary.                             

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3.51     Conflicts                                                              

         None  of  the  Executive  Directors  nor  any  affiliate  of any of the
         foregoing  (a) has any direct or  indirect  interest  in (i) any entity
         that does any business with, or directly  competes with, the Subsidiary
         or (ii) the  Business  as  operated  by the  Subsidiary,  or(b) has any
         contractual   relationship   with  the   Subsidiary   other  than  such
         relationship  as  relates to being an  employee  of the  Subsidiary  or
        officer or director of the Company or Subsidiary or affiliate thereof.

3.52     Suppliers and Customers                                                

         Schedule 3.52 sets forth the nine (9) largest  suppliers by expenditure
         of the  Subsidiary  (the  "Major  Subsidiary  Suppliers")  and ten (10)
         largest  customers by turnover of the Subsidiary (the "Major Subsidiary
         Customers")  of the  Subsidiary  for the year ended March 31, 1998, and
         each other supplier or customer of significance  meaning a purchaser of
         in excess of $25,000 of goods or services or a provider of in excess of
         $25,000 of goods or services to the business of the Subsidiary. No such
         supplier or customer has  cancelled or otherwise  modified or so far as
         the Executive Directors are aware intends to cancel or otherwise modify
         its  agreement  with the  Subsidiary or decrease or limit its services,
         supplies or materials to the Subsidiary or its usage or purchase of the
services or products of the Subsidiary.                       

3.53     Labour Matters                                                         

(a)           No  employee  of  the   Subsidiary  is  covered  by  a  collective
              bargaining  agreement or  recognition  agreement and no collective
              bargaining  or  recognition  agreement  binding on the  Subsidiary
restricts the Subsidiary in any way whatsoever.     

(b)           There is not currently pending, and since March 31, 1995 there has
              not been, any strike, lockout,  picketing, work stoppages or other
              labour  troubles  or  industrial  disputes  with  respect  to  the
              Subsidiary  and, so far as the Executive  Directors are aware,  no
              such strikes,  picketing,  lockouts, slow downs, work stoppages or
  labour troubles or industrial disputes are threatened.

(c)           There  does  not  currently  exist,  and so  far as the  Executive
              Directors  are  aware  there  is  not  currently  threatened,  any
              grievance,  arbitration  proceeding,  charge or complaint filed on
              behalf of an employee or labour organization,  before the National
              Labour  Relations   Board,   the  Equal   Employment   Opportunity
              Commission,  state and local  civil  rights  agencies,  federal or
              state departments of labour, the various  occupational  health and
              safety  agencies or any  judicial  or other  legal or  arbitration
forum with respect to the Subsidiary.               

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(d)           No representation  question exists or has been raised with respect
              to employees of the Subsidiary within the last three years.  There
              are no campaigns being conducted to solicit cards or authorization
              from  employees of the  Subsidiary to be represented by any labour
              organization.  In addition,  the  Subsidiary has not performed any
              act  which  might  be  construed  as  recognition  of  any  labour
organization.                                       

(e)           The  Subsidiary  is currently  in  compliance  in all  significant
              respects  with  all  applicable   laws,   regulations,   policies,
              procedures  and  contractual  obligations  relating to employment,
              employment  practices,  wages, hours,  discrimination,  safety and
              health of employees, workers compensation, unemployment insurance,
         withholding of wages, and terms and conditions of employment.

(f)           The Subsidiary  has not closed any plant or facility,  effectuated
              any  mass  layoff  of  employees  as  defined  under  the  Workers
              Adjustment and Retraining Notification Act (or other similar state
              law), or implemented  any early  retirement or separation  program
              within  the past  three  years nor has the  Subsidiary  planned or
              announced any such action. Set forth in Schedule 3.53 is a list of
              all persons whose  employment  was terminated by the Subsidiary in
the last three years.                               

(g)           The  Subsidiary  is not  liable  for any  severance  pay or  other
              payments to any employee or former employee due to the termination
              of employment and will not have any  significant  liability  under
              any  benefit  or  severance  plan,  policy,  practice,  program or
              agreement  which  exist  or  may  be  deemed  to  exist  under  an
              applicable  law,  as a  result  of the  transactions  contemplated
hereunder.                                          

3.54     Bank Accounts                                                          

         Schedule  3.54  sets  forth  the  names  and  locations  of all  banks,
         depositories  and other financial  institutions in which the Subsidiary
         has an account,  including any brokerage  account,  or safe deposit box
         and the names of all  persons  authorized  to draw  thereon  or to have
access thereto.                                               

3.55     Accounts Payable                                                       

         Schedule  3.55 sets forth a true and correct and  complete  list of all
         accounts  payable  of the  Subsidiary  as of June 30 1998 in  excess of
$10,000 to any one payee.                                     

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3.56     Officers, Directors and Key Employees                                  

         Schedule  3.56  sets  forth  (i)  the  name,  title  and  total  annual
         compensation  or  remuneration  of each  officer  and  director  of the
         Subsidiary and (ii) the name,  title and total annual  compensation  or
         remuneration  of each other  employee or consultant  of the  Subsidiary
         whose current annual rate of compensation  or  remuneration  (including
         bonuses and commissions) exceeds $20,000.  Included in Schedule 3.56 is
         a copy of any written employment,  consulting, commission, severance or
         similar arrangement with any such person and of terms and conditions of
         employment,  which documents set forth the entire  understanding of the
         Subsidiary,  on the one hand, and such person,  on the other hand, with
         respect to the employment,  engagement and/or severance of such person.
         None of such persons has  indicated to the  Subsidiary or to any of its
         officers  or  directors  any  intention  on the part of such  person to
         terminate  such  person's   relationship   with  the   Subsidiary.   No
         negotiations  for any increase in the  remuneration  or benefits of any
officer or employee of the Subsidiary are current.            

3.57            Subsidiary Computer System                                      

                (a)           Details  of  all  hardware   leases  and  software
                              licences  granted to the Subsidiary in relation to
                              the  computer   software  and  equipment  used  or
                              operated by the  Subsidiary  in its business  (the
                              "Subsidiary   Computer  System")  and  all  escrow
                              agreements,  maintenance agreements and facilities
                              management  agreements  in respect of the same and
                              any  computer   bureaux  and   disaster   recovery
                              agreement to which the  Subsidiary  is a party are
    set out in Schedule 3.57

                (b)           Subject to the terms of all applicable  agreements
                              the  Subsidiary  has  full  use of its  Subsidiary
                              Computer System and is legally entitled to use the
same.               

                (c)           The continued right of the Subsidiary to have full
                              use of the Subsidiary Computer System as envisaged
                              in Section  3.57(b) is not subject to the grant of
                              any additional rights to third parties  permitting
                              them to access and/or use the Subsidiary  Computer
             system on a sole or shared basis.
3.58     Commissions                                                            

         No broker, finder, agent or similar intermediary has acted on behalf of
         the Company or the Subsidiary in connection  with this Agreement or the
         transactions  contemplated  hereby  and  that  there  are no  brokerage
         commissions,  finders  fees or similar fees or  commissions  payable in
         connection therewith based on any agreement, arrangement or undertaking
         with the Company or the  Subsidiary  or any action taken by the Company
or the Subsidiary.                                            

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         Notwithstanding the terms of any of the Warranties, the only Warranties
         which  shall  apply  to  taxation  referable  to the  Company  and  the
         Subsidiary  shall  be  those  Warranties  set out in  Section  3.21 and
         Section 3.49 and the only  Warranties  which shall apply to  heritable,
         leasehold or real property of the Company and the  Subsidiary  shall be
those set out in Section 3.10 and Section 3.38.               

Each of the  Warranties  set out herein is separate and several and  enforceable
accordingly and shall not be limited by any other.                              

By its execution hereof the Buyer hereby  irrevocably agrees with and undertakes
to  each  of  the  Sellers   that   (without   prejudice  to  Section  11.1  but
notwithstanding  any other provision of this Agreement or any rule of law to the
contrary):-                                                                     

         the Disclosure Letter and Supplemental Disclosure Letter (if any) forms
and shall be deemed to have formed part of this Agreement in accordance with the
terms of the Disclosure  Letter and the Supplemental  Disclosure Letter (if any)
as if such terms were fully set out mutatis mutandis herein;                    

         the  entire  contents  of  the  Disclosure   Letter  and   Supplemental
Disclosure Letter (if any) including,  without limitation,  all the contents and
matters  apparent from the face of the documents  annexed thereto such documents
annexed to the  Disclosure  Letter  having been  supplied to the Buyer  within a
reasonable period prior to the date hereof and all other general disclosures set
out in  paragraph  D of the  Disclosure  Letter  or set out in the  Supplemental
Disclosure  Letter (if any) shall in  accordance  with their  terms be deemed to
have been fairly disclosed to the Buyer.                                        

Subject to Section  14.11 the  Warranties  in this  Section are provided for the
benefit of the Buyer only.                                                      

 SECTION 4
LIMITATIONS ON LIABILITY

In this  Agreement the expression  "Relevant  Claim" means a claim in respect of
breach  of any of the  Warranties  given in  Section  3 or  Section  10.2 or the
warranties  given in  Section  10.5 of this  Agreement  in each case as given on
signing of this  Agreement  and  immediately  before the Closing Date or a claim
under  Section 12 or  Section  5.2 and the  liability  of the  Sellers  shall in
respect of these matters be limited as follows:                                 

4.1      No  Relevant  Claim  may be made  unless  written  notice  detailing  a
         specific  breach of  warranty,  or of the facts  giving rise to a claim
         under  Section 12, and  containing  details of the facts giving rise to
         the claim in so far as they are known at the time of giving  notice and
         the general nature of the claim and approximate  amount thereof,  which
         shall be a reasonable  estimate taking into account the facts available
         at the  relevant  time and (but  without  limiting  the validity of the
         notice or claim) how this was calculated,  shall have been given by the
         Buyer   to  each  of  the   Sellers   with  a  copy  to  the   Sellers'
         Representatives  as soon as practicable  after the Buyer or the Company
 or the Subsidiary as the case may be first becomes aware of the

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         matters or  circumstances  giving or which may give rise thereto and in
         any event before the date falling  twelve (12) months after the Closing
         Date in the case of any Relevant  Claim other than any  Relevant  Claim
         under Section 12, or the  provisions of Sections  3.19,  3.21,  3.47 or
         3.49,  in which event in respect of  Sections  3.19 and 3.47 the notice
         must be given in any event  before the date  falling  twenty  four (24)
         months after the Closing  Date and in respect of Sections  3.21 or 3.49
         or Section 12 before the date falling forty eight (48) months after the
Closing Date.                                                 

4.2      Any  Relevant  Claim for breach of warranty  which is validly  notified
         within the required period aforesaid shall (unless  previously  settled
         or withdrawn), and subject to Section 4.4 and Section 4.6, be deemed to
         have been waived or  withdrawn in the event that legal  proceedings  in
         respect thereof are not issued and served on each of the Sellers with a
         copy to the Sellers'  Representatives  within six (6) months of written
         notice of the Relevant Claim first being given aforesaid. Time shall be
of the essence for the purposes of the foregoing.             

4.3      The  liability  of the  Sellers  for breach of Warranty in Section 3 or
         Section 10.2 or Section 10.5 shall be excluded or limited to the extent
         that the fact,  event or matter  giving  rise to the breach or claim is
         fairly  disclosed  in the  Disclosure  Letter or,  where the context so
         requires,  the Supplemental  Disclosure Letter including in either case
         the  contents  and  matters  apparent  from the  face of the  documents
annexed thereto.                                              

4.4      No  Relevant  Claim may be made in respect  of any  breach of  warranty
         which is in respect of a contingent  liability save where notice of the
         contingent  liability is given within the period referred to in Section
         4.1, the contingent  liability  becomes an actual  liability within six
         (6)  months  of the  notice  and where  such  claim is not  settled  or
         resolved  proceedings  are commenced by the Buyer within six (6) months
after the contingent liability becomes actual.                

4.5      The  Sellers  liability  for  a  Relevant  Claim  shall  be excluded or
limited:-                                                     

(a)           to the extent that the claim arises or is increased as a result of
              any legislation or governmental  legislation or any administrative
              or judicial decision not in force or in effect at the date hereof;
              or  any  change  in  law or in  the  interpretation  of  law  (but
              excluding  for these  purposes  any  Relevant  Claim  arising from
              re-enacted  legislation where there would not have been a Relevant
              Claim but for that re-enactment) or the withdrawal or amendment of
              any extra  statutory  concessions  or practice  made by a taxation
authority after the date hereof; or                 

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(b)           to the extent that the Relevant  Claim arises or is increased as a
              result  of  any  accounting  methods,   policies,   principles  or
              practices  or bases  used or the  application  thereof  in  future
              accounts of the Company and/or the Subsidiary being different from
              the treatment or application of the same utilised in preparing the
              March 1998  Accounts or the  Subsidiary  March 1998  Accounts save
              where any such  different  treatment or application is implemented
              in  order  more  properly  to  comply  with   generally   accepted
accounting standards in force at the date hereof; or

(c)           to the  extent  that  there is a  corresponding  reduction  in the
              liability  to make a payment of  taxation  or an  increase  in the
              amount of any  repayment  of taxation  available to the Company or
              the Subsidiary for the same or another accounting period ending on
or before Closing; or                               

(d)           to the extent  that it would not have  arisen but for any  Reliefs
              available  to the  Company  or the  Subsidiary  at  Closing  being
              utilised in respect of taxation  attributable to any act, omission
              or  transaction  occurring  or  entered  into  after  that date or
              resulting  from or calculated by reference to any income,  profits
              or gains  earned,  accrued  or  received  or  deemed  to have been
              earned,  received or accrued  after that date except that  Section
              4.5 (d) and  Section  4.15 shall not  prevent  the Buyer  making a
              Claim where a  Liability  to Taxation of the Company is created or
              increased  by a  further  adjustment  to income  profits  or gains
              arising in an accounting  period ending on or before  Closing,  in
              circumstances  where the trading losses available for the purposes
              of  Corporation  tax or where  relevant  the  appropriate  foreign
              equivalent and arising on or before Closing, cannot be set against
              that  Liability to Taxation,  or be reduced by the  adjustment  to
income profits or gains; or                         

(e)           to the extent it was paid or discharged prior to Closing; or      

(f)           to the  extent  that it would not have  arisen  (or would not have
              arisen  at the  time  that it  does  arise)  but  for  any  claim,
              disclaimer,  notice, election, consent or return (or withdrawal or
              revocation  or amendment  thereof) made or given (or omitted to be
              made or given in any  requisite  period) for any taxation  purpose
              (including   without   limitation   in  respect  of  any   capital
              allowances)  after Closing  unless the same was assumed to be made
              or given (or, as the case may be,  omitted to be made or given) in
              or for the purpose of the March 1998  Accounts  or the  Subsidiary
              March 1998 Accounts (as  appropriate).  This Section 4.5 (f) shall
              not apply  where any such  claim,  disclaimer,  notice,  election,
              consent or return (or withdrawal, revocation or amendment thereof)
              necessarily  results from an adjustment  to a  pre-Closing  period
required by any taxation authority; or              

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(g)        to the extent the Sellers  have asked for written  consent  after the
           date hereof to the fact,  matter or event giving rise to the Relevant
           Claim and the Buyer has given such written consent  acknowledging the
           provisions of this Section,  but for the avoidance of doubt  anything
           provided for in this  Agreement in or pursuant to Section 8 shall not
           be deemed to be  consented  to by the Buyer for the  purposes of this
Section; or                                               

(h)        if the Buyer assigns its rights  hereunder in breach of Section 14.11
           or makes or  purports  to make a  declaration  of trust in  breach of
Section 14.11; or                                         

(i)        to the extent  that it would not have  arisen  but for any  transfer,
           winding  up or  cessation  after  Closing  of any  trade or  business
           carried on by the Company or the  Subsidiary  taking  place after the
           Closing  Date  or any  significant  increase  in the  capital  of the
Company or the Subsidiary after the Closing Date; or      

4.6      Recovery                                                               

         Where the Buyer or the  Company  and/or  the  Subsidiary  is/are at any
         relevant time and only in respect of breach of Warranty or Section 10.2
         actually  entitled  to recover  from some  other  person  including  an
         insurer any sum in respect of a matter giving rise to a Relevant  Claim
         the Buyer shall,  and shall procure that the Company or the  Subsidiary
         shall,  take all  reasonably  necessary  steps to enforce such recovery
         prior to  taking  any  action  against  the  Sellers  (and  each of the
         Executive  Directors  shall and hereby  undertakes to assist the Buyer,
         the Company and/or the  Subsidiary in taking all such necessary  steps)
         but the Buyer  shall be  entitled  to notify the  Relevant  Claim under
         Section 4.1 mutatis mutandis, provided that the Buyer is able to comply
         with such Section mutatis mutandis. The Sellers shall have no liability
         in respect of such Relevant Claim unless proceedings are raised against
         each of the Sellers with a copy to the Sellers'  Representatives within
         three (3) months  following the Buyer's  failure to recover in whole or
         in part the relevant  sums from the third party.  In the event that the
         Buyer or the Company or the  Subsidiary  shall  recover any amount from
         such other person the amount of the  subsequent  Relevant Claim against
         the Sellers shall be reduced by the amount  recovered less all Taxation
         thereon and any excess incurred or sustained under any insurance policy
         and less all  reasonable  costs,  charges and expenses  incurred by the
         Buyer or the Company or the Subsidiary in recovering that sum from such
other person.                                                 

4.7      The  Sellers  and each  Seller  shall  have no  liability  to any party
         arising  from or in  connection  with or in respect of Relevant  Claims
         unless the  Sellers'  aggregate  liability  in respect of all  Relevant
         Claims exceeds  $60,000 in which event the Sellers shall only be liable
         for the  excess  of such  liability  or  liabilities  over  $60,000  in
accordance with Section 11.                                   

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4.8      Nothing in this  Agreement  restricts the general  obligation at law to
         mitigate loss and the Buyer shall take all reasonable steps to mitigate
         loss  arising  from  Relevant  Claims for breach of Warranty or Section
10.2 or a claim under Section 5.2.                            

Conduct of Claims                                             

4.9      The Buyer shall  procure  that if it or the  Company or the  Subsidiary
         becomes aware of circumstances  likely to give rise to a Relevant Claim
         for breach of Warranty or Section 10.2 or a claim under  Section 5.2 it
         shall as soon as practicable after the matter first comes to its notice
         aforesaid give written notice thereof to the Sellers with a copy to the
Sellers' Representatives and shall procure that:-             

(a)         none of the Buyer  and/or the Company  and/or the  Subsidiary  shall
            make any admission of liability, agreement, settlement or compromise
            or otherwise take any action in relation  thereto  without the prior
            written consent of the Sellers' Representatives (such consent not to
be unreasonably withheld or delayed); and               

(b)         each of the Buyer and the  Company  and the  Subsidiary  will at all
            times promptly give to the Sellers'  Representatives all information
            and  documents  in its or their  possession  or  under  its or their
            control  relevant to the  Relevant  Claim,  and such access to their
            premises and personnel,  as may be reasonably requested from time to
time upon reasonable notice being given; and            

(c)         each of the Buyer and the  Company  and the  Subsidiary  will at all
            times permit the Sellers' Representatives to take such action on its
            behalf  as  the  Sellers  Representatives  may  from  time  to  time
            reasonably think appropriate to avoid, resist,  appeal,  compromise,
            defend,  mitigate or otherwise  deal with the claim or the liability
            the   subject    thereof    including    permitting   the   Sellers'
            Representatives in their own name on behalf of the Sellers or in the
            name  of  the  Company  or  the   Subsidiary  to  conduct   relevant
            proceedings  or pursue any rights of the Buyer or the Company or the
            Subsidiary or any of them in respect thereof,  subject always to the
            Buyer and the Company and the Subsidiary first being indemnified and
            secured to their reasonable  satisfaction against any losses, costs,
            interest,  damages and  expenses  which they may  thereby  incur and
            provided always that the Sellers' Representatives shall not take any
            steps  which in the  reasonable  opinion of the Buyer  would have an
            adverse  effect on the  business  of the Buyer or the Company or the
            Subsidiary  in which event the Buyer may  terminate the right of the
            Sellers or the  Sellers'  Representatives  under this  Section  upon
notice being served upon the Sellers' Representatives.  

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4.10     The Buyer  shall  not be  entitled  to  recover  under the  Warranties,
         Section 5.2,  Section  10.2,  Section 10.5 and/or  Section 12 more than
         once in  respect  of the same loss,  liability  or damage  and  without
         limitation no Relevant Claim in respect of the same loss,  liability or
         damage  may be made under  more than one of  Section  3,  Section  5.2,
Section 10.2, Section 10.5 and Section 12.                    

4.11     The Buyer  acknowledges  that it does not enter into this  Agreement on
         the  basis of and does not rely  upon any  warranty  or  representation
         other than the  Warranties  contained  in Section 3 and the  warranties
contained in Sections 5 and 10.5 of this Agreement.           

4.12     The Buyer  confirms  that it has not  already  formulated  and does not
presently contemplate making a Relevant Claim.                

4.13     No breach of this  Agreement  shall give the Buyer the right to rescind
this Agreement following Closing.                             

4.14     The number of  MicroFrame  Shares  (including  any Escrowed  MicroFrame
         Shares)  retained  by or returned to the Buyer in respect of a Relevant
         Claim for which a Seller is liable shall together with cash paid to the
         Buyer if any  pursuant to Section 11 be treated as a  reduction  of the
consideration for the Shares sold by such Seller.             

4.15     The Buyer hereby  undertakes to each of the Sellers not voluntarily and
         deliberately  to do any thing or allow any act within its control to be
         done after Closing which it knows would, of itself,  create or increase
         the  liability  of the Sellers or any of them for breach of Warranty or
         Section  10.2 or Section  10.5 or under  Section 12 except that Section
         4.5 (d) and Section  4.15 shall not  prevent  the Buyer  making a Claim
         where a Liability to Taxation of the Company is created or increased by
         a  further  adjustment  to  income  profits  or  gains  arising  in  an
         accounting period ending on or before Closing,  in circumstances  where
         the trading  losses  available for the purposes of  Corporation  tax or
         where  relevant the  appropriate  foreign  equivalent and arising on or
         before Closing, cannot be set against that Liability to Taxation, or be
reduced by the adjustment to income profits or gains.         

4.16     Each  limitation of liability in this Agreement and each other right or
         remedy  included in this Agreement or implied by operation of law shall
         be  construed  independently  and shall not be limited by, or limit the
         interpretation  of, any other limitation of liability,  right or remedy
included in this Agreement or implied by operation of law.    

4.17     The Buyer will compensate each of the Sellers and indemnify each of the
         Sellers  in  respect  of all  reasonable  costs and  expenses  directly
         incurred or sustained by that Seller in connection  with claims against
         that Seller under this Agreement which do not result in liability being
         established  against that Seller,  and the Sellers in  accordance  with
         Section 11 will compensate the Buyer and indemnify the Buyer in respect
of all reasonable costs and expenses directly                 

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         incurred  or  sustained  by  the  Buyer  in   connection   with  claims
successfully resolved in favour of the Buyer.                 

4.18     The Sellers  shall have no liability to the Buyer  arising  under or in
         relation  to this  Agreement  except  in  respect  of a claim  which is
         resolved,  agreed or  determined  or settled in favour of the Buyer and
results in liability being established.                       

4.19     The Buyer acknowledges that, in the absence of fraud, in respect of any
         misrepresentations  or untrue  statements made to it in connection with
         the purchase of the Shares, the Buyer shall be entitled,  to the extent
         there is a  breach  of  Warranty  under  Section  3 or 10.2  breach  of
         warranty  under  Section 5 or Section 10.5, to claim in respect of such
         breach in accordance  with the terms of this Agreement and shall not be
entitled to any other remedy.                                 

4.20     If payment  or  satisfaction  is made by the  Sellers or any of them in
         respect of a Relevant  Claim or  MicroFrame  Shares are returned by the
         Sellers (whether under the Escrow Agreement or otherwise) and the Buyer
         or the Company or the Subsidiary subsequently recovers or receives from
         a third party a sum directly  attributable to the subject matter of the
         claim, and the Buyer will take all reasonable steps to so recover,  the
         Buyer and the  relevant  company  shall be liable  forthwith  after the
         receipt of such sum to reimburse  to each of the  relevant  Sellers the
         net amount received (after  deducting all reasonable costs and expenses
         incurred in the recovery  and all  Taxation  suffered or to be suffered
         thereon) but not in any event  exceeding the amount  originally paid or
     satisfied by the relevant Sellers in respect of the Relevant Claim.

4.21     The Sellers  shall have no  liability  for  Relevant  Claims  after the
       Company or the Subsidiary has ceased to be an affiliate of the Buyer.

4.22     Where a breach of Warranty  under  Sections 3.21 and 3.49 results in an
         increase  in  the  income  gains  or  profits  of  the  Company  or the
         Subsidiary  for  the  purposes  of  UK  corporation  tax  or a  foreign
         equivalent  a claim for breach of that  Warranty or under  Section 10.2
         may only be made to the extent that tax losses arising in respect of an
         accounting  period ending before the Closing Date cannot be set against
     such increase or be reduced by such increase at the relevant time..

4.23     The  liability  of the Sellers in respect of Relevant  Claims and other
         claims  under this  Agreement  shall be  further  limited as set out in
Section 11.                                                   

4.24     The Sellers  shall have no liability in respect of a Relevant  Claim or
         under  Sections  7.18 or Schedule  7.18  arising only from the grant of
         share options in the Buyer  pursuant to this  Agreement or arising only
         from the grant of share  options in the Company  after the date of this
Agreement to employees of the Company.                        

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4.25     The Sellers shall not be liable for a breach of Warranty and as updated
         under  Section 10.2, in Sections 3.21 or 3.49, or under Section 10.2 or
         under Section 12 where the  Liability to Taxation  arises in respect of
         or by reference to an Event  occurring or deemed to occur after Closing
         or income,  profits or gains  arising or deemed to arise after  Closing
         would not have  arisen  but for tax  losses  arising  in  respect of an
         accounting  period  ending  before  Closing  ceasing to be available or
         being  reduced by reason of an  adjustment  in respect of an accounting
         period ending before  Closing.  For the purposes of this Clause 4.25 an
         accounting  period shall be deemed to commence on 1 April, 1998 and end
         on Closing.  Provided  that if there is a Liability  to Taxation  under
         Section 12 or a liability  arising from a breach of Warranty as updated
         under  Section  10.2 arising in respect of a  pre-Closing  period which
         arises in  respect  of, or by  reference  to,  an Event as  defined  in
         Section 12  occurring  or deemed to occur  after  Closing  the  Sellers
     subject to the terms of this Agreement will be liable to the Buyer.

4.26     The  Sellers  shall not be liable for any breach of  Warranty  or under
         Section 10.2 to the extent that the matter is  adequately  provided for
         in the  calculation of the Debt Free Amount in the Estimated  Statement
         as referred to in Section  7.18 and  Schedule  7.18 in respect of known
         debts or obligations  which are  irrecoverable  or could  reasonably be
         expected to be  irrecoverable  and to the extent that the Company is in
         receipt  of  funds in an  amount  equal to that  provision  at  Closing
pursuant to implementation of the provisions of Section 7.18. 

 SECTION 5
INDIVIDUAL WARRANTIES OF EACH SELLER

                             5.1 Each  Seller  hereby  warrants  to the Buyer as
follows:                                                                        

(a)            Title to Shares                                                  

               Such Seller owns legally and (except in the case of the Trustees,
               Anderson  Strathearn  Nominees Limited and Other Nominee Holders)
               beneficially,  free and clear of all mortgages, pledges, security
               interests,  liens,  charges,   encumbrances,   equities,  claims,
               rights,  options or restrictions  ("Liens"),  the Ordinary Shares
               set forth  opposite  such Seller's name on Schedule 1 and, at the
               Closing Date, his Shares (other than the Ordinary  Shares),  and,
               upon Closing,  the Buyer will acquire good and valid title to his
Shares, free and clear of any Lien.               

(b)            Authority to Execute and Perform Agreements                      

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               Such Seller has the full legal right and power and all  authority
               and approval  required to enter into,  execute and implement this
               Agreement and the agreements  contemplated  hereby,  in so far as
               such Seller is party thereto,  and to perform fully such Seller's
               obligations  in connection  therewith or pursuant  thereto.  This
               Agreement  and the  agreements  contemplated  hereby in so far as
               such   Seller  is  party   thereto  are  the  valid  and  binding
               obligations of such Seller  enforceable in accordance  with their
               respective  terms.  The  execution  and  implementation  of  this
               Agreement,  the  consummation  of the  transactions  contemplated
               hereby and the  performance  in each case by such  Seller of this
               Agreement,  and the agreements  contemplated  hereby,  insofar as
               such Seller is party thereto in accordance with their  respective
               terms and conditions do not and will not so far as such Seller is
               aware  (i)  require  the  approval  or  consent  of any  foreign,
               federal, state, national,  county, local or other governmental or
               regulatory  body;  (ii)  conflict with or result in any breach or
               violation of any of the terms and  conditions  of, or  constitute
               (or with  notice or lapse of time or both  constitute)  a default
               under,   any   certificate   of   incorporation,    document   of
               constitution,  statute,  regulation,  order,  judgement or decree
               applicable  to such  Seller or to the  Ordinary  Shares or at the
               Closing Date the Shares held by such Seller,  or any  instrument,
               contract or other agreement to which such Seller is a party or by
               or to which  such  Seller  is, or the  Ordinary  Shares or at the
               Closing  Date  the  Shares  held by such  Seller  are,  bound  or
               subject;  or  (iii)  result  in the  creation  of any Lien on the
               Ordinary  Shares or at the  Closing  Date the Shares held by such
               Seller. Each Seller has delivered to the Buyer by annexure to the
               Disclosure  Letter  a true  accurate  and  complete  copy  of all
               shareholder  agreements  if any to which  such  Seller is a party
relating to such Seller's Shares.                 

(c)            No Obligations                                                   

               Effective at the Closing,  neither the Company nor the Subsidiary
               has or will have or owe any liability or  obligation  (accrued or
               unaccrued,  choate or inchoate,  contingent or otherwise) to such
               Seller other than obligations, if any, in respect of then current
salary earned prior to the Closing Date.          

(d)            Regulation S                                                     

               (i)            Such  Seller  (but  excluding  for these  purposes
                              Frances  Loretta  DeLaura) is not a U.S. Person as
                              that   term  is   defined   under   Regulation   S
                              ("Regulation S") promulgated  under the Securities
                              Act of 1933,  as  amended  (the  "Act") and is not
                              acquiring  the  MicroFrame  Shares to be  acquired
                              hereunder  by  such  Seller  for  the  account  or
benefit of any U.S. 
Person.             

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               (ii)           Such Seller  (excluding  Frances Loretta  DeLaura)
                              shall resell the MicroFrame  Shares to be acquired
                              hereunder by such Seller only in  accordance  with
                              Regulation S, pursuant to  registration  under the
                              Act, or pursuant to an  available  exemption  from
                              registration    therefrom    and    such    Seller
                              acknowledges  that  certificates  representing the
                              MicroFrame Shares to be acquired hereunder by such
                              Seller shall  contain  restrictive  legends to the
                              effect   thereof  or  as  otherwise   required  by
applicable law.     

               (iii)          This  Agreement  has  been  executed  by,  and the
                              MicroFrame Shares to be acquired hereunder by such
                              Seller (but excluding for these  purposes  Frances
                              Loretta DeLaura) have been offered to, such Seller
                              outside  the  "United  States" (as defined in Rule
                              902(p) of Regulation S) and the MicroFrame  Shares
                              to be acquired  hereunder by such Seller are being
                              acquired in an "offshore  transaction" (as defined
            in Rule 902(i) of Regulation S).

               (iv)           Each Seller is acquiring the MicroFrame  Shares to
                              be acquired  hereunder  by such Seller for his own
                              account for investment  purposes only and not with
                              a view to or for  resale  in  connection  with any
                  distribution of any MicroFrame Shares.

The  warranties  given in this Section 5 by each Seller are given solely by such
Seller in relation to himself and not in relation to any other Seller and solely
in relation to the Ordinary Shares or, at the Closing Date the Shares held or to
be held by such Seller and accordingly one Seller shall not be liable in any way
for any breach of the warranties in this Section 5 by any other Seller.         

5.2            Indemnification re: information statement                        

               The Sellers  hereby  indemnify and hold  harmless  Buyer from and
               against  any and all  liabilities,  claims or damages  (including
               without  limitation,  attorneys' fees) arising out of or relating
               to any untrue  statement  of a  material  fact  contained  in the
               Information  Statement  and approved in writing by the  Executive
               Directors  to be filed  with  the  Commission  (as  such  term is
               hereinafter  defined)  or  omission  to  state  a  material  fact
               required to be stated  therein or  necessary in order to make the
               statements,  in the light of the  circumstances  under which they
               were made,  not  misleading,  in each instance to the extent that
               such fact or omission  relates to the Company and is based solely
               upon  information  provided  to  the  Buyer  or  its  counsel  or
               representatives  by the  Company  or any  Seller  as set forth on
Schedule 5.2 annexed hereto.                      

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 SECTION 6
 WARRANTIES BY THE BUYER

         The Buyer warrants to each of the Sellers as follows subject to matters
fairly disclosed in Schedule 6.1(g)  disclosing facts or matters for the purpose
of this Section 6 and subject as hereinafter set out in particular,  but without
limitation, to Section 6.2:                                                     

(a)           Authority of Buyer                                                

              The Buyer has the full  corporate  power  and  authority  to enter
              into,  execute and implement  this  Agreement  and the  agreements
              contemplated  hereby in so far as the Buyer is a party thereto and
              to perform fully the Buyer's obligations  hereunder and thereunder
              and in connection  therewith  and herewith.  The execution of this
              Agreement and the agreements contemplated hereby, the consummation
              of the  transactions  contemplated in connection  herewith and the
              performance  by the  Buyer of this  Agreement  and the  agreements
              contemplated  hereby in so far as the Buyer is a party  thereto in
              accordance  with their  respective  terms and conditions have been
              duly authorized by all necessary  corporate  action on the part of
              the Buyer except for the required approval of its shareholders and
              no other  proceedings  on the  part of the  Buyer  other  than the
              requisite   shareholder   approval  are  necessary  in  connection
therewith.                                          

(b)           Enforceability                                                    

              This Agreement and the agreements contemplated hereby to which the
              Buyer  is  a  party  constitute  the  legal,   valid  and  binding
              agreements of the Buyer enforceable  against it in accordance with
              their respective terms except as such enforceability is limited by
            laws relating to bankruptcy, insolvency or specific performance.

(c)           Existence and Qualification                                       

              The Buyer is a corporation duly organized, validly existing and in
              good standing under the laws of the State of New Jersey, with full
              corporate   power  and  authority  and  all  necessary   licences,
              authorisations, consents and approvals to conduct its business and
              to own and  operate its assets and  properties  as  conducted  and
operated.                                           

(d)           Consents and Approvals; No Violation                              

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              The execution and  performance  by the Buyer of this Agreement and
              the other agreements to be entered into by it pursuant hereto, the
              consummation by the Buyer of the transactions  contemplated hereby
              and by such other  agreements and the compliance by the Buyer with
              the provisions hereof and of such other agreements do not and will
              not (a) except as otherwise  set forth in this  Agreement  require
              the Buyer to make any filing or  registration  with, or obtain any
              other   permit,   authorization,   consent  or  approval  of,  any
              governmental  or  regulatory  authority  or any third  party;  (b)
              conflict  with or  breach  any  provision  of the  Certificate  of
              Incorporation or By-laws of the Buyer; (c) conflict with,  violate
              or breach any  provision  of, or constitute a default (or an event
              which,  with notice or lapse of time or both,  would  constitute a
              default) under, or result in a modification  of, any of the terms,
              covenants, conditions or provisions of, or give rise to a right to
              terminate  or  accelerate  or  increase  the amount of payment due
              under,  any  note,  bond,  mortgage,  indenture,  deed  of  trust,
              license,  franchise,  permit, lease, contract,  agreement or other
              instrument,  commitment  or  obligation  to which  the  Buyer is a
              party,  or by which it or any of its  properties  or assets may be
              bound,  except for such as to which requisite  waivers or consents
              either  have  been  obtained  or the  obtaining  of which has been
              expressly  waived in writing by the  Sellers'  Representatives  on
              behalf of the Sellers;  (d) conflict  with,  result in a breach or
              violation   of,  or  constitute  a  default  under  any  agreement
              applicable  to the  Buyer,  to which  the Buyer may be party or by
              which  the  Buyer  may be bound or  affected;  (e)  result  in the
              creation  of any Lien on any asset of the Buyer;  (f)  violate any
              order, writ, injunction, decree, judgement, or ruling of any court
              or governmental  authority,  applicable to the Buyer or the assets
              of the Buyer; or (g) violate any statute,  law, rule or regulation
applicable to the Buyer or the assets of the Buyer. 

(e)           Public Filings                                                    

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              The Buyer is current  with  respect to all filings  required to be
              made by the Buyer with the U.S. Securities and Exchange Commission
              (the  "Commission")  pursuant to the  Securities  Exchange  Act of
              1934,  as  amended  (the  "Exchange  Act"),  and  all  information
              contained in any such  filings,  to the extent  applicable  to the
              Buyer or its business and operations  including without limitation
              all  financial   information   and   information  in  relation  to
              intellectual  property or trading  relationships or contracts,  is
              true and correct in all  material  respects.  Such filings did not
              contain any untrue  statement of a material  fact or omit to state
              any  material  fact when  made  necessary  to make the  statements
              contained  therein in the light of the  circumstances  under which
              they were made not  misleading  and nothing has occurred since the
              date of the filing  which  would  render  any of the  information,
              untrue,  incomplete or incorrect in any material respect as at the
date thereof.                                       

(f)           MicroFrame Shares.                                                

              The MicroFrame  Shares,  when issued and delivered by the Buyer in
              accordance  with the terms  contained in this  Agreement,  will be
          duly authorized, validly issued, fully paid and nonassessable.

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(g)           Capitalisation                                                    

              The  authorised  capital stock of the Buyer consists of 50,000,000
              shares of common  stock,  $0.001 par value and  200,000  shares of
              Preferred  Stock,  $ 10 par  value.  As of July 14 1998 there were
              issued 5,296,879 shares of common stock and outstanding  5,296,479
              shares of common  stock,  no shares of preferred  stock,  employee
              stock  options to purchase an  aggregate  of  1,067,493  shares of
              common  stock (of which  839,283  were  exercisable  as of July 14
              1998) All  outstanding  shares of capital  stock of the Buyer have
              been duly authorised and validly issued and are fully paid. Except
              as set forth in  Schedule  6.1(g)  there were at July 14,  1998 no
              outstanding (i) shares of capital stock, stock appreciation rights
              or  "phantom"  stock  or  other  equity  interests  or any form of
              security or instrument  convertible  into equity  interests of the
              Buyer  (ii)   securities   of  the  Buyer   convertible   into  or
              exchangeable  for shares of capital  stock or other  securities of
              the Buyer or (iii)  options,  warrants or other  rights to acquire
              from the Buyer any capital stock,  securities  stock  appreciation
              rights or "phantom"  stock or other equity  interests of the Buyer
              (the items in sub sections (i),  (ii) and (iii) being  referred to
              collectively  as the "Buyer  Securities").  Except as set forth in
              Schedule  6.1(g)  there  were at  July  14,  1998  no  outstanding
              obligations of the Buyer (or any of its  subsidiaries),  actual or
              contingent,  to issue  or  deliver  or to  repurchase,  redeem  or
              otherwise acquire any Buyer Securities  whether now or at any time
              in the future or any  pre-emption  rights to equity  securities in
              the Buyer.  Except as set forth on Schedule 6.1 (g), from July 14,
              1998 until the date of this Agreement, the Buyer has issued no (i)
              shares or  capital  stock,  except  upon  exercise  of  options or
              warrants outstanding as at July 14, 1998 or (ii) options, warrants
              or other  securities  convertible  into  equity  interests  of the
Buyer.                                              

(h)           Obligations/SEC Filings : Financial Statements                    

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(i)           The Buyer has timeously filed all forms, reports and documents    
        required to be filed by the Buyer with the Commission within
         the last two (2) years and has delivered or made available to
    the Sellers' Representatives, in the form filed with the
        Commission (i) the Buyer's registration statement on Form S-
         3, (ii) Annual Reports on Form 10-K SB for fiscal years ended
    March 31, 1996, 1997 and 1998 (iii) all proxy statements
        relating to Buyer's meetings of stockholders (whether annual
         or special) held in 1998, (iv) all amendments and supplements
        to all such reports and registration statements filed by the
       Buyer with the Commission. All such required forms, reports
         and documents (including those enumerated in sub-sections (i)
          through (iv) of the preceding sentence) are referred to herein
         as the "Commission Reports".  So far as the Buyer is aware as
    of the respective dates, the Commission Reports (i) were
         prepared substantially in accordance with the requirements of
   the Securities Act of 1933 as amended or the Securities
       Exchange Act of 1934 as amended as the case may be, and the
          rules and regulations of the  Commission thereunder applicable
        to such Commission Reports and (ii) did not at the time they
            were filed (or if amended or superseded by a filing prior to the
         date hereof, then on the date of such amending or superseding
            filing) contain any untrue statements of a material fact or omit
     to state a material fact required to be stated therein or
           necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not
             misleading.  None of the Buyer's subsidiaries is required to file
        independently any forms, reports or other documents with the
Commission.                                         

(ii)          Each of the consolidated financial statements (including,  in each
              case,  any related  notes  thereto)  contained  in the  Commission
              Reports, including any Commission Reports filed (i) complied as to
              form  in all  material  respects  with  the  published  rules  and
              regulations  of the  Commission  with  respect  thereto,  (ii) was
              prepared in accordance  with U.S.  generally  accepted  accounting
              principles  applied on a consistent  basis  throughout the periods
              involved  (except as may be  indicated  in the notes  thereto) and
              (iii) fairly presented the financial position of the Buyer and its
              subsidiaries   as  at  the   respective   dates  thereof  and  the
              consolidated  results  of its  operations  and cash  flows for the
periods indicated.                                  

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(iii)         The Buyer has heretofore made available to the Executive Directors
              a complete and correct  copy of any  amendments  or  modifications
              that have not yet been  filed  with the  Commission,  but that are
              required  to  be  filed,   to   agreements,   documents  or  other
              instruments  which previously had been filed by the Buyer with the
          Commission pursuant to the Securities Act or the Exchange Act.

(i)             NASDAQ Obligations                                              

                The  Buyer  has  complied  in all  material  respects  with  the
                obligations  imposed  upon it under  applicable  NASDAQ  Listing
Rules.                                          

(j)             Brokerages                                                      

                There are no brokerage commissions, finders fees or similar fees
                or  commissions  payable  by the Buyer in  connection  with this
                Agreement  based on any  agreement,  arrangement  or undertaking
with the Buyer or any action taken by the Buyer.

6.2      Limitation                                                             

         No claim may be made by the  Sellers  or any of them for  breach of any
         provision contained in this Section 6 unless written notice detailing a
         specific  breach of warranty and containing  details of the claim shall
         have been given by the Sellers Representatives on behalf of the Sellers
         or any of them to the Buyer on or before the  Closing  Date except with
         respect to the provisions contained in Sections 6.1(a),  6.1(b), 6.1(c)
         and 6.1(f) in respect of which such notice shall have been given by the
         Sellers  Representatives  on behalf of the Sellers to the Buyer  before
         the date falling twelve (12) months after the Closing Date. The maximum
         aggregate liability of the Buyer for a claim under this Section 6 shall
not exceed $200,000.                                          

 SECTION 7
COVENANTS OF THE PARTIES

         Where in this Section  there is reference  to the  Executive  Directors
         "using  all  reasonable  endeavours"  that shall not mean that they are
         required to perform any act in breach of any law of the UK or the State
         of New York,  USA.  Where in this  Agreement  there is reference to the
         Executive Directors or any of them undertaking to do any act, if any of
         the  Executive  Directors  ceases to be an employee of or non executive
         director  or part time  adviser  or  consultant  to the  Company,  that
         Executive Director shall continue to have that obligation to the extent
         that it can be performed by him as  shareholder  in the Company and all
         relevant  references to his or "all"  "reasonable  endeavours"  (on his
part) shall mutatis mutandis be read accordingly.             

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7.1      Conduct of Business                                                    

         From the date hereof until the Closing Date,  the  Executive  Directors
         shall  use all  reasonable  endeavours  to cause  the  Company  and the
         Subsidiary  to, conduct their business in the ordinary and usual course
         provided  that with the prior  written  consent  of the Buyer not to be
         unreasonably  withheld or delayed,  the Company shall have the right to
         issue  further  ordinary  shares  of 1 pence  each to any or all of the
Sellers .                                                     

7.2      Preservation of Business                                               

         From the date hereof until the Closing Date,  the  Executive  Directors
         shall  use all  reasonable  endeavours  to cause  the  Company  and the
         Subsidiary  to,  preserve  their  business  organization  intact,  keep
         available   the  services  of  their   present   officers,   employees,
         consultants and agents, maintain their present suppliers and customers,
         preserve  their  goodwill and  maintain  their  corporate  and business
         records  with at least the same care and  diligence as has been applied
thereto to date.                                              

7.3      Insurance                                                              

         From the date hereof until the Closing Date,  the  Executive  Directors
         shall  use all  reasonable  endeavours  to cause  the  Company  and the
         Subsidiary to, maintain in force (including necessary renewals thereof)
         the insurance  policies  listed on Schedule 3.17,  except to the extent
         that they may be  replaced  with  equivalent  policies  appropriate  to
         insure the  assets,  properties  and  business  of the  Company and the
         Subsidiary to the same extent as currently insured at the same or lower
rates or at rates approved in writing by the Buyer. Litigation

         From the date hereof until the Closing Date,  the  Executive  Directors
         shall notify  promptly the Buyer of any actions or  proceedings  raised
         against  the  Company or the  Subsidiary  intimation  of which has been
         received by way of written notice by any one of the Executive Directors
         of the  type  described  in  Section  3.16 or  Section  3.44  that  are
         commenced or, to the best of their  knowledge,  information  and belief
         having made reasonable enquiry only of their professional  advisers and
         employees  threatened  against the Company or the Subsidiary or against
         any officer,  director,  employee,  consultant,  agent,  shareholder or
         other authorised  representative  of the Company or the Subsidiary with
         respect to the Company or the Subsidiary or the business of the Company
or the Subsidiary.                                            

7.5      Corporate Examinations and Investigations                              

         Prior to the Closing  Date,  the Buyer shall be  entitled,  through its
         employees  and  representatives,  to  make  such  investigation  of the
         assets,  properties,  business  and  operations  of the Company and the
      Subsidiary, and such examination of the books, records and financial

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         condition of the Company and the Subsidiary as the Buyer may reasonably
         require.  Any such  investigation and examination shall be conducted at
         reasonable   times  and  under   reasonable   circumstances   following
         reasonable  notice and the Company and the Subsidiary and the Executive
         Directors shall co-operate fully therein. No investigation by the Buyer
         shall   diminish   or   obviate   or   otherwise   affect  any  of  the
         representations,  warranties,  covenants, undertakings or agreements of
         the Sellers under this Agreement. In order that the Buyer may have full
         opportunity  to  make  such  business,  accounting  and  legal  review,
         examination  or  investigation  as it  may  reasonably  require  of the
         business and affairs of the Company and the  Subsidiary,  the Executive
         Directors  shall  furnish and shall use all  reasonable  endeavours  to
         cause the Company and the Subsidiary to furnish the  representatives of
         the Buyer  during such period with all such  information  and copies of
         such documents concerning the affairs of the Company and the Subsidiary
         as such  representatives may reasonably request and cause its officers,
         employees, consultants, agents, accountants and attorneys to co-operate
         with  such   representatives   in  connection   with  such  review  and
examination. Payment of Seller Debts                          

         Prior to or concurrently with the Closing, each Seller shall, and shall
         cause each  affiliate  of him to, pay to the Company or the  Subsidiary
   any amounts owed by such person to the Company or the Subsidiary.

A.       Notification of Certain Damage or Destruction                          

         From the date hereof until the Closing Date,  the  Executive  Directors
         shall  notify the Buyer in writing  (or cause the Company to notify the
         Buyer in  writing)  of any  damage,  destruction,  or loss  suffered or
         experienced by the Company or the Subsidiary that materially  adversely
         affects  the  assets,  properties,   business,  operations,   condition
         (financial or otherwise) of the Company and the  Subsidiary  taken as a
         whole.  Such notice shall be given to the Buyer promptly  following the
occurrence or incurrence of such damage, destruction or loss. 

7.8      Taxes                                                                  

         To the extent not filed by the Company or the Executive Directors prior
         to the Closing  Date,  the  Executive  Directors  shall  after  Closing
         prepare or cause to be prepared,  at the Company's cost and expense and
         in a manner  consistent with past practice,  and provide or cause to be
         provided to the Buyer all  Pre-Closing  Corporation  Tax Returns of the
         Company and Federal corporate income tax and corporate state income tax
         returns  of the  Subsidiary  due with  respect to all  taxable  periods
         ending on or  before  the  Closing  Date  (each,  a "Pre-  Closing  Tax
         Period").  At  least  ten  (10)  days  prior  to the  date  on  which a
         Pre-Closing  Tax Return is due to be filed  (including any  extensions)
         with the  appropriate  Tax authority  pursuant to  applicable  law, the
         Executive  Directors  shall deliver the  Pre-Closing  Tax Return to the
         Buyer.  Upon the  Buyer's  review of and consent to a  Pre-Closing  Tax
         Return,  such  consent not to be  unreasonably  withheld or delayed the
         Buyer shall file (or cause the Company or the  Subsidiary  to file) the
Pre-Closing Tax Return and pay by the due date (or            

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         cause  the  Company  or the  Subsidiary  to  pay)  to  the  appropriate
         governmental entity all amounts due with respect to the Pre-Closing Tax
Return.                                                       

(a)          From  and  after  the date  hereof  until  the  Closing  Date,  the
             Executive  Directors  shall not, and the Executive  Directors shall
             cause the Company and the Subsidiary not to, make,  amend or revoke
             any  election  with  respect to any Tax matter or change any Tax or
             accounting  practice or procedure without the prior written consent
of the Buyer.                                         

(b)          From and after the date hereof  until the Closing  Date the Company
             shall accrue for any  liability to  corporation  tax arising out of
the profits during that period.                       

7.10     Conduct of Business of Buyer                                           

         From the date  hereof  until the  Closing  Date the Buyer shall use all
         reasonable endeavours to conduct its business in the ordinary and usual
course.                                                       

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7.11     Preservation of Business of Buyer                                      

         From the date  hereof  until the  Closing  Date the Buyer shall use all
         reasonable  endeavours  to preserve its business  organisation  intact,
         keep  available  the  services  of  its  present  officers,  employees,
         consultants  and agents,  maintain its present  suppliers and customers
         save in each case where it is not in the  interests  of the Buyer to do
         so,  preserve its goodwill  and  maintain  its  corporate  and business
         records  with at least the same care and  diligence as has been applied
thereto to date.                                              

7.12     Insurance of Buyer                                                     

         From the date  hereof  until the  Closing  Date the Buyer shall use all
         reasonable   endeavours  to  maintain  in  force  (including  necessary
         renewals thereof) the insurance  policies  maintained by it at the date
         hereof,  except to the extent that they may be replaced with equivalent
         policies  appropriate to insure the assets,  properties and business of
the Buyer to the same extent as currently insured.            

7.13     Litigation of the Buyer                                                

         From the date  hereof  until the Closing  Date the Buyer  shall  notify
         promptly  the  Sellers'  Representatives  of any  material  actions  or
         proceedings  raised  against the Buyer that are commenced or threatened
         against  the  Buyer  or  against  any  officer,   director,   employee,
         consultant,  agent,  shareholder or other authorised  representative of
         the Buyer with respect to the Buyer or the business of the Buyer and by
way of written notice.                                        

7.14     Corporate Examinations and Investigations of the Buyer                 

         Prior  to the  Closing  Date  the  Sellers'  Representatives  or  other
         representatives  of investors or bona fide  potential  investors in the
         Company  shall be  entitled to make such  investigation  of the assets,
         properties,  business and operations of the Buyer and such  examination
         of the  books,  records  and  financial  condition  of the Buyer as the
         Sellers' Representatives or any of the foregoing may reasonably require
         for the purpose of enabling  the Sellers to meet their  obligations  to
         procure third party funding under Section 7.18. Any such  investigation
         and  examination  shall be  conducted  at  reasonable  times  and under
reasonable circumstances following reasonable notice.         

7.15     Notification of Certain Damage or Destruction of the Buyer             

         From the date  hereof  until the Closing  Date the Buyer  shall  notify
         promptly  the  Sellers'  Representatives  in  writing  of  any  damage,
         destruction   or  loss  suffered  or  experienced  by  the  Buyer  that
         materially   adversely  affects  the  assets,   properties,   business,
         operations,  condition (financial or otherwise) of the Buyer taken as a
whole. Such notice shall be given to the                      

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         Sellers'   Representatives   promptly   following  the   occurrence  or
incurrence of such damage, destruction or loss.               

7.16     NASDAQ SmallCap Market Listing                                         

         The Buyer  agrees to  effectuate  the  listing on the NASDAQ  Small Cap
         Market  prior to or  simultaneously  with the Closing Date of the total
         number of  MicroFrame  Shares  issued or to be issued as  consideration
         hereunder together with shares of Common Stock to be issued pursuant to
         all  options to be granted  pursuant to this  Agreement  and to use all
         reasonable  endeavours  to maintain and keep such listing in full force
and effect.                                                   

7.17     Board of Directors of the Buyer                                        

         The Sellers  shall have the right to nominate two nominees to the Board
         of Directors of the Buyer as of the Closing Date by the delivery to the
         Buyer of a written  notice  from the  Sellers  Representatives  and the
         Buyer  covenants  that the total number of  directors  shall not exceed
         five (5) at that date prior to the appointment of such nominees. If the
         Sellers  Representatives  have not delivered a notice in respect of one
         or both of such  appointees  prior  to the  Closing  Date,  they  shall
         continue to be entitled to deliver such a notice  following the Closing
       Date in respect of either or both appointees not previously notified.

7.18     Subscription of Shares on Closing & Debt Free Amount                   

         Prior to the Closing  hereunder,  the Sellers shall use all  reasonable
         endeavours  to procure  funding from a third party or parties by way of
         subscription  for ordinary shares of 1 pence each in the capital of the
         Company of such  amount as shall  equal the Debt Free Amount as set out
         in the  Estimated  Statement  (as provided for in Schedule  7.18) ("the
         Funding").In  the event that the whole or any part of the  Funding  has
         not been made  available and  completed  prior to the Closing Date then
         each of the undernoted  Sellers (each a "Funding  Seller") hereby binds
         and obliges himself and undertakes to supply the relevant  shortfall to
      the Company at Closing in the percentages set out opposite his name:

Name                                Subscription Percentages                    
----                                ------------------------                    

Peter MacLaren                                6.25                              
Peter Wilson                                  12.5                              
Hugh Evans                                    12.5                              
Helen Sealey                                 11.72                              
Andrew Sealey                                 7.03                              
Lady Margaret Elliot                          8.75                              
Brian Souter                                   15                               
Ann Gloag                                     7.5                               
Michael Rutterford                            12.5                              
June Georgina Rutterford                      6.25                              

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         In so far as a Funding  Seller is the holder of CULS such Seller  shall
         convert  the  whole of the CULS held by him into  ordinary  shares of 1
         pence in the capital of the Company by no later than two business  days
         prior to the  Closing  Date in so far as such CULS  shall not have been
         converted,  redeemed  or repaid by that  date.In  the case of breach of
         this  Section  7.18 by either the Sellers or by the Funding  Sellers or
         any  Funding  Seller  then the sole party with any rights in respect of
         such  breach  shall be the Buyer and the sole rights of the Buyer shall
         be either (i) to proceed to Closing  but in that event the Buyer  shall
         have no rights  against the  Sellers or the  Funding  Sellers or any of
         them in respect of their  failure to procure or supply such  Funding or
         (ii) to terminate this  Agreement  under Section 13.1 and in that event
         the  provisions of Section 13.2 (a) shall apply and neither the Sellers
         nor the Funding Sellers or any of them shall have any obligation to the
         Buyer whether to make payment or otherwise other than to pay the sum to
         the Buyer as set out in Section 13.2 (a).The  Buyer hereby  consents to
         the  issue  of such  further  ordinary  shares  of 1 pence  each in the
         capital of the Company contemplated by this Section 7.18.The provisions
of Section 7.26 shall not apply to this Section 7.18.         

7.19     Consents                                                               

         Each of the  parties  hereto  covenants  and agrees  that he, she or it
         shall  use all  reasonable  efforts  to  obtain  consents  of all third
         parties and governmental  authorities  necessary to the consummation of
         the transactions  contemplated by this Agreement  including but without
         limitation in the form of Exhibit Q those from  Clydesdale  Bank public
         limited  company,  British Coal Enterprise  Limited ("BCE") and Lothian
         and Edinburgh  Enterprise  Limited  ("Consents")  (excluding  for these
         purposes The Scottish Office).  The Buyer acknowledges that the consent
         of BCE is given on the basis that the  relevant  loans  shall be repaid
         following  the Closing  for which the Buyer shall be solely  liable and
the Sellers shall have no responsibility therefor.            

7.20     Employee Options                                                       

7.20.1   The Buyer undertakes to the Sellers and each of the relevant  employees
         as soon as  practicable  after  Closing  and subject to approval of the
         Inland Revenue in the United Kingdom (and hereby  undertakes to use its
         best  endeavours to obtain such approval as soon as  practicable  after
         Closing) to  constitute a stock  option plan solely for such  employees
("the Sub Plan").                                             

         The Buyer  undertakes to file with the SEC a registration  statement on
         form S8 in respect of all common  stock to be issued to option  holders
         thereunder.The Buyer shall as soon as practicable after Closing deliver
         to the members of the  Company's UK Inland  Revenue  approved  employee
         share option scheme a letter  substantially  in the form annexed hereto
         as Exhibit IIn the event of the relevant  employees  electing to accept
         options to  subscribe  for shares of common  stock par value  $.001 per
         share  of the  Buyer  in the Sub Plan  and in  exchange  releasing  and
         discharging  their rights under the UK Inland Revenue approved employee
         share  option  scheme  the  options  of the Buyer in the Sub Plan to be
granted to such                                               

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         employees  who so elect  shall be  calculated  in  accordance  with the
         formula  set out  below  and in the  event  of the  relevant  employees
         electing  to accept  the first  option  set out in the  letter  annexed
         hereto as Exhibit I the  options of the Buyer in its 1998 Stock  Option
         Plan to be granted to such  employees  who so elect shall be calculated
as set out below.                                             

7.20.2   The total  number of  options  in the Buyer to be issued to all  option
         holders in the Company as at the  Closing  Date (of both  approved  and
         unapproved  options)  shall be the number of options in the  Company at
         the Closing Date divided by the Conversion  Factor (set out below) with
         any fractions rounded up to the nearest whole number. If members of the
         UK Inland Revenue  approved scheme elect for options under the Sub-Plan
         then the exercise price shall be not  manifestly  less than fair market
         value of shares of common  stock of the Buyer on or around  the date of
         grant as shall be agreed  between the Buyer and the UK Share  Valuation
         Division and if the employees opt for options in the Buyer's 1998 Stock
         Option Plan then the exercise price shall be the current exercise price
         of the existing  options in the Company  multiplied  by the  Conversion
         Factor (as defined  below) and converted  into US$ at the exchange rate
specified in Section 14 (the "Exchange Rate").                

         Each of the undernoted  Sellers has been granted  unapproved options in
         the Company  subject to the exercise prices and last dates for exercise
all as set out below                                          

Exercise Price          (pound)0.0375     (pound)0.1084         (pound)0.14     

Last date of Exercise    31 Dec 2003       21 Aug 2007           30 Nov 2007    

Fran DeLaura                               350,000                              

Hugh Evans               2,920,000                               938,607        

Keith Laing              100,000                                 148,531        

Peter MacLaren           1,240,000                               474,255        

Peter Wilson             2,920,000                               938,607        

         The Buyer  undertakes  that it will on the  Closing  Date  enter into a
         Stock Option  Contract  substantially  in the form annexed as Exhibit H
         with each of such Sellers and with employees of the Company as the case
         may be who have been granted  unapproved options subject to the release
         and discharge by such employees of such unapproved option rights.  Each
         of such Sellers shall enter into such Stock Option  Contract in respect
         of such Seller's  separate holding of options in terms of which each of
         such  Sellers  shall be entitled to receive  options in the Buyer under
         the Buyer's 1998 Stock Option Plan  (substantially  in the form annexed
hereto                                                        

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         as  Exhibit  N) in  exchange  for  the  release  and  discharge  of any
         unapproved  option  rights  in the  Company  (and in the  case of Peter
         MacLaren  his options  shall be  exerciseable  within  twenty five (25)
         months of the termination of his present  engagement with the Company).
         The  relevant  number of  options in the Buyer to be  received  by such
         Seller or such  employee as the case may be in respect of each separate
         holding  of  options  shall be equal to the  number of  options  in the
         Company  held by such  Seller or employee as the case may be divided by
         the Conversion Factor and the relevant exercise price of options in the
         Buyer (in respect of each  separate  holding of  options)  shall be the
         relevant exercise price noted above multiplied by the Conversion Factor
         converted  into  US$ at the  Exchange  Rate.For  the  purposes  of this
         Section the  Conversion  Factor shall be the sum of the total number of
         ordinary  shares of 1 pence each in the capital of the Company in issue
         at Closing and the total  number of ordinary  shares of 1 pence each in
         the  capital of the  Company  under  option at Closing  all  divided by
         5,800,000.The  Buyer  undertakes  to file  with the SEC a  registration
         statement  on form S8 in respect  of all  common  stock to be issued to
option holders under the Buyers 1998 Stock Option Plan.       

7.20.3   Notwithstanding any other provision hereof the Buyer hereby consents to
         the issue of up to 800,000  options to  employees  by the Company  over
         ordinary  shares of 1 pence each in the share  capital  of the  Company
         prior to the Closing Date  (subject to each of Peter Wilson and William
         Hugh Evans each cancelling and releasing 400,000 options in the capital
         of the Company  with a last  exercise  date of November 30, 2007) which
         options may at the  discretion  of the Company be granted  either under
         the UK Inland  Revenue  approved  employee  share  option  scheme or as
unapproved options.                                           

7.21     Filings                                                                

         The Buyer (in  relation to itself and the  Company  and the  Subsidiary
         following  Closing)  and the  Executive  Directors  (in relation to the
         Company and the  Subsidiary in the period prior to Closing)  shall each
         cause to be made, as promptly as practicable, any necessary filings and
         submissions  under the laws of the UK or the US to the  extent to which
         the provisions  thereof are applicable to the Buyer, the Company or the
         Subsidiary  as the case  may be in  connection  with  the  transactions
         contemplated  by this  Agreement,  and  the  Buyer  and  the  Executive
         Directors will cause such filings and submissions for which he or it is
         responsible  to be made  timeously.  The Sellers and the Company hereby
         agree to render all  assistance  reasonably  necessary  to the Buyer in
         connection  with the  preparation  of the  information  statement to be
filed with the Commission.                                    

7.22     Standstill                                                             

         For a period of (1) year from the Closing Date, neither the Company nor
         the Sellers nor any of them shall acquire any shares of Common Stock of
the Buyer other than the MicroFrame Shares.                   

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7.23     Exclusivity                                                            

         From the date hereof to the Closing Date, each of the Sellers severally
         covenants that he, she or it shall not directly or indirectly,  through
         any representative or otherwise, (a) solicit, initiate or in any manner
         encourage,  accept or  consider  any  proposal or offer from any person
         relating to the acquisition of any interest in the Shares, the Company,
         the Subsidiary, the Business or any of the assets of the Company or the
         Subsidiary  (other  than sales of  inventory  goods or  services in the
         ordinary  and  usual  course  consistent  with past  practice),  or (b)
         participate in any discussions or negotiations  regarding,  furnish any
         information with respect to, assist or participate in, or in any manner
         facilitate any effort or attempt by any person to do or seek any of the
foregoing.                                                    

7.24     Employment Agreements                                                  

         Subject  to  the  satisfaction  of  the  other  conditions  to  Closing
         hereunder,  (i) Peter Wilson agrees that he will execute and deliver at
         the Closing to the Buyer,  an amendment to his employment  agreement in
         the form of Exhibit B annexed hereto (the "Wilson Employment  Agreement
         Amendment"),  (ii) Hugh Evans  agrees he will  execute  and  deliver at
         Closing to the Buyer,  an amendment to his employment  agreement in the
         form of  Exhibit C annexed  hereto  (the  "Evans  Employment  Agreement
         Amendment"),  (iii) Keith Laing agrees that he will execute and deliver
         at the Closing to the Buyer,  an amendment to his terms and  conditions
         of  employment  in the form of  Exhibit D annexed  hereto  (the  "Laing
         Employment  Agreement  Amendment").  The Buyer  agrees  subject  to the
         satisfaction of its other conditions to Closing to enter into the Other
         Employment  Agreement Amendments and each of the agreements referred to
         in (i), (ii) and (iii) above and the Company undertakes to execute each
of the foregoing agreements.                                  

7.25     Registration Rights Agreement                                          

         Subject  to  the  satisfaction  of  the  other  conditions  to  Closing
         hereunder,  the  Buyer and each of the  Sellers  shall  enter  into the
         Registration  Rights  Agreement  substantially in the form of Exhibit E
annexed hereto (the "Registration Rights Agreement").         

7.26     Further Assurance                                                      

         Each of the parties  hereto  agrees to use his,  her or its  reasonable
         efforts to take, or cause to be taken all reasonable action, and to do,
         or cause to be done, all things  necessary,  proper or advisable  under
         applicable laws and regulations or otherwise  (including  executing all
         relevant agreements to which he is a party which are to be entered into
         pursuant  to this  Agreement  at  Closing  and in the case of the Buyer
         obtaining the requisite approval of stockholders to the transaction and
         of the SEC to the  Information  Statement,  and  otherwise  taking  all
         action  necessary  which it is  reasonably  able to take to satisfy the
         conditions  set out in Section 8) to consummate  and make effective the
transactions contemplated by this Agreement as                

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         expeditiously as practicable and such that the Closing Date shall occur
         as soon as practicable  after the date hereof and in any event no later
         than  December  31, 1998 unless  otherwise  agreed by the Buyer and the
         Sellers  Representatives.  If at any time  after  the date  hereof  any
         further  action is  necessary or desirable to carry out the purposes of
         this  Agreement,  each of the  parties  shall  take  or use  reasonable
         endeavours to cause to be taken all such necessary  action,  including,
         without  limitation,   the  execution  and  delivery  of  such  further
         instruments  and documents as may be reasonably  requested by any party
         for such purposes or otherwise to complete or perfect the  transactions
         contemplated  hereby  provided  that this does not  involve  such party
         incurring substantial  expenditure or that such party is indemnified to
         his  reasonable  satisfaction  against  such  expenditure  where  it is
         substantial. This Section shall not apply to the obligations in Section
         7.18.  The  obligations  in this Section in so far as they apply to the
         Sellers  will bind each Seller only to the extent that he, she or it is
         reasonably  capable of taking the action or doing the thing in question
         and the obligations  specified in this Section 7.26 on the part of each
         of the Sellers  are  undertaken  by each  Seller  solely in relation to
         himself  and not in relation to any other  Seller and  accordingly  one
         Seller shall not be liable in any way for breach of  obligation in this
Section 7.26 by any other Seller.                             

7.27.1   Conditions to Closing                                                  

         As soon as  practicable  after  the date  hereof  (i) the  Buyer  shall
         confirm in writing to the Sellers'  Representatives  whether all of the
         conditions  of the Buyer set out in  Section 8 have been  satisfied  or
         where appropriate  waived or that the Buyer is in a position to satisfy
         such conditions and (ii) the Sellers'  Representatives shall confirm in
         writing to the Buyer  whether all of the  conditions of the Sellers set
         out in Section 9 have been  satisfied  or where  appropriate  waived or
that the Sellers are in a position to satisfy such conditions.

7.27.2   The Buyer and the Sellers'  Representatives shall advise one another if
         and when they are in a position to deliver  the  written  confirmations
         referred to in Section  7.27.1  subject only to receipt of the relevant
         documents specified in the relevant condition. Closing shall take place
         on the seventh  business day  following  such advice being  received by
         each of the Buyer and the Sellers'  Representatives  that they are in a
         position to deliver such  confirmations  (or at such other date as they
may agree).                                                   

7.27.3   From the date  hereof to  Closing  each of the  Buyer and the  Sellers'
         Representatives shall keep each other advised as to the satisfaction of
the relevant conditions in Sections 8 and 9.                  

7.28     Closing Share Allocation List                                          

         Prior  to  the   Closing  the  Buyer   shall   consult   the   Sellers'
         Representatives  about the  Closing  Share  Allocation  List and at the
         Closing the Buyer shall deliver to the Sellers'  Representatives a list
         in the form set out in Schedule  7.28 the  ("Closing  Share  Allocation
         List") in a form  agreed  between  them which  sets out the  MicroFrame
Shares including the Escrowed                                 

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         MicroFrame  Shares  to  which  each  of  the  Sellers  is  entitled  as
calculated in accordance with Section 1.4.                    

7.29     Trustees                                                               

         Those  of the  Sellers  who are  trustees  (other  than  Other  Nominee
         Holders)  undertake in respect of their respective  trusts that it will
         not be wound up prior to the  expiration  of the longest time limit for
         making any Relevant Claim hereunder, and further that if the MicroFrame
         Shares delivered as  consideration  for the sale of their Shares in the
         Company are disposed of prior to the  expiration of any such time limit
         a capital value equivalent to the value of such shares when disposed of
         shall be retained  until  expiry of the longest time limit for making a
Relevant Claim hereunder.                                     

7.29.2   Those of the Sellers who are Other  Nominee  Holders  undertake  not to
         divest  themselves of their legal ownership of the Escrowed  MicroFrame
         Shares  delivered  for the sale of their Shares in the Company prior to
         the expiry or discharge of the  appointment  of the Escrow Agent or any
substitute therefor.                                          

7.30     Consent to Conversion of Preference Shares                             

         Each of the Sellers hereby gives all consents  necessary on his part to
         the subdivision and conversion of the Preference  Shares referred to in
         the  fourth  recital  hereto  and to the  conversion  of  the  CULS  as
contemplated by Section 7.18.                                 

Shareholder Matters and Buyer Securities                      

The Buyer agrees in the period up to the Closing Date not to:-

(a)              cause,   permit  or  propose  any   amendment  to  the  Buyer's
                 Certificate of  Incorporation  or By-laws or otherwise take any
                 action or agree to take any  action  which  would  require  the
                 approval  of the  stockholders  of the Buyer  other than in the
                 ordinary course including  without  limitation annual board and
stockholders meetings, or                     

(b)              issue or agree to issue  any Buyer  Securities  as  defined  in
                 Section  6.1(g) but for the  avoidance of doubt  excluding  any
                 shares issued  pursuant to the exercise of options  outstanding
                 on the date hereof and any employee options granted pursuant to
                 the Buyer's  employee  stock option plan as constituted on July
                 14,  1998  and  any  shares  issued  pursuant  to the  exercise
thereof..                                     

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7.32     Public Filings                                                         

         The Buyer hereby covenants that it shall use all reasonable  efforts to
         file on a timely basis all public  filings  required to be filed by the
Buyer under the Securities Act of 1933 as amended.            

7.33     Investor  SPA                                                          

         The  Buyer  undertakes  to each  of the  Sellers  that it will  use its
         reasonable  endeavours  to  negotiate  the  Investor SPA with any third
         party or third  parties  who are to provide  all or part of the Funding
         and to execute the same provided that the obligations contained therein
 are no more onerous than the obligations in the LIFE Agreement.

7.34     HP                                                                     

         The  Buyer  undertakes  to the  Company  and  the  Sellers  to  provide
         reasonable  assistance  in the  manner  substantially  similar  to that
         provided  prior  to  date  hereof  in  connection  with  the  Company's
         relationship with HP (as hereinafter  defined) including the use of the
     equipment already provided to the Company prior to the date hereof.

7.35     Deed of Adherence                                                      

         As soon as  practicable  after  Closing  each of the Buyer and Anderson
       Strathern Nominees Limited shall execute the A & S Deed of Adherence.

7.36     LIFE Agreement                                                         

         The  Buyer  undertakes  to the  Sellers  upon  Closing  to  fulfil  all
obligations on its part under the LIFE Agreement.             

Subject to Section  14.11 the covenants in this Section 7 given by the Executive
Directors are provided for the benefit of the Buyer only.                       

 SECTION 8
BUYER'S CLOSING CONDITIONS

The  obligations of the Buyer to purchase the Shares  pursuant to this Agreement
are subject to the fulfilment to the reasonable  satisfaction  of the Buyer,  or
(with the  exception of (h), (i) , (j), (k) and (l) of this  Section) the waiver
by the Buyer, at or prior to the Closing, of the conditions set forth below.    

(a)           That the Buyer does not  exercise  its rights of  recission  under
          Section 10 or that there is no Supplemental Disclosure Letter.

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(b)          Each  Seller  shall so far as the  Buyer is  actually  aware,  have
             performed and complied in all material  respects with all covenants
             and undertakings  required to be performed or complied with by such
             Seller under this Agreement (excluding Section 7.18) on or prior to
             the Closing  Date and the relevant  Sellers or the Funding  Sellers
             shall have  complied in all respects with their  undertaking  under
Section 7.18.                                         

(c)          If Closing  takes  place after  October 16, 1998 the Sellers  shall
             have delivered to the Buyer the management  accounts of the Company
and the Subsidiary as at September 30, 1998.          

(d)          The Sellers Representatives and the Sellers shall have delivered or
             procured  the  delivery  to the  Buyer  at  the  Closing  of  share
             certificates  representing  the Shares  being  sold by the  Sellers
             together with share transfer forms duly executed by a Seller or his
             attorney in favour of the Buyer,  and the board of directors of the
             Company  shall have approved the same for  registration  subject to
stamping.                                             

(e)          The Buyer shall have  received  the opinions of Mayer Brown & Platt
             Murray Beith & Murray,  Counsel to the Company,  Anderson Strathern
             and Maclay Murray & Spens,  Counsel to certain Sellers addressed to
             the  Buyer,  dated the  Closing  Date,  substantially  in the forms
annexed hereto as Exhibit G.                          

(f)          There shall be no order, decree, judgement, injunction or interdict
             of a court of competent jurisdiction,  of which the Buyer is aware,
             which  prevents  or delays  the  consummation  of the  transactions
contemplated by this Agreement.                       

(g)          The Sellers   shall have  delivered or cause to be delivered to the
Buyer the following additional items:                 

                (i)    in respect of those Sellers who are individuals  personal
searches free from incumbrance    

               (ii)    a copy of the Certificate or Articles of Incorporation of
                       the Company  and the  Subsidiary,  certified  as true and
                       correct by the appropriate  officials of their respective
                       jurisdictions  of  formation;  a copy of the  by-laws  or
                       Memorandum and Articles of Association of the Company and
                       the  Subsidiary  certified  as true  and  correct  by the
          Secretary of the Company and the Subsidiary;

               (iii)   evidence  that all known third party  waivers or consents
                       referred to in Section 7.19 have been obtained (excluding
                       for these  purposes  from The  Scottish  Office)  and the
Consents;                         

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               (iv)    the  resignation,   dated  the  Closing  Date,  of  Peter
                       MacLaren as director of the Company and of the  Secretary
                       of the Company and the Subsidiary and the  resignation of
                       Michael David  Rutterford,  Peter Wilson and William Hugh
                       Evans as  directors  of the Company and in respect of the
                       Subsidiary  resignation  as  directors  of Peter  Wilson,
                       William  Hugh  Evans  and  Frances   Loretta  DeLaura  in
          substantially the form annexed as Exhibit Q.

                (v)    any power of attorney  under which this  Agreement or any
                       document  referred  to herein or  executed  in  pursuance
                 hereof is executed on behalf of any of the Sellers;

               (vi)    a written  waiver in the form  annexed  as Exhibit P from
                       each  Seller in respect of any claims  which such  Seller
                       may have against the Company  and/or the Subsidiary as at
Closing;                          

               (vii)   any  Certificate  of  Incorporation  or  Change  of Name,
                       statutory  and minute and other record books  (written up
                       to the Closing Date) and share  certificate  books of the
                       Company   together   with  all  unused   forms  of  share
                       certificates (if any) of the Company and such of the same
                       or  the  equivalent  under  the  law  of  its  respective
                      jurisdiction for the Subsidiary as is readily available;

              (viii)   definitive  certificates  in respect  of the  outstanding
                       shares of capital stock beneficially owned by the Company
                       in the Subsidiary  together with duly executed  transfers
                       in blank or as the  Buyer  may  require  in favour of the
                       Buyer in  respect  of all  shares of common  stock in the
                       Subsidiary  (if  any) not  registered  in the name of the
Company;                          

               (ix)    a  written  resignation  (in  duplicate)  in the  form of
                       Exhibit  R  from  the   auditors  of  the  Company   such
                       resignation  to take effect as of Closing and which shall
                       contain in respect of the Company the statement  required
                       to be made  pursuant to Section  394(1) of the  Companies
                       Act 1985 of the U.K. and a statement  confirming  that as
                       at  Closing  no  sums  are due to  such  auditors  by the
                       Company in respect of outstanding  invoices or in respect
                       of work  carried  out but not  invoiced  and a  statement
                       disengaging   itself  from  any   involvement   with  the
Subsidiary;                       

                (x)    a  statement  in  respect  of each  bank  account  of the
                       Company  and the  Subsidiary  as at a date not more  than
                       seven  business  days  prior  to  Closing  together  with
                       reconciliations  in respect of each such bank  account as
                       at the close of business on the day immediately preceding
the Closing Date.                 

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               (xi)    a letter from each holder of a bond and  floating  charge
                       affecting the property and  undertaking of the Company or
                       any part thereof confirming that it has taken no steps to
                crystallise the relevant bond and floating charge.

(h)          The Stock Option Contract  substantially in the form annexed hereto
             as Exhibit H shall have been duly  executed  by the Sellers who are
the parties thereto                                   

(i)          The Buyer shall have received all requisite  shareholder  approvals
             in connection with the transactions  contemplated by this Agreement
             as required under applicable federal or state law and the rules and
             regulations  of the  National  Association  of  Securities  Dealers
             Automated  Quotation  System  (NASDAQ)  and that NASDAQ  shall have
             approved any and all requisite  shareholder  approvals of the Buyer
authorising the transactions contemplated hereby.     

(j)          The Commission shall have cleared an Information Statement pursuant
             to  Regulation  14C under the Exchange Act in  connection  with the
             transactions  contemplated  by  this  Agreement  and  any  and  all
             consents  from  PriceWaterhouseCoopers  LLP and Grant  Thornton  in
             connection with the use of their  respective  financial  statements
therein.                                              

(k)          The  issuance  of the  MicroFrame  Shares  shall be exempt from the
             registration  requirements  under the Act pursuant to  Regulation S
             promulgated  thereunder or other  exemptions  therefrom  reasonably
satisfactory to the Buyer and its counsel.            

(l)          The Buyer shall have received all requisite  shareholder  approvals
             in  connection  with the adoption of its 1998 Stock Option Plan and
the Sub Plan.                                         

(m)          Peter Wilson, Hugh Evans and Keith Laing and the Company shall have
             executed and delivered to the Buyer the Wilson Employment Agreement
             Amendment,  the Evans  Employment  Agreement  Amendment,  the Laing
             Employment  Agreement  Amendment  and each of Keith  Baker,  Robert
             Struthers and Stephen  Connelly and the Company shall have executed
             and delivered to the Buyer amendments to their employment contracts
             in the forms set out in  Exhibit  F  ("Other  Employment  Agreement
Amendments").                                         

(n)          The Sellers and the  Sellers'  Representatives  and Dundas & Wilson
             C.S.  shall have  executed  and  delivered  to the Buyer the Escrow
Agreement.                                            

(o)          The Sellers  shall have  executed  and  delivered  to the Buyer the
             Registration Rights Agreement  substantially in the form set out in
Exhibit E.                                            

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(p)          The Buyer shall have received an update to the Fairness Opinion for
             the  Buyer  dated  as of June  10,  1998 of Van  Kasper  &  Company
             reasonably  satisfactory to the board of directors of the Buyer and
             affirming   that,  as  of  the  Closing  Date,   the   transactions
             contemplated  herein  are fair and  reasonable  to the  holders  of
   Common Stock of the Buyer from a financial point of view.

(q)          The  Buyer  shall  have  received  a Full and  Final  release  duly
             executed by  Technically  Elite,  Inc,  David A. Norman,  Richard J
             Wixted, Harvey Yap and the Company in respect of litigation between
             the Company and Network Application  Technology,  Inc;  Technically
             Elite Concepts, Inc Corp. No. C1414912; Technically Elite Concepts,
             Inc Corp No.  C1950473;  NAT Acquisition  Corporation;  Technically
             Elite,  Inc;  David A.  Norman;  Richard J Wixted  and  Harvey  Yap
             together  with  the  executed   Certification   of  the  respective
attornies of Technically Elite, Inc and the Company;  

(r) (i)               The  Company  has  delivered  to  Hewlett-Packard  Company
                      ("HP")  to  the  Buyer's   reasonable   satisfaction   and
                  notwithstanding any prior breach of the HP Agreement:-

(a)               the items set out as "Deliverables" code named Vesuvius under 
            Phase 8 in Appendix A-4 to Amendment 6 of the Technology
              Licence Agreement (the "HP Agreement") between the Company
                 and HP (such agreement being annexed to the Disclosure Letter
            as Disclosure Document 21 ) in respect of the undernoted
                  Daughter Cards (or such other items as have been agreed or may
               be agreed between the Company and HP as Deliverables) on or
               prior to 1 August 1998 (or such later date as may be agreed
      between the Company and HP for the delivery of the
aftermentioned items);                      

(i)             T1 Daughter Card;           

(ii)            E1 Daughter Card;           

(iii)           V-Series Daughter Card;     

(iv)            ATM-OC3 Daughter Card; and  

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(b)               the items  set out as  Deliverables  referred  to as T3 Lucent
                  Project under Phase 5 in Appendix A-4 to Amendment 6 of the HP
                  Agreement  in  respect  of ABT3  Daughter  Card (or such other
                  items as have been agreed or may be agreed between the Company
                  and HP as Deliverables in respect of such Daughter Card) on or
                  prior to 1 September 1998 (or such later date as may be agreed
                  between  the  Company  and HP  for  delivery  of the  relevant
items).                                     

(r) (ii)              HP has not  terminated  the  HP Agreement  and neither the
                      Company nor the  Executive  Directors  nor any of them has
               received notice of termination of the HP Agreement.

(s)        There shall have not been  proposed or enacted so far as the Buyer is
           aware, any statute, rule or regulation, or any change in any existing
           statute, rule or regulation,  which prohibits or delays, or threatens
           to prohibit or delay the performance of the transactions contemplated
by this Agreement.                                        

(t)        The Company and the other  parties  thereto  shall have  executed and
delivered to the Buyer the Termination Agreements.        

(u)        The Sellers  shall have  procured and completed the Funding and in so
           far as such  Funding is not  provided by a Seller,  the  Investor SPA
           shall have been  completed in accordance  with its terms subject only
to Closing.                                               

(v)        The Preference Shares have been subdivided and subsequently converted
           into 731,428 ordinary shares of 1 pence each and 2,268,572 preference
           shares  of 1 pence  each  and the  LIFE  Agreement  shall  have  been
     completed in accordance with its terms subject only to Closing.

(w)        Frances  Loretta  DeLaura  shall have  executed and  delivered to the
           Buyer an investment  representation  letter substantially in the form
of Exhibit M.                                             

(x)        That in so far as not converted into ordinary  shares of 1 pence each
           in the  capital of the  Company  pursuant  to Section  7.18 the whole
           amount of  principal  and interest  outstanding  under the CULS shall
have been redeemed.                                       

(y)        The  Landlord of the premises at Block 1,  Garbett  Road,  Livingston
shall not have irritated the lease of the Property.       

(z)        The  Retrocession  shall have been duly executed and delivered to the
Buyer.                                                    

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(aa)       Peter  Wilson and William  Hugh Evans shall each have  cancelled  and
           released  400,000  options granted to him in the share capital of the
           Company  with a last  exercise  date of  November  30,  2007  and the
           Company shall have granted up to 800,000 options over ordinary shares
           of 1 pence each in the capital of the Company to certain employees at
           an  exercise  price of 11 pence per share,  which  options may at the
           discretion  of the  Company  be  granted  either as options in the UK
           Inland Revenue  approved  employee share option scheme of the Company
           or as  unapproved  options and in respect of any such  employees  who
           have elected for  unapproved  options the Buyer shall have offered to
           enter  into a Stock  Option  Contract  substantially  in the  form of
Exhibit H.                                                

 SECTION 9
 SELLERS' CLOSING CONDITIONS

The  obligations  of the Sellers to sell the Shares  pursuant to this  Agreement
shall be subject to the fulfilment, or the waiver by the Sellers (acting through
the Sellers' Representatives), at or prior to the Closing, of the conditions set
forth below.                                                                    

(a)           The Buyer  shall so far as the Sellers  Representatives  are aware
              have  performed  and  complied in all material  respects  with all
              covenants  and  undertakings  required to be performed or complied
            with by it under this Agreement on or prior to the Closing Date.

(b)           The Buyer  shall have  delivered  to the  Sellers  Representatives
              stock  certificates for all of the MicroFrame Shares to which each
              Seller is entitled  hereunder  except for the Escrowed  MicroFrame
              Shares and the Buyer shall have delivered the Escrowed  MicroFrame
              Shares to the Escrow  Agent to be held by the Escrow  Agent  under
the Escrow Agreement.                               

(c)           The Buyer shall have  delivered  or caused to be  delivered to the
           Sellers or their legal advisers the following additional items:

                 (i)     a certificate executed by the Secretary of State in the
                         State  of New  Jersey  certifying  the  Certificate  of
                         Incorporation of the Buyer dated within one week of the
                         Closing Date and a Certificate  dated as of the date of
                         the  Closing  Date,  executed by the  Secretary  of the
                         Buyer, certifying the By-laws, resolutions of the board
                         of directors and shareholders of the Buyer  authorising
                         the transactions contemplated hereby and the incumbency
   of the officers of the Buyer; and

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                 (ii)    "good standing" documents,  including certifications by
                         appropriate    officials   of   its   jurisdiction   of
                         incorporation,  of the  valid  incorporation  and  good
standing of the Buyer.        

(d)           The Buyer shall have obtained all consents and approvals  required
      on the part of the Buyer to purchase the Shares hereunder.

(e)           There  shall  be no  order,  decree  or  injunction  of a court of
              competent  jurisdiction of which the Sellers  Representatives  are
              aware   which   prevents  or  delays  the   consummation   of  the
transactions contemplated by this Agreement.        

(f)           The Buyer  shall have  elected or caused to be elected two persons
              nominated in writing by the Sellers'  Representatives on behalf of
              the Sellers to serve on the board of  directors of the Buyer where
              the   relevant   notice  has  been   delivered   by  the   Sellers
              Representatives  pursuant to Section 7.17 and as a consequence the
              board of  Directors  of the Buyer  shall  consist  of no more than
seven (7) persons.                                  

(g)           The Company and the Buyer shall have  executed and  delivered  the
              Wilson  Employment  Agreement  Amendment,   the  Evans  Employment
              Agreement Amendment, the Laing Employment Agreement Amendment, and
              the Company and the Buyer shall have  executed and  delivered  the
              other amendments to service contracts referred to in Section 8(m).

(h)           Clearance  shall have been obtained from the Inland  Revenue under
              Section  138 of the TCGA and  Section  707 of ICTA  1988  that the
              transactions contemplated by this Agreement are being effected for
             bona fide commercial purposes and not for tax avoidance purposes.

(i)           There  shall  have  not been  proposed  or  enacted  so far as the
              Sellers are aware any statute,  rule or regulation,  or any change
              in any existing  statute,  rule or regulation,  which prohibits or
              delays,  or threatens to prohibit or delay the  performance of the
transactions contemplated by this Agreement.        

(j)           The  Sellers'  Representatives  shall have  received an opinion of
              Parker Chapin  Flattau & Klimpl LLP addressed to the Sellers dated
              the Closing Date  substantially in the form annexed hereto as part
of Exhibit G.                                       

(k)           The Buyer  shall have  executed  and  delivered  the  Registration
              Rights  Agreement,  the Stock  Option  Contracts  in favour of the
         persons specified in Section 7.20.2 and the Escrow Agreement.

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(l)               (i)     The  Buyer  shall  have   certified   to  the  Sellers
                          Representatives  that no  event  shall  have  occurred
                          which  constitutes  or would be  reasonably  likely to
                          constitute a material  adverse effect on the business,
                          financial position,  assets or operations of the Buyer
                          as evidenced by a 25% reduction in the revenues and/or
                          assets of the Buyer from those  pertaining in the June
                          30 1998 financial  statements of the Buyer and that to
                          the best of the knowledge,  information  and belief of
                          the  directors  of the  Buyer  there  are no  material
                          actions investigations  enquiries or administrative or
                          arbitration proceedings by or against the Buyer or its
                        affiliates or any of the same pending or threatened;

                 (ii)     No matter  shall have been  disclosed  to the  Sellers
                          Representatives pursuant to Section 10.6 and the Buyer
                          shall have  certified  to the Sellers  Representatives
                          that it is not in breach,  or the Buyer shall not have
                          been proved to be in breach,  in either case,  subject
                          to  Schedule  6.1(g)  of any of the  warranties  given
                          under Section 6.1 as given by the Buyer at the date of
                          this  Agreement  in  either  case  giving  rise  to  a
                          liability  on the part of the  Buyer of an  amount  in
excess of $200,000.         

(m)           The Buyer shall have received all requisite  shareholder approvals
              in connection with the transactions contemplated by this Agreement
              as required  under  applicable  federal or state law and the rules
              and regulations of the National  Association of Securities Dealers
              Automated  Quotation  System  (NASDAQ)  and that NASDAQ shall have
              approved   any  and  all   shareholder   approvals  of  the  Buyer
authorising the transaction contemplated hereby.    

(n)           The  Commission  shall  have  cleared  an  Information   Statement
              pursuant to  Regulation  14C under the Exchange Act in  connection
              with the  transactions  contemplated by this Agreement and any and
              all consent from  PriceWaterhouseCoopers LLP and Grant Thornton in
              connection with the use of their respective  financial  statements
therein.                                            

(o)           The  issuance of the  MicroFrame  Shares  shall be exempt from the
              registration  requirements  under the Act pursuant to Regulation S
              promulgated  thereunder or other exemptions  therefrom  reasonably
satisfactory to the Buyer and its counsel.          

(p)           The Buyer shall have received all requisite  shareholder approvals
              in connection  with the adoption of its 1998 Stock Option Plan and
the Sub Plan.                                       

(q)           All  necessary  approvals  have  been  granted  by  the  Board  of
              Directors  of the  Buyer  or  otherwise  in  accordance  with  the
              proposed 1998 Stock Option Plan to permit options to be granted at
              the exercise  prices and numbers thereof under or pursuant to this
Agreement.                                          

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(r)           Peter Wilson and William Hugh Evans shall each have  cancelled and
              released  400,000  options  granted to him in the share capital of
              the Company with a last exercise date of November 30, 2007 and the
              Company  shall have granted up to 800,000  options  over  ordinary
              shares of 1 pence each in the  capital  of the  Company to certain
              employees  at an  exercise  price of 11  pence  per  share,  which
              options may at the  discretion of the Company be granted either as
              options in the UK Inland  Revenue  approved  employee share option
              scheme of the Company or as  unapproved  options and in respect of
              any such  employees  who have elected for  unapproved  options the
              Buyer  shall have  offered to enter into a Stock  Option  Contract
substantially in the form of Exhibit H.             

SECTION 10
SURVIVAL OF WARRANTIES
 ADDITIONAL CLOSING WARRANTIES

10.1     Survival of Representations and Warranties of the Sellers              

         Notwithstanding  any  right  of  the  Buyer  or  its  agents  fully  to
         investigate   the  affairs  of  the  Company  and  the  Subsidiary  and
         notwithstanding any knowledge of facts determined by the Buyer pursuant
         to such  investigation  or right of  investigation,  the  Buyer has the
         right  subject  to the terms of this  Agreement  to rely fully upon the
         warranties,  covenants,  undertakings  and  agreements  of the  Sellers
         contained in this  Agreement.  For the avoidance of doubt the foregoing
         sentence  is without  prejudice  to the other  terms of this  Agreement
including Sections 4 and 11.                                  

10.2     Subject to the provisions of Section 11, immediately before the Closing
         Date each of the  Sellers  shall be deemed to warrant to the Buyer that
         each of the  Warranties  set forth in Section 3 and the  warranties  in
         Section 5 is by reference to the facts then  existing true and accurate
         in all respects  (all  references to "the date hereof" and "the date of
         this Agreement" and similar  expressions being amended mutatis mutandis
         subject to, in the case of the  Warranties  contained  in Section 3 and
         the  warranties  in  Section  10.5,  the  terms  of  Section  4 of this
         Agreement and matters fairly  disclosed in or by the Disclosure  Letter
         and  any  letter  from  the  Sellers   addressed   to  the  Buyer  (the
         "Supplemental   Disclosure   Letter")   which   is   expressed   to  be
         supplementary to the Disclosure  Letter.  The  Supplemental  Disclosure
         Letter shall be  delivered to the Buyer not later than 3 business  days
         prior to the  proposed  time for the Closing  Date in  accordance  with
Section 10.3 or such later time as the Buyer may agree.       

         10.3.1   In the event that the Supplemental Disclosure Letter discloses
                  a fact,  matter or event which had it not been disclosed would
                  have  resulted  in a Relevant  Claim under the  Warranties  as
                  given at the date of execution of this  Agreement of an amount
                  in excess of  $300,000  and the  Buyer  has  delivered  to the
Sellers' Representatives an opinion         

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         from a  Queens  Counsel  in  Scotland,  with  a  minimum  of ten  years
         experience in dealing with corporate and commercial  matters,  selected
         by the Buyer together with relevant instructions to such Queens Counsel
         that the  Relevant  Claim  would in fact be a relevant  and prima facie
         valid  claim on the basis of the facts  presented  to him  taking  into
         account inter alia Section 4 of this Agreement  then without  prejudice
to Section 11 the Buyer shall have the right:-                

(a)      to rescind this Agreement  provided always that, if the Buyer elects to
         rescind this  Agreement,  save in the case of fraud or as otherwise set
         forth in Section 13.2 (where  applicable) the Buyer shall have no right
         to damages or  compensation  on any ground  under or in respect of this
         Agreement  whether in relation to a breach of Warranty or otherwise and
         in the case of fraud only those Sellers guilty of fraud will be liable.

(b)      to proceed to Closing provided always that, for the avoidance of doubt,
         if the Buyer  elects to  proceed  to  Closing  subject in all events to
         Section  1.2.1 the Buyer  shall  have no right to claim for  damages or
         compensation  in  respect  of  any  matter  fairly   disclosed  in  the
         Disclosure  Letter or the  Supplemental  Disclosure  Letter or apparent
from the face of the documents annexed thereto.               

         10.3.2   In the  event  that  following  delivery  of the  Supplemental
                  Disclosure  Letter a fact,  matter  or event  occurs  which is
                  disclosed  in  writing  to the Buyer  (such  disclosure  to be
                  deemed for all purposes of the Agreement to be included within
                  the  Supplemental  Disclosure  Letter and the liability of the
                  Sellers shall be limited  accordingly)  which would, if not so
                  disclosed,  result in a Relevant Claim under the Warranties as
                  given at the date of execution of this  Agreement of an amount
               in excess of $300,000 then the Buyer shall have the right:-

(a)               to  postpone  Closing of this  Agreement  for 3 business  days
                  until  the Buyer has had an  opportunity  to  consult a Queens
                  Counsel as  referred  to above and the  provisions  of Section
10.3.1 shall apply mutatis mutandis; or     

(b)               to rescind this  Agreement  and the proviso in Section  10.3.1
(a) shall apply mutatis mutandis; or        

(c)               to proceed to Closing  and the  proviso in Section  10.3.1 (b)
shall apply mutatis mutandis.               

10.4     Survival of Representations and Warranties of the Buyer                

         10.4.1   The Sellers have the right to rely fully upon the  warranties,
                  covenants,  undertakings and agreements of the Buyer contained
  in this Agreement. All warranties given by the

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                  Buyer hereunder shall be deemed  repeated  immediately  before
                  the Closing Date by  reference to the facts then  existing all
                  references  to  "the  date  hereof"  and  "the  date  of  this
                  Agreement"  and  similar  expressions  being  amended  mutatis
                  mutandis  and  subject to matters  fairly  disclosed  in or by
                  Schedule 6.1(g) as supplemented immediately before the Closing
Date.                                       

         10.4.2   The Buyer shall have the right to supplement  Schedule 6.1 (g)
                  by reference to the  warranties  given by the Buyer  hereunder
                  immediately before the Closing Date by delivering a supplement
                  thereto at that time to the Sellers  Representatives  provided
                  always  that the Buyer  shall have  delivered  to the  Sellers
                  Representatives a final draft of such supplement on the second
business day prior to the Closing Date.     

         10.4.3   The entire  contents of Schedule 6.1(g) and Schedule 6.1(g) as
                  so  supplemented  shall be deemed to have  formed part of this
          Agreement as if fully set out mutatis mutandis herein.

10.5     Additional Closing Warranties of Sellers                               

         The Sellers  hereby  warrant to the Buyer in addition to the Warranties
         set out in Section 3 and the warranties set out in Section 5 as follows
as of immediately before the Closing Date:-                   

(a)     all  consents  have been  obtained and all  corporate  actions have been
        performed by the Company in order validly to effect the  subdivision and
        conversion  of the  Preference  Shares as referred to in the recitals to
        this  Agreement  and the  allotment and issue of the Third Party Shares;
and                                                             
(b)     At the Closing Date all warrants to subscribe  for shares in the capital
of the Company have lapsed and are of no effect.                

10.6     The Buyer undertakes that it will forthwith  disclose in writing to the
         Sellers  Representatives  any matter or thing which may occur or become
         known to it between the date of this Agreement and immediately prior to
         the Closing Date,  which subject to Schedule  6.1(g),  is  inconsistent
         with  any of the  warranties  given  by the  Buyer  at the date of this
         Agreement  and which would give rise to a liability  on the part of the
         Buyer of an amount in excess of $100,000 and for the  purposes  only of
         this  Section  10.6,  and  separately  condition  9 (l) (ii) only,  and
         separately  for  the  purposes  of  Section  11.15  (b)  only,  all the
         warranties  in Section  6.1 shall be deemed to survive  Closing for the
         purpose only of  determining  liability or possible  liability  for the
         purposes of this Section  10.6 only,  or as the case may be condition 9
(l) (ii) only or Section 11.15 (b) only.                      

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SECTION 11
LIABILITY OF SELLERS and BUYER

11.1     Other than as set out in this Section 11 and Section 13.2(a), no Seller
         shall  have any  liability  or  obligation  to the Buyer of any  nature
         whatsoever  under or in  respect  of this  Agreement  or in  connection
         herewith  (whether under breach of contract or to implement any term of
         this Agreement, or in delict or in quasi delict or in respect of unjust
         enrichment or recompense,  under any statute or otherwise). The Company
         shall not have nor shall the  Subsidiary  have any rights of any nature
         against any Seller.  Neither the Company nor the Subsidiary  shall have
         any  liability or  obligation of any nature under or in respect of this
         Agreement  save in the  case of the  Company  to  execute  and  deliver
         certain  documents at Closing  subject to  fulfilment  or waiver of the
         other conditions to Closing.  For the avoidance of doubt the provisions
         of this  Section 11 shall not apply to release a Seller from  liability
to the Buyer in the case of fraud on the part of such Seller. 

11.2     The  liability of each Seller to the Buyer under or in respect of or in
         connection with this Agreement shall be determined and satisfied solely
         in  accordance  with the  following  provisions  of this Section 11 and
         Section 13.2(a) and each of the Sellers has agreed to assume  liability
         accordingly  and the Buyer  shall  have no other  rights of any  nature
whatsoever against the Sellers or any of them.                

11.3     The  Buyer  shall  be  obliged  to  quantify and  denominate all claims
hereunder in US dollars.                                      

11.4     If Closing does not occur for any reason  whatsoever except in the case
         of a breach by any  Seller  of  Section  7.26  prior to  Closing  where
         Closing  does not occur none of the Sellers or the  Company  shall have
         any liability or obligation of any nature  whatsoever to the Buyer save
         as  regards a claim  under  Section  13.2(a)  or  Section  14.4,  where
         applicable  and  this  provision  shall  survive  termination  of  this
         Agreement.  The  liability  of the  Sellers in respect of a claim under
         Section 13.2(a) shall be as set out in that Section. The sole liability
         of the Sellers in respect of a claim under Section 7.26 shall be as set
out in Section 11.16.                                         

11.5     If Closing  occurs the only  liability  of the  Sellers  shall be under
         Sections 3, (as updated  pursuant to Section 10.2), 5, 10.5, 7.8, 7.22,
         7.29 and  Schedule  7.18 and Section 12 and none of the  Sellers  shall
         have any other liability of any nature  whatsoever to the Buyer for any
         breach of this  Agreement of any nature which shall have occurred prior
         to the Closing or in respect of any  non-satisfaction  of any condition
in Section 8.                                                 

11.6     The maximum aggregate  liability of each Seller for all claims under or
         in respect of this  Agreement  following  Closing  shall not exceed the
         value  in US  dollars  of all of the  MicroFrame  Shares  which  he has
         received as  consideration  for the sale of his Shares hereunder valued
         in  accordance  with Section 11.7  provided  that where any  MicroFrame
         Share has been sold by a Seller and the gross proceeds of sale received
by him from the sale of such                                  

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         MicroFrame Share is less than the Closing Value,  such Seller's maximum
         aggregate  liability  shall be reduced by the amount of the  difference
         between  the gross  proceeds  of sale as  received  in  respect of such
         MicroFrame  Share and the Closing Value thereof (the maximum  aggregate
         liability of a Seller  calculated (and where  appropriate  reduced from
         time to  time)  as  aforesaid  being  hereinafter  referred  to as such
         Seller's  "Maximum  Liability").  Where such gross proceeds are greater
         than the Closing Value then such Seller's Maximum  Liability in respect
     of such MicroFrame Share shall remain limited to the Closing Value.

11.7     The Closing Value of each MicroFrame Share shall be $3.12 ("the Closing
Value").                                                      

11.8     Each Seller shall  satisfy his  liability in respect of any claim under
         this Agreement at his option by the transfer to the Buyer of MicroFrame
         Shares or by the  payment  of cash,  as the case may be, in  accordance
with this Section.                                            

11.9     For the purposes of  satisfying  liabilities  in terms of the following
         Sections of this  Section 11,  MicroFrame  Shares  (including  Escrowed
MicroFrame Shares) shall be valued at the Closing Value.      

11.10    In respect of a breach by a Seller of Section 7.8 or 7.22 or 7.29 or of
         a  warranty  given by him or it in  Section  5, the  liability  of such
         Seller  shall  be  solely  in  respect  of his  own  breach,  and in no
         circumstances  shall  one  Seller be  liable  for the  breach of such a
provision by another Seller.                                  

11.11    In respect of or in connection  with Relevant Claims resolved in favour
         of the  Buyer in  accordance  with  this  Agreement  the  extent of the
         liability  of  each  Seller  and the  manner  of  satisfaction  of such
liability shall be as follows:-                               

         11.11.1  In respect of each  Relevant  Claim  resolved in favour of the
                  Buyer each of the Executive  Directors  shall be liable for an
                  amount  in US  dollars  equal  to  such  Executive  Director's
                  Proportion  (as  defined  in 11.11.2  below) of such  Relevant
                  Claim  provided  always  that  the  liability  of  each of the
                  Executive  Directors  under this Section  11.11.1  shall in no
                  circumstances  exceed his Primary Liability Amount and none of
                  the other Sellers shall be liable therefor until the aggregate
                  of all Relevant Claims resolved in favour of the Buyer exceeds
                  the  aggregate  of  all of the  Executive  Directors'  Primary
                  Liability Amounts calculated in accordance with 11.11.3 below.

         11.11.2  The  Proportion   (the  "Executive   Director's   Proportion")
                  applicable  to each  Executive  Director  shall  be as set out
              opposite such Executive Director's name as provided below:

                  Name                           Executive Director's Proportion
                  ----                           -------------------------------

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        Peter Atholl Wilson                           2/5ths
        William Hugh Evans                            2/5ths
        Peter MacLaren                                 1/5th

         11.11.3  Each of the  Executive  Director's  Primary  Liability  Amount
            shall be an amount in US dollars calculated as follows:-

    Name                    Primary Liability Amount
    ----                    ------------------------

             Peter Atholl Wilson     400,000 multiplied by the Closing
         Value
             William Hugh Evans      400,000 multiplied by the Closing
         Value
             Peter MacLaren          200,000 multiplied by the Closing
         Value

         11.11.4  In respect of a Relevant  Claim  where,  prior to the  Buyer's
                  recovery  in whole or in part for  that  Relevant  Claim,  the
                  amount of all Relevant  Claims resolved in favour of the Buyer
                  exceeds  the  Primary   Liability   Amount  of  the  Executive
                  Directors in aggregate,  the liability, if any, of each of the
                  Sellers (including the Executive Directors) in respect of that
                  Relevant  Claim (or any balance  thereof not  satisfied by the
                  Executive Directors pursuant to the above provisions) shall be
                  determined as follows. Each Seller shall only be liable to the
                  extent of that  Seller's Pro Rata Share of the Relevant  Claim
                  (or balance  thereof,  if appropriate)  subject always to such
                  Seller's  liability in respect of all Relevant Claims resolved
                  in favour of the Buyer not  exceeding  such  Seller's  Maximum
Liability.                                  

         11.11.5  For the  purposes  of Section  11.11.4 a Pro Rata Share  shall
                  mean, in respect of a Seller,  a fraction (a) the numerator of
                  which is (i) in the case of a Seller  who is not an  Executive
                  Director, the total number of MicroFrame Shares issued to that
                  Seller at Closing (including Escrowed MicroFrame Shares);  and
                  (ii) in the case of a Seller who is an Executive Director, the
                  total number of  MicroFrame  Shares  issued to that  Executive
                  Director  (including  Escrowed  MicroFrame  Shares)  minus the
                  number of MicroFrame  Shares set out opposite  such  Executive
                  Director's name below; and (b) the denominator of which is the
                  aggregate  number of  MicroFrame  Shares  (including  Escrowed
                  MicroFrame  Shares)  issued  by the  Buyer to all  Sellers  at
Closing (less 1,000,000 MicroFrame Shares). 

                  Name                                  No. of MicroFrame Shares
                  ----                                  ------------------------

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           Peter Atholl Wilson                             400,000
           William Hugh Evans                              400,000
           Peter MacLaren                                  200,000

11.12    Each Seller shall be entitled to satisfy his  liability to the Buyer in
         respect of any claim hereunder including Relevant Claims by the release
         and delivery to the Buyer of the relevant  number of MicroFrame  Shares
         as have an aggregate  value  calculated in accordance with Section 11.9
         which is equal to the amount of the claim which  falls to be  satisfied
         by that  Seller.  The only  circumstances  in  which a Seller  shall be
         obliged to pay cash to the Buyer shall be where,  in respect of a claim
         under this  Agreement,  the Seller is not able to release and deliver a
         sufficient  number of  MicroFrame  Shares to satisfy  the amount of the
         claim  which falls to be  satisfied  by that Seller (as such Seller has
         sold the relevant  MicroFrame  Shares).  The provisions of Section 11.6
         shall  apply to limit the amount of cash  payable by such  Seller  such
         that in no  circumstances  shall the liability of a Seller to the Buyer
         exceed such Seller's Maximum  Liability.  Each Seller shall be entitled
         (but in no  circumstances  obliged)  at his sole  option to settle  his
         liability in respect of a claim in cash in whole or in part rather than
by the transfer of MicroFrame Shares to the Buyer.            

11.13    In  respect  of any  claim  hereunder,  where  there  are any  Escrowed
         MicroFrame  Shares,  the Buyer shall be entitled to have  released  and
         delivered to it pursuant to Clause 6 of the Escrow  Agreement  ("Clause
         6") from a Seller  such number of  Escrowed  MicroFrame  Shares as will
         satisfy in whole or in part such Seller's  liability in respect of that
         claim as determined in accordance  with this Section 11 provided always
         that where a Seller at his sole  option pays cash to the Buyer prior to
         the release and  delivery  of Escrowed  MicroFrame  Shares to the Buyer
         pursuant to Clause 6 the Buyer shall only be entitled to have  released
         and delivered to it such number of Escrowed  MicroFrame  Shares rounded
         upwards as have a value  calculated  in  accordance  with  Section 11.9
    equal to the balance of the claim for which such Seller is liable.

11.14    The  foregoing  provisions  of this Section 11 are without prejudice to
the terms of Section 4.                                       

11.15    The rights of the Sellers and/or the Sellers Representatives for breach
         of this  Agreement or otherwise on the part of the Buyer  (except under
         Section 4,  Sections 7.16 and 7.17,  Sections  7.20 and 7.21,  Sections
         7.31 and 7.32 and 7.35, Section 10.6, Section 12, Sections 14.1 to 14.3
         inclusive,  Section 14.5 and Sections 14.11 and 14.12,  if Closing does
         occur where the  liability of the Buyer shall not be limited as set out
below) shall be as follows:-                                  

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(a)        if the Closing does not occur by reason of any of the Sellers closing
           conditions  not being met and  satisfied  the right only to terminate
           this  Agreement  under  Section  13.1(a) (iv)  without any  liability
           (excluding  for these  purposes any liability  under  Sections  14.2,
           14.3,  14.5,  14.12 which continue  ("Section 14 Liabilities") on the
           part of the Buyer (whether under breach of contract,  or in delict or
           quasi delict or to make restitution,  under any statute or otherwise)
           provided that if Closing does not occur by reason only of a breach by
the Buyer of Section 7.26 Section 11.16 shall apply.      

(b)        if the Buyer is proved to be in breach of any of the warranties given
           under Section 6.1 as given by the Buyer at the date of this Agreement
           subject  to  Schedule  6.1(g)  to  such  extent  as  gives  rise to a
           liability on the part of the Buyer of an amount in excess of $200,000
           the right  only not to  proceed  to  Closing  without  any  liability
           (excluding "Section 14 Liabilities" which shall continue) on the part
           of the Buyer,  (whether  under  breach of  contract,  or in delict or
           quasi delict or to make restitution, under any statute or otherwise).

(c)        if the Buyer is in breach of any of the  warranties  given in Section
           6.1 as at the date of this  Agreement  subject to Schedule  6.1(g) to
           such extent as gives rise to a liability  on the part of the Buyer of
           an amount below  $200,000 the right only to sue the Buyer  subject to
           Section  6.2  without  any other  liability  on the part of the Buyer
           (whether under breach of contract, or in delict or quasi delict or to
make restitution, under any statute or otherwise).        

(d)        if the Buyer is in breach of any of the  warranties  given in Section
           6.1 immediately before the Closing Date subject to Schedule 6.1(g) as
           updated immediately before the Closing Date as referred to in Section
           10.4.2 the right only to sue the Buyer subject to Section 6.2 without
           any other liability on the part of the Buyer (whether under breach of
           contract, or in delict or quasi delict or to make restitution,  under
any statute or otherwise).                                

(e)        if the Buyer breaches Section 7.26 and Closing does not occur Section
11.16 shall apply.                                        

11.16    In the event of Closing not occurring by reason only of a breach by the
         Buyer or the Sellers of Section  7.26 the  liability  of the persons or
         entity in default  shall be an amount not  exceeding  $400,000.  If the
         Sellers are liable for $400,000  the Buyer shall  recover such sum from
         each of the Sellers, other than Anderson Strathern Nominees Limited who
         shall have no liability, in the proportion which such Sellers Shares at
         the  Closing  Date  bears to the  total  Shares in the  capital  of the
         Company at the Closing  Date  (excluding  those Shares held by Anderson
Strathern Nominees Limited).                                  

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11.17    The   provisions  of  Sections   11.15  and  11.16  shall  survive  any
termination of this Agreement.                                

11.18    Where there is any subdivision or consolidation  and division of shares
         of common stock of the Buyer following the date of this Agreement,  the
         Closing Value of a MicroFrame Share and the number of MicroFrame Shares
         for the purposes of this Section 11 shall be adjusted  appropriately in
         a  manner   which  is  agreed   between   the  Buyer  and  the  Sellers
         Representatives  within two weeks of the event or,  failing  agreement,
        certified in writing by PriceWaterhouseCoopers, auditors to the Buyer.

11.19    The  Sellers  shall  not be  entitled  to  recover  against  the  Buyer
         hereunder  more than once in  respect of the same  loss,  liability  or
damage.                                                       

SECTION 12
TAXATION UNDERTAKING

All the  provisions  of this Section 12 shall be read subject to the other terms
of this Agreement.                                                              

In this Section:-                                                               

"Claim for Taxation" shall mean any notice, demand, assessment,  letter or other
document issued or action taken by or on behalf of the Inland Revenue or Customs
and Excise or any other statutory or  governmental  authority or body whatsoever
in any part of the world from which it appears  that a Liability  to Taxation is
or will or may come to be imposed on the Company or the  Subsidiary  (whether or
not such  Liability  to Taxation  is  primarily  imposed  upon or payable by the
Company or the  Subsidiary  and whether or not the Company or the Subsidiary has
or may have any right of relief or reimbursement);                              

"Event"  shall mean any  transaction,  action or  omission of any person and any
event or occurrence of whatever nature, whether or not in the ordinary course of
business  (including,  without limitation,  any failure to take any action which
would avoid an apportionment of deemed distribution of income) and shall include
Closing;                                                                        

"Final Determination" shall mean in relation to a Claim for Taxation where there
is an appeal against such claim:  (a) an agreement under Section 54 of the Taxes
Management Act 1970 or any legislative provision having an effect similar to the
effect of that  section;  or (b) a decision of a court or tribunal from which no
appeal lies or in respect of which no appeal is made within the prescribed  time
limit;                                                                          

"Liability  to  Taxation"  shall  mean  any  liability  of  the  Company  or the
Subsidiary  to make any actual  payment of or in  respect of  Taxation  and also
means and includes: (a) the loss of, reduction in the amount of, cancellation or
set off of any right to repayment  of Taxation  treated as an asset in preparing
the March 1998  Accounts  or the  Subsidiary  March 1998  Accounts  which  would
otherwise have been available to the Company or the Subsidiary;  (b) the setting
off against income,  profits or gains or against any Taxation (in either case in
respect of which, but for such setting off, the                                 

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Company or the  Subsidiary  would have had a Liability to Taxation in respect of
which the Sellers  are liable to make a payment to the Buyer under the  Taxation
undertaking)  of any Relief not  available  before  Closing but which  arises in
respect of any Event  occurring  after  Closing  but does not  include the loss,
counteracting or reduction in the amount of any Relief arising in respect of any
Event occurring before Closing.                                                 

"Relief" shall mean any relief, allowance,  exemption, credit or set-off against
any Taxation,  and any relief,  allowance,  set-off or deduction in computing or
against  profits,  income or gains of any description or from any source for the
purposes of any Taxation;                                                       

"Taxation"  shall  mean  all  forms  of  taxation,   duties,  imposts,  charges,
withholdings,  contributions,  impositions  and levies in the nature of taxation
whatsoever  and  whenever  imposed and whether of the UK or the U.S. and without
prejudice  to  the  generality  of  the  foregoing  includes:  (a)  income  tax,
corporation  tax, advance  corporation tax, capital gains tax,  inheritance tax,
stamp duty,  stamp duty reserve tax, rates,  value added tax,  customs and other
import duties,  national insurance and social security  contributions  which the
Company or the Subsidiary may be or become bound to make to any person, revenue,
customs or fiscal  authority  or any other body or  authority as a result of any
enactment  relating to taxation and any other taxes,  duties,  levies or imposts
supplementing  or replacing any of the  foregoing;  and (b)  interest,  fines or
penalties incurred in respect of any of the foregoing, except to the extent that
such interest, fine or penalties are attributable to the negligent or fraudulent
conduct of the Company or the Subsidiary after Closing.                         

12.1     The  Sellers  hereby  undertake  and  covenant  to pay to the Buyer but
         subject  always to the  provisions  of  Sections 11 and 4 and the other
provisions of this Section 12 :-                              

(a)        an amount equal to each and every  Liability to Taxation which arises
           in respect of or by reference to any income,  profits or gains earned
           or accrued or deemed for the  purposes  of any  Taxation to have been
earned or accrued on or before Closing; and               

(b)        an amount equal to each and every  Liability to Taxation which arises
           as a consequence of or by reference to any Event  occurring or deemed
           for the  purposes  of any  Taxation  to have  occurred  on or  before
           Closing or as a consequence of or by reference to the combined effect
           of two or more  Events of which at least  one  occurs or is deemed to
           have  occurred  on or before  Closing but only to the extent that the
           first  mentioned  Event is outside the ordinary course of business of
           the Company or the  Subsidiary  and the second or  successive  Events
           occur after Closing and are inside the ordinary course of business of
the Company or the Subsidiary; and                        

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               (c)      all reasonable costs and expenses  properly  incurred by
                        the Company or the  Subsidiary  or the Buyer in relation
                        to any  Liability  to  Taxation  in respect of which the
                        Sellers are liable pursuant to the foregoing  provisions
                 of this Section to make any payment to the Buyer.

               (d)      No Liability  to Taxation  shall arise under this Clause
                        12.1 to the  extent  that  such  Liability  to  Taxation
                        represents  deductions  of income tax,  PAYE or national
                        insurance   contributions  made  from  payments  by  the
                        Company or  deductions of payroll  withholding  taxes or
                        social security tax from payments made by the Subsidiary
                        after  31  March  1998,  or  to  the  extent  that  such
                        Liability  to  Taxation  consists  of  value  added  tax
                        chargeable  after  31  March  1998 in the  usual  way on
                        supplies  made  by the  Company  or  sales  in  use  tax
                        chargeable  after  March  31,  1998 in the  usual way on
                        supplies made by the Subsidiary but excluding  interest,
                        surcharge,  penalties or fine relating thereto or to the
                        extent  that such  liability  to  taxation  consists  of
                        employers liability to national insurance  contributions
                        or other  payroll  taxes in respect of wages or salaries
paid in the usual way.          

12.2     The Sellers  shall be liable to make payment  under  Section 12.1 above
         notwithstanding  the  existence of any Reliefs,  rights of repayment or
         other  rights or claims of a similar  nature  (in each case  arising by
         reason of an Event occurring after Closing) which may be set against or
         available  to set  against  or  otherwise  mitigate  any  Liability  to
         Taxation  so that  Section  12.1  shall  take  effect as though no such
        Reliefs, rights of repayment or other rights or claims were available.

12.3           (a)      All  amounts  payable by the  Sellers to the Buyer under
                        Section  12.1 above  shall be paid free and clear of all
                        deductions,   withholdings,  set-offs  or  counterclaims
                        whatsoever  save only as may be  required by law. If any
                        deductions  or  withholdings  are  required by law to be
                        made from any such amount the  Sellers  shall be obliged
                        to pay to the Buyer such additional amount or amounts as
                        will in aggregate be sufficient to ensure that after all
                        required  deductions and withholdings have been made the
                        Buyer  shall have  received  the same amount as it would
                        have been  entitled  to  receive  in the  absence of any
               requirement to make a deduction or withholding.

               (b)      If any amount  payable by the Sellers to the Buyer under
                        Section  12.1 shall  itself be  subject to any  Taxation
                        then the amount which the Sellers shall pay to the Buyer
                        shall be increased to such larger  amount as will ensure
                        that after payment of the amount of all Taxation payable
                        on such larger  amount  there shall be left in the hands
                        of the Buyer the amount  which the Buyer would have been
                        entitled to receive from the Sellers  under Section 12.1
               if such amount was not subject to any Taxation.

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               (c)      The  liability  of the  Sellers  under this  Clause 12.3
                        shall be no  greater  than it would be were the Buyer UK
                        resident  for the  purposes of taxation  and UK taxation
 law only applied to the payments.

               (a)      The amount of any Liability to Taxation  which arises as
                        a  result  of (a)  in the  definition  of  Liability  to
                        Taxation  being  applicable  shall be the  amount of the
                        repayment  which has been lost,  cancelled or set off as
the case may be.                

               (b)      The amount of any Liability to Taxation  which arises as
                        a  result  of (b)  of the  definition  of  Liability  to
                        Taxation  applying  shall be the amount of Taxation that
                        would  have  been  payable  but  for  the set off of the
Relief.                         

12.5     The Sellers  shall make  payment to the Buyer or  otherwise  satisfy in
         respect of any matter  for which  they are  liable  under this  Section
         within  seven  days of receipt of a written  demand  (given  reasonable
 details of the matter giving rise to the payment) or if later:-

(i)      insofar as the Company or the  Subsidiary is required to make a payment
         to discharge any  Liability to Taxation,  seven days before the date on
which that payment becomes due and payable; and               

(ii)     insofar as the Company or the Subsidiary  would have required to make a
         payment to  discharge  any  Liability to Taxation but for the fact that
         the  Liability  to  Taxation  has been set off  against,  or reduced or
         otherwise  mitigated  by the  availability  of any  Relief,  seven days
         before  the date on which  payment of the  amount of the  Liability  to
Taxation would otherwise have become due and payable; and     

(iii)    insofar as the  Liability to Taxation  arises as a result of (a) in the
         definition of Liability to Taxation being applicable, seven days before
the repayment of Taxation would have been received; and       

(iv)     insofar as the  Liability to Taxation  arises as a result of (b) in the
         definition of Liability to Taxation being applicable,  on the date upon
         which  the  payment  would  have  been due  pursuant  to the  foregoing
         provisions  of  this  Section  but for the  setting  off of the  Relief
concerned.                                                    

12.6           (a)      Upon Final Determination of any Claim for Taxation,  the
                        Sellers shall within 7 days after a demand  therefor pay
                        to the Buyer such  amount or further  amount in addition
                        to the  amounts  already  paid  as may be  necessary  to
                        discharge  in full the  liability  of the Sellers  under
this Section.                   

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               (b)      Upon Final Determination of any Claim for Taxation where
                        the  Liability  to  Taxation  is less than the amount or
                        amounts already paid by the Sellers the Buyer will repay
 such shortfall within seven days.

               (c)      If any  payment  due to be  made by the  Sellers  or the
                        Buyer under this Section is not made on the due date for
                        payment it shall  carry  interest  from the due date for
                        payment until final payment in full has been made at the
                        rate of two per  cent  per  annum  above  base  rate for
                        lending  from time to time of The Royal Bank of Scotland
                        plc provided  that  interest  under this Clause 12.6 (c)
                        shall  not be  payable  for any  period  for  which  the
                        Sellers  have paid  interest to the Buyer  under  Clause
                        12.1 or otherwise  discharges that liability to interest
     as part of the liability to taxation.

12.7     The Sellers  shall have no  obligation  to make any payment  under this
         Section in respect of any  Liability  to  Taxation  to the extent  that
         adequate   provision  reserve  or  allowance  in  respect  thereof  was
         specifically  and  expressly  made in the March  1998  Accounts  or the
Subsidiary March 1998 Accounts.                               

12.8           (a)      The Buyer shall notify the Sellers or shall procure that
                        the Sellers  shall be notified,  in writing of any Claim
                        for  Taxation  which comes to the notice of the Buyer or
                        the  Company or the  Subsidiary  in respect of which the
                        Buyer or the Company or the  Subsidiary  considers  that
                        the Sellers  are or may become  liable to make a payment
             to the Buyer under this Taxation Undertaking.

               (b)      Where a time limit for appeal  applies to such Claim for
                        Taxation,  the  notification  shall  be  given  within 5
                        business days after the date on which the Claim comes to
                        the notice of the Company or the  Subsidiary  but, where
                        no time limit applies,  the notification  shall be given
within 21 days after that date. 

               (c)      If the Sellers shall indemnify the Buyer and the Company
                        or  the  Subsidiary  to  their  reasonable  satisfaction
                        against all liability,  costs, damages or expenses which
                        may be  reasonably  and properly  incurred in respect of
                        such Claim for Taxation the Buyer shall procure that the
                        Company or the Subsidiary  shall take such action as the
                        Sellers  Represenatives may reasonably request to avoid,
                        resist,  defend or  compromise  the  Claim for  Taxation
                        including  taking over conduct of the matter in the name
                        of  the  Company  or the  Subsidiary  and  shall  afford
                        reasonable  access to the Company's or the  Subsidiary's
                        relevant   books  and   accounts  and  comply  with  all
                        reasonable    directions    given    by   the    Sellers
Representatives.                

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12.9     In connection  with the conduct of any dispute  relating to a Claim for
Taxation to which this Section applies:-                      

(i)       the  Sellers  Representatives  shall keep the Buyer and the Company or
          the  Subsidiary  informed  of all  relevant  matters  and the  Sellers
          Representatives  shall forward or procure to be forwarded to the Buyer
          copies  of  all  correspondence   and  other  written   communications
pertaining to the Company or the Subsidiary;                

(ii)      the appointment by the Sellers  Representatives of solicitors or other
          professional  advisers  shall be  subject  to the  prior  approval  in
      writing of the Buyer (not to be unreasonably withheld or delayed);

(iii)     the  Sellers   Representatives   shall  not  make  any  settlement  or
          compromise of the dispute, (nor agree any matter in its conduct) which
          is likely to increase the future  Liability to Taxation of the Company
          or the Subsidiary,  without the prior approval in writing of the Buyer
(not to be unreasonably withheld or delayed);               

(iv)      if any dispute  arises  between the Company or the  Subsidiary and the
          Sellers  Representatives  as to  whether  the  Claim for  Taxation  or
          Liability  to  Taxation  should  at any  time  be  settled  in full or
          contested  in whole or in part,  the dispute  shall be referred  for a
          decision  to a Queen's  Counsel  (or where  relevant  the  appropriate
          foreign  equivalent)  of at least ten years standing with expertise in
          the relevant area of law, appointed by agreement between the Buyer and
          the  Sellers   Representatives,   or  (failing   agreement)  upon  the
          application  of either  party to the  President  of the Law Society of
          Scotland or where relevant the appropriate  foreign  equivalent.  Such
          Counsel shall be asked to advise  whether,  in his opinion,  an appeal
          against the Claim for Taxation or Liability to Taxation,  would on the
          balance of probabilities, be likely to succeed. If the opinion of such
          Counsel is to the effect  that on the  balance  of  probabilities  the
          appeal  would be likely to  succeed  then an appeal may be made if the
          Sellers so  decide.  If the  opinion of such  Counsel is to the effect
          that on the balance of  probabilities  an appeal against the Claim for
          Taxation or Liability to Taxation would not succeed then the Claim for
          Taxation  or  Liability  to  Taxation  shall  be  settled  as  soon as
          practicable.  Any further  dispute arising between the Sellers and the
          Company or the  Subsidiary as to whether any further  appeal should be
          pursued  following  determination of an earlier appeal (whether or not
          in favour of the  Company or the  Subsidiary)  shall be  resolved in a
similar manner.                                             

         The Company  or the Subsidiary shall be at liberty without reference to
         the Sellers to  admit, compromise,  settle, discharge or otherwise deal
with any Claim for Taxation or Liability to                   

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         Taxation  if  the  Sellers   Representatives   do  not  give  or  delay
         unreasonably in giving any such request as is mentioned in Section 12.8
       above within twenty eight days notice to the Sellers Representatives.

SECTION 13
 TERMINATION

13.1     Termination                                                            

         (a)      Notwithstanding  anything to the  contrary  contained  in this
               Agreement, this Agreement may be terminated at any time by:

                  (i)      the  written  consent  of the  Buyer  and  all of the
                           Sellers or the Sellers'  Representatives on behalf of
                  the Sellers provided or supplied by Closing;

                  (ii)     either  the  Buyer  or the  Sellers  or the  Sellers'
                           Representatives  on  behalf  of  the  Sellers  if the
                           Closing  does  not  occur  before  December  31 1998;
                           provided, however, that the party seeking termination
                           under  this  Section  13.1  (a) (ii)  shall  not have
                           prevented  the Closing from  occurring or committed a
                           breach of Section  7.26 which has  prevented  Closing
from occurring;           

                  (iii)    the  Buyer,  if any of the  conditions  set  forth in
                           Section 8 shall have become  incapable of  fulfilment
                           on or prior to December  31 1998,  and shall not have
                           been  waived  by the  Buyer in so far as  capable  of
                           waiver  provided  the Buyer shall not have  prevented
                           any such conditions from being fulfilled or committed
a breach of Section 7.26; 

                  (iv)     the  Sellers'   Representatives   on  behalf  of  the
                           Sellers,  if any  of  the  conditions  set  forth  in
                           Section 9 shall have become  incapable of  fulfilment
                           on or prior to December  31 1998,  and shall not have
                           been waived by the Sellers' Representatives on behalf
                           of the Sellers  provided  none of the  Sellers  shall
                           have  prevented  any  such   conditions   from  being
                      fulfilled or committed a breach of Section 7.26;

         (b)      In the event of the termination of this Agreement by the Buyer
                  or Sellers'  Representatives on behalf of the Sellers pursuant
                  to this Section 13.1, written notice thereof shall promptly be
                  given to the other party or parties  and,  except as otherwise
                  provided  herein,   the  transactions   contemplated  by  this
                  Agreement  shall be terminated,  without further action by any
party.                                      

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13.2     Effect of Termination                                                  

         (a)      Upon the  termination  of this  Agreement in  accordance  with
                  Section 13.1, this Agreement  shall forthwith  become null and
                  void save for this Section,  and Sections 11, 14.2, 14.3, 14.4
                  and 14.5 and 14.6,  without any  liability  on the part of the
                  parties  hereto,  and all  obligations  of the  parties  shall
                  terminate  except  those set out in this  Section 13.2 (a) and
                  Sections 14.2, 14.3,  14.4,14.5 and 14.6. For the avoidance of
                  doubt   Section  11.4  shall  survive   termination   of  this
                  Agreement.  The  parties  agree  that  if  this  Agreement  is
                  terminated  pursuant to Section 13.1 by the Buyer by reason of
                  Sellers'  failure or any of them to comply  with the  covenant
                  contained in Section 7.18, the Funding  Sellers shall promptly
                  reimburse  the  Buyer the whole  amount of its  actual  legal,
                  accounting,   other  professional  and  additional  costs  and
                  disbursements  incurred in  connection  with the  transactions
                  contemplated  herein but not  exceeding the amount of $400,000
                  and shall have no other  liability  or  obligation.  The Buyer
                  after  evidence  of such  costs  being  given  to the  Sellers
                  Representatives  shall only be entitled to collect  these sums
                  from each of the Funding  Sellers in the  proportions  set out
    opposite their respective names in Section 7.18.

SECTION 14
 MISCELLANEOUS

14.1     Fees                                                                   

         On Closing the Buyer shall make arrangements to pay the fees (including
         VAT)  and   out-of-pocket   expenses  in  respect  of  the  transaction
         contemplated  hereby  to those  advisers  whose  names  are  listed  in
         Schedule 14.1 subject to the Buyer being reasonably  satisfied that the
         whole amount of the Funding has been received by the Company which fees
         shall  include any amounts  paid to such  advisers  prior to Closing in
         respect of this  transaction  (and such advisers shall account for such
sums to their respective clients).                            

14.2     Non Solicitation                                                       

         14.2.1   If this  Agreement  does not become  unconditional,  the Buyer
                  covenants  with  each  of the  Sellers,  the  Company  and the
                  Subsidiary that, for a period of 2 years from the date hereof,
                  it shall not  solicit  or induce  any of the  Company  (or the
      Subsidiary's) employees to leave their employment;

         14.2.2   The Buyer  undertakes  that the  statutory  merger which it is
                  about to undertake will not, of itself, trigger termination of
            options in the Buyer to be granted under this Agreement.

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14.3     Confidentiality/Buyer                                                  

         The Buyer hereby covenants with the Company for itself and also for the
         Subsidiary and with each of the Sellers that from the date hereof until
         Closing and as from any termination of this  Agreement,  the Buyer will
         hold, and will use its best efforts to cause its affiliates,  officers,
         directors, employees,  accountants,  counsel, consultants, advisors and
         agents to hold, in confidence, unless compelled to disclose by judicial
         or  administrative  process  or  by  other  requirements  of  law,  all
         confidential and proprietary  information  disclosed by or on behalf of
         the  Company or the  Subsidiary  orally or in writing  with  respect to
         their  respective  businesses  and  operations  ("Company  Confidential
         Information"),  except to the extent that such information can be shown
         to have been (i) previously  known on a  non-confidential  basis by the
         Buyer, (ii) in the public domain through no fault of the Buyer or (iii)
         later  lawfully  acquired  by the Buyer  from  sources  other  than the
         Company or the Subsidiary or any Seller or their respective  agents. If
         the Closing  does not occur the Buyer  agrees that (i) it shall not use
         any of the Company  Confidential  Information now or hereafter received
         or obtained in furtherance  of its business,  or the business of anyone
         else and shall return the same promptly to the Company (ii) it will use
         its  best  efforts  to  cause  its  affiliates,   officers,  directors,
         employees,  accountants,  counsel, consultants,  advisors and agents to
         destroy or deliver  to the  Company,  upon  request,  all such  Company
         Confidential  Information,  obtained  by  the  Buyer  that  contain  or
constitute Company Confidential Information.                  

14.4     Confidentiality/Seller                                                 

         Each of the Sellers  hereby  covenants  that from the date hereof until
         Closing and as from any termination of this Agreement,  the each of the
         Sellers  will  hold,  and  will  use its  best  efforts  to  cause  his
         affiliates,  accountants,  counsel, consultants, advisors and agents to
         hold,  in  confidence,  unless  compelled  to  disclose  by judicial or
         administrative   process  or  by  other   requirements   of  law,   all
         confidential and proprietary  information  disclosed by or on behalf of
         the Buyer  orally or in  writing  with  respect to its  businesses  and
         operations  ("Buyer  Confidential  Information"),  except to the extent
         that such information can be shown to have been (i) previously known on
         a  non-confidential  basis by any of the  Sellers,  (ii) in the  public
         domain  through no fault of any of the Sellers or (iii) later  lawfully
         acquired by any of the Sellers  from sources  other than the Buyer.  If
         the Closing does not occur each of the Sellers agrees that (i) he shall
         not use any of the  Buyer  Confidential  Information  now or  hereafter
         received or obtained in furtherance of his business, or the business of
         anyone  else and shall  return the same  promptly  to the Buyer (ii) he
         will  use its  best  efforts  to  cause  his  affiliates,  accountants,
         counsel, consultants,  advisors and agents to destroy or deliver to the
         Buyer, upon request, all such Buyer Confidential Information,  obtained
   by him that contain or constitute Buyer Confidential Information.

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4.5      Public Announcements                                                   

         Each of the Sellers and the Buyer agrees that he or it shall not issue,
         prior to the  Closing  Date,  any  press  release  or make  any  public
         statement in respect of this Agreement or the transactions contemplated
         hereby or by the documents to be entered into pursuant  hereto  without
         the prior written consent of the Sellers'  Representatives on behalf of
         the Sellers and the Buyer, save as may be required by applicable law or
         regulation  (including  regulations of the NASDAQ Small Cap Market). If
         the Closing does not take place, the Buyer shall forthwith hand over or
         procure the handing over of all accounts, records, documents and papers
         of or relating to the Sellers and the Company and the Subsidiary  which
         shall have been made  available to it including the  Disclosure  Letter
         any Supplemental  Disclosure  Letter and their annexures and all copies
         or  other  records  derived  from  such  materials,   and  expunge  any
         information  derived from such  materials or otherwise  concerning  the
         subject matter of this  Agreement from any computer,  word processor or
         other device containing information, provided that this shall not apply
         to information available from public records or information acquired by
         the Buyer  otherwise than from the Sellers.  For the avoidance of doubt
         the Buyer's  legal or  financial  advisers  shall be entitled to retain
         papers,  records and documents  reasonably  necessary to be retained as
evidence of work done.                                        

14.6     Whole Agreement                                                        

         This  Agreement,  together  with its  Schedules  and Exhibits and other
         documents  to be  entered  into  pursuant  hereto,  contains  the whole
         agreement between the parties relating to the transactions provided for
         therein.  This  Agreement  and  the  Schedules  and  Exhibits,  and the
         documents to be entered into  pursuant  hereto  supersede  all previous
         agreements  (if any)  between  such  parties in respect of such matters
         (and it is hereby  expressly  agreed that the Letter of Intent  dated 9
         April 1998  between  the  Company,  the  Subsidiary  and the  Executive
         Directors  shall  be  expressly  superseded)  and  each of the  parties
         acknowledges  that,  in agreeing to enter into this  Agreement  and the
documents to be entered into pursuant hereto:-                

(i)        it has not relied on any pre-contractual statement, representation or
           opinion (whether oral or written and whether express or implied) made
by any person;                                            

(ii)       the Buyer  hereby  waives any right which it has or may have to raise
           an  action   against  any  Seller  based  on  innocent  or  negligent
           misrepresentation   in   respect   of  any   statement,   opinion  or
           representation  other  than in  respect  of any  breach of any of the
           Warranties  expressly  granted  to the Buyer  under  Section 3 or the
           warranties  expressly  granted  under  Sections  5 or  10.5  of  this
           Agreement  liability for which shall be determined in accordance with
Section 11;                                               

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(iii)      Section  14.6 (ii)  above  shall not  operate  so as to  exclude  any
           remedies  which the Buyer has or may have  against the Sellers or any
of them for any fraudulent misrepresentation.             

14.7     Amendment and Modification                                             

         This Agreement may be amended, modified or supplemented only by written
agreement of each of the Sellers, the Company and the Buyer.  

14.8     Sellers' Representatives                                               

         14.8.1   Such  of the  Sellers  ("the  Investor  Sellers")  as  hold in
                  aggregate  80% in nominal  value of the  Investors  Shares (as
                  defined  below)  shall be entitled  to appoint  such person as
                  they in their sole discretion shall decide (and to remove such
                  person)  as  one  of  the  Sellers'  Representatives  and  his
                  alternate for the purpose of performing  the functions set out
                  in this  Agreement by notice in writing to the Buyer signed by
                  or  on  behalf  of  the  Investor  Sellers  and  (in  case  of
                  appointment) the relevant person  accepting such  appointment.
                  The parties  hereto agree that Barry Sealey shall be deemed to
                  be the first such  Sellers'  Representative  appointed  at the
date hereof pursuant to this Section 14.8.1.

         14.8.2   Such of the Sellers as hold in aggregate  60% in nominal value
                  of the  Ordinary  Shares as at the date hereof  other than the
                  Investor  Shares  in  issue  at the date  hereof  (the  "Other
                  Shares")  shall be entitled to appoint  such person as they in
                  their sole discretion shall decide (and to remove such person)
                  as one of the Sellers'  Representatives  and his alternate for
                  the  purpose  of  performing  the  functions  set  out in this
                  Agreement  by notice in writing  to the Buyer  signed by or on
                  behalf of such  Sellers  holding in  aggregate  60% in nominal
                  value of the Other  Shares  and (in case of  appointment)  the
                  relevant person  accepting such  appointment all as set out in
                  Schedule  14.8.  The parties  hereto  agree that Peter  Wilson
                  shall be deemed to be the first such  Sellers'  Representative
                 appointed at the date hereof pursuant to this Section 14.8.2.

         14.8.3   Each of the  Sellers  undertakes  to the Buyer that they shall
                  use all  reasonable  endeavours to procure (i) that the number
                  of  Sellers'  Representatives  from time to time  shall not be
                  less  than two and (ii) the  Sellers  Representatives  perform
their duties in terms of this Agreement.    

         14.8.4   Each of the  Sellers'  Representatives  alternates  shall have
                  full power and  authority  to carry out the  functions  of his
                  appointer  in his absence.  An alternate  shall be entitled to
                  receive  from the  Buyer  copies  of any  notices  sent to his
                  appointer.  An alternate  shall continue to be an alternate if
                  his appointer  ceases to be a Sellers'  Representative  unless
                  and until the relevant  Sellers remove him. Any appointment or
removal or an                               

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                  alternate shall be by notice in writing delivered to the other
Sellers' Representative and to the Buyer.   

         14.8.5   For the  purposes of this  Section  14.8,  "Investors  Shares"
                  means those  ordinary  shares in the Company which are held at
                  the date hereof by Ann Gloag,  Brian  Souter,  Andrew  Sealey,
                  Helen Sealey, Lady Margaret Elliot,  Michael Rutterford,  June
Rutterford and EFG Reads Trustees Limited.  

         14.8.6   Each   Seller   hereby   irrevocably   grants   the   Sellers'
                  Representatives acting unanimously full power and authority on
behalf of such Seller:                      

(i)       to waive any of the  conditions set out in section 9 of this Agreement
          in  their  absolute  discretion  or to  agree  that all or any of such
          conditions  are  fulfilled  or  satisfied  for  the  purpose  of  this
Agreement and to confirm the same to the Buyer in writing;  

(ii)      to (a) dispute or refrain from  disputing  any Relevant  Claim made by
          the Buyer  under  this  Agreement;  (b)  remedy or seek to remedy  the
          circumstances   giving  rise  to  such  a  claim;  (c)  negotiate  and
          compromise  any  such  claim  where  so  permitted  in  terms  of this
          Agreement;  (d) engage lawyers,  attorneys and agents; (e) execute any
          settlement  agreement,  release or other document with respect to such
          claim;  (f) refer or agree to refer to a Scottish  Queen's Counsel the
          question of whether or not there is a reasonable prospect of defending
          such a claim within specified cost  parameters;  (g) operate under the
Escrow Agreement in accordance with its terms;              

(iii)     to give or agree to any and all  consents  and  waivers  deemed by the
          Sellers'  Representatives  in their sole discretion to be necessary or
          appropriate   under  this  Agreement  and,  in  each  case,   and,  if
          appropriate to return the same to such Seller to deliver any documents
     that may be necessary or appropriate in connection therewith; and

(iv)      to give such  instruction  or take such action or refrain  from taking
          such   action  in  relation  to  this   Agreement   as  the   Sellers'
          Representatives   deem  in  their   sole   discretion   necessary   or
appropriate;                                                

(v)       to execute and deliver the Escrow Agreement;                          

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(vi)      to accept in such  Seller's  name and on such  Seller's  behalf  share
          certificates in respect of the MicroFrame Shares deliverable  pursuant
          to Section 1.2, such certificates to be sent to each of the Sellers at
          such Seller's address as set out in Schedule 1 by recorded delivery at
          such  Seller's  sole  risk and to  deliver  to the  Escrow  Agent  the
Escrowed MicroFrame Shares;                                 

(vii)     to accept  delivery  of such  Seller's  share  certificates  and share
transfers pursuant to Section 1.3;                          

(viii)    to execute  and  deliver in the name and on behalf of such  Seller any
          and all Closing  documents,  receipts or  certificates  required to be
          delivered hereunder or in connection with any agreements  contemplated
hereunder;                                                  

(ix)      to receive from the Buyer a list in the form set out in Schedule  7.28
          (the "Closing  Share  Allocation  List") which sets out the MicroFrame
          Shares including the Escrowed  MicroFrame  Shares to which each of the
          Sellers is entitled as calculated  in accordance  with Section 1.2 and
to consult and agree the same with the Buyer; and           

(x)       to terminate this Agreement under Section 13                          

14.8.7  Each Seller hereby agrees that:                     

(i)       if either of the  Sellers'  Representatives  resigns  or is removed or
          otherwise  ceases to function  in his  capacity as such for any reason
          whatsoever,  the sole Sellers'  Representative  shall be authorised to
          act together with the alternate of the other  Sellers'  Representative
          on behalf of the  Sellers  under this  Section  14.8.7  until a second
Sellers' Representative is appointed;                       

(ii)      the  authority  of the  Sellers'  Representatives  hereunder  shall be
          effective until the rights and obligations  under this Agreement shall
have terminated;                                            

(iii)     there shall at no time be more than two Sellers' Representatives;     

(iv)      the  Sellers  Representatives  shall be  authorised  to carry  out the
          functions  ascribed  to them  under  this  Agreement  and  the  Escrow
Agreement.                                                  

         14.8.8   In  carrying  out  their  functions  hereunder,  the  Sellers'
                  Representatives shall be entitled to exercise their discretion
         and shall not be obliged to consult with the Sellers,

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                  provided that if the Sellers' Representatives elect to consult
                  with  the  Sellers,  such  consultation  shall  not in any way
                  affect the right of the Sellers'  Representatives  to exercise
                  their  discretion  as  aforesaid.  The  acts  of the  Sellers'
                  Representatives carried out in terms of this Agreement and the
                 Escrow Agreement shall in all circumstances bind the Sellers.

14.9     Waiver of Compliance: Consents                                         

         Except as otherwise  provided in this Agreement,  any failure of any of
         the  parties  to comply  with any  obligation,  covenant,  undertaking,
         agreement  or condition  herein may be waived by the party  entitled to
         the  benefits  thereof only by written  instrument  signed by the party
         granting such waiver,  but such waiver or failure to insist upon strict
         compliance with such obligation, covenant, agreement or condition shall
         not operate as a waiver of, or estoppel or personal bar or acquiescence
         with  respect  to,  any  subsequent  or other  failure.  Whenever  this
         Agreement  requires or permits consent by or on behalf of a party, such
         consent  shall be  given in  writing  in a manner  consistent  with the
         requirements  for a waiver of  compliance  as set forth in this Section
14.9.                                                         

14.10    Notices                                                                

         All notices and other communications hereunder shall be given or served
         by personal delivery or by registered or certified mail (return receipt
         requested),  postage  prepaid,  or by  facsimile  to the parties at the
         following  addresses  (or at such other address for a party as shall be
         specified by like notice,  provided that notices of a change of address
shall be effective only upon receipt thereof):                

If to the Buyer, to:                                          

MicroFrame, Inc.                            
21 Meridian Avenue                          
Edison, New Jersey  08820                   
Attention:  Stephen B. Gray                 
Fax No.: 732-494-4570                       
with copies to:                             

James Alterbaum, Esq.                       
Parker Chapin Flattau & Klimpl, LLP         
1211 Avenue of the Americas                 
New York, New York 10036                    
Fax No.: 212-704-6288                       

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Kathleen Stewart                            
Semple Fraser W.S.                          
10 Melville Crescent                        
Edinburgh EH3 7LU                           
Fax No.: 0131 623 7201                      
("Buyer's UK Legal Advisers")               

If to the Company, to:                                        

SolCom Systems Limited                      
SolCom House                                
Meikle Road                                 
Kirkton Campus                              
Livingston EH54 7DE                         
Scotland                                    
Fax No.: 1506-461-717                       

         If to the  Sellers  or any of the  Sellers,  to each  of them at  their
respective addresses set out in Schedule 1 with a copy to:    

Michael Sloyer Esq                          
Mayer Brown Platt                           
1675 Broadway, New York, New York 1009 5820 
Fax No : 001-212-262-1910                   

and                                                           

Marian Glen                                 
Shepherd & Wedderburn                       
155 St. Vincent Street                      
Glasgow G2 5WR                              
Scotland, UK                                
Fax No : 0141-565-1222                      

         If to the Sellers' Representatives,  to both of them and with a copy to
         their  alternates  at their  respective  addresses  set out in Schedule
         14.10 with a copy to Michael  Sloyer and  Marian  Glen  (whose  contact
         details  are  set  out  above).  If a new  Sellers'  Representative  or
         alternate  is  appointed,  written  notice  of  such  appointment  with
         relevant contact details for the purpose of this Section 14.10 shall be
         sent  to  the  Buyer  as  soon  as   practicable   after  the  relevant
appointment.                                                  

         All such  notices  and other  communications  shall be deemed  given or
         delivered or served when  received,  or 48 hours after  mailing,  or 24
         hours after facsimile  whichever occurs first and in proving service by
         mail it shall be  necessary  to prove that the  communication  was duly
addressed and posted in accordance with this Section.         

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14.11    Assignation                                                            

         This Agreement and all of the  provisions  hereof shall be binding upon
         and inure to the benefit of the parties  hereto,  their heirs and their
         respective  successors  and  permitted  assignees.  The Buyer's  rights
         hereunder may only be assigned to any affiliate of the Buyer,  and then
         solely  in  connection  with a  corporate  reorganisation  of the Buyer
         provided that the surviving entity  resulting from such  reorganisation
         shall  continue  the  business  and  operations  of the Buyer and shall
         assume  all of the  rights  and  obligations  of the  Buyer  hereunder.
         Neither the  Company  nor any Seller may assign or transfer  any of its
         rights or obligations  hereunder  without the prior written  consent of
         the Buyer.  The Buyer shall not be entitled to transfer its obligations
         under this  Agreement.  If the Buyer  assigns its rights  hereunder  in
         accordance  with Section  14.11  Section 4 shall  continue to apply and
         reference therein to "the Buyer" shall be deemed to include a reference
to the relevant assignee.                                     

14.12    Governing Law                                                          

(a)      Subject as set forth in this Section this Agreement  shall be construed
in accordance with and governed by the laws of Scotland.      

         Any action or proceeding  seeking to enforce any provision of, or based
         on any  right  arising  out of,  this  Agreement  as so  construed  and
         governed  shall be brought  against  any of the parties in the Court of
         Session, Edinburgh,  Scotland and each of the parties hereby submits in
         respect of such  matters to the  exclusive  jurisdiction  of such Court
         (and the appropriate appellate court) in any such action or proceeding.

         The Buyer hereby undertakes to each of the parties hereto that it shall
         observe the provisions of this Section 14.12 (a) and it shall not raise
         any action or proceeding  seeking to enforce any provision of, or based
         on any right arising out of, this  Agreement in respect of such matters
in any Court other than the Court of Session in Edinburgh.    

(b)      Solely for the purposes of  establishing  as a matter of fact whether a
         warranty  given by the Sellers in terms of which it is  warranted  that
         the   requirements  of  any  piece  of  American   legislation  or  any
         regulations made in terms thereof has been breached or not, the parties
         agree that the words and phrases within such legislation or regulations
         will be  interpreted  in  accordance  with the law of the  state of New
         York.  For the  avoidance of doubt nothing in this section shall affect
the governing law provisions in Section 14.12 (a).            

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(c)      All matters  whatsoever  in  connection  with, or relating to, any U.S.
         securities laws or regulations contained in this Agreement ("Securities
         Matters")  namely those set out in Sections 5.1 (d); 5.2;  6.1(e),  (h)
         and (i); 7.16;  7.20.1  (second  paragraph),  7.20.2 (last  paragraph),
         7.32;  8 (i),  (j),  (k) and (l);  9 (m),  (n),  (o) and (p),  shall be
         governed by and  construed in  accordance  with the federal laws of the
         United States (regardless of the laws that might otherwise govern under
         applicable principles of choice or conflicts of law) as to all matters,
         including but not limited to matters of validity, construction, effect,
         performance and remedies.  Jurisdiction and venue of any suit or action
         to enforce any  provisions  contained in this  Agreement in  connection
         with any  Securities  Matters  shall rest solely in the federal  courts
         located in the State of New York, County of New York and the Buyer, the
         Company and each Seller hereby submit to the personal  jurisdiction  of
         the federal courts located in the State of New York, County of New York
         for the purpose of resolving  any and all matters  arising  under or in
         respect of this Agreement in connection with any Securities Matters and
         agree  that  personal  service  upon  each  such  party  may be made by
         delivery thereof to such party at the address  specified herein (which,
         in the case of service upon any Seller,  shall include service upon the
Sellers' Representatives).                                    

14.13    Exchange Rate                                                          

         For purposes of this Agreement, the exchange ratio between U.S. dollars
         and U.K.  pounds  sterling in  connection  with any  references to U.S.
         dollars contained herein shall be $1.6319 for each U.K. pound sterling.

14.14    Severability                                                           

         The invalidity or  unenforceability  of any provision  hereof shall not
      affect the validity or enforceability of any other provision hereof.

IN WITNESS WHEREOF, the parties have subscribed this Agreement as follows:      

SUBSCRIBED at                                          on                       
for and on behalf of Anderson Strathern Nominees Limited by                     
John Kerr, Director in the presence of                                          

SUBSCRIBED  at on for and on behalf of Frances  Loretta  DeLaura by Peter Atholl
Wilson her duly appointed attorney in the presence of:                          

SUBSCRIBED at                                          on                       

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for and on behalf of Andrew  Edward  Sealey,  Helen Sealey,  Brian Souter,  Lady
Margaret  Elliott  and Ann Heron  Gloag by Barry  Sealey,  their duly  appointed
attorney in the presence of:                                                    

SUBSCRIBED at on by William Hugh Evans, a trustee of The Hugh Evans Family Trust
constituted by Declaration of Trust dated September 13 1997 in the presence of: 

SUBSCRIBED at                                          on                       
by Keith Laing in the presence of:                                              

SUBSCRIBED at                                          on                       
by Keith Laing for and on behalf of Colin Laing as his duly                     
appointed attorney in the presence of:                                          

SUBSCRIBED  at on by Peter James  MacLaren for himself and and for and on behalf
of Elizabeth Marie McQuillan as her duly appointed attorney in the presence of: 

SUBSCRIBED  at on by John  Kerr as the  duly  appointed  attorney  of EFG  Reads
Trustees Limited the present and sole trustee of Mrs J G Rutterford's 1991 Trust
in the presence of:                                                             

SUBSCRIBED  at on by John  Kerr as the  duly  appointed  attorney  of EFG  Reads
Trustees Limited the present and sole trustee of M D Rutterford's  1991 Trust in
the presence of:                                                                

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SUBSCRIBED at                                          on                       
by William Hugh Evans in the presence of:                                       

SUBSCRIBED at                                          on                       
by John Kerr as the duly appointed attorney of June Georgina                    
Rutterford in the presence of:                                                  

SUBSCRIBED at                                          on                       
by John Kerr as the duly appointed attorney of Ali Reza Taheri in               
the presence of:                                                                

SUBSCRIBED at                                          on                       
by Peter Atholl Wilson for himself and separately as guardian of                
Alison Elizabeth Wilson in the presence of:                                     

SUBSCRIBED at                                          on                       
by Michael David Rutterford in the presence of:                                 

SUBSCRIBED a                                          on                        
for and on behalf of the Company by Peter Atholl Wilson,                        
Director in the presence of:                                                    

SUBSCRIBED at                                          on                       
for and on behalf of MicroFrame Inc. by John McTigue, its Chief                 
Financial Officer, in the presence of:                                          

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SHARE PURCHASE AGREEMENT
 with respect to all of the issued share capital

of

SolCom Systems Limited

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 AGREEMENT

 among

 MICROFRAME, INC

 and

OTHERS

 and

SOLCOM SYSTEMS LIMITED

SEMPLE FRASER W.S.
Solicitors
10 Melville Street
 EDINBURGH EH3 7LU
Tel: 0131 623 8777
Fax: 0131 623 7201

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 AGREEMENT

 among

 MICROFRAME, INC a New
Jersey corporation
having its principal
 office at 21 Meridian
 Avenue, Edison, New
Jersey 08820, U.S.A.
 (the "Buyer")

 and

 THE PERSONS whose
 names and addresses
are set forth in
columns 1 and 2 of the
Schedule annexed
 hereto (each, a
"Seller" and
collectively the
"Sellers")

 and

SOLCOM SYSTEMS LIMITED
a company incorporated
 under the Companies
Act 1985 of the United
Kingdom and having its
registered office at
Solcom House, Meikle
 Road, Kirkton Campus,
Livingston ("the
 Company")

WHEREAS                                                                         

A        The parties  hereto  entered  into an agreement on 14th and 17th August
         1998 providing,  subject to the fulfilment of certain  conditions,  for
         the sale and purchase of the whole ordinary issued share capital of the
Company;                                                      

B        The  parties  hereto  wish to make  certain  amendments  to the  terms,
         conditions and provisions of the sale and purchase  agreement  referred
         to above and to document  certain  other  arrangements  agreed  between
them.                                                         

NOW THEREFORE IT IS HEREBY AGREED AS FOLLOWS                                    

1.       INTERPRETATION AND DEFINITIONS                                         

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         1.1 In  this  agreement  unless  otherwise  specified  or  the  context
otherwise requires:                                                             

                  (i)      reference to the "Sale and Purchase  Agreement" shall
                           mean the sale and purchase  agreement  referred to in
   the first recital hereto, and

                  (ii)     the  provisions  set  out  in  the   "Interpretation"
                           section (A) of the Sale and Purchase  Agreement shall
                           apply herein as therein subject to such amendments as
are set out herein, and   

                  (iii)    "the/this   Amendment   Agreement"  shall  mean  this
agreement, and            

                  (iv)     "clauses"  shall  mean   clauses  of  this  Amendment
Agreement.                

                           1.2      In construing  this Amendment  Agreement the
                                    euisdem  generis  rule  shall  not apply and
                                    accordingly  the  interpretation  of general
                                    words  shall  not  be  restricted  by  being
                                    preceded by words  indicating  a  particular
                                    class of acts,  matters  or  things or being
                            followed by particular examples, and

                           1.3      In this Amendment  Agreement the headings to
                                    clauses  are used for  convenience  only and
                                    shall not  affect the  construction  hereof,
and     

                           1.4      Reference in the Sale and Purchase Agreement
                                    to "the/this  Agreement"  shall be deemed to
                                    be a  reference  to the  Sale  and  Purchase
                                    Agreement   as  amended  by  the   Amendment
  Agreement.

2.       AMENDMENTS TO SALE AND PURCHASE AGREEMENT            

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                           2.1      With  effect  on and  from the date of final
                                    execution  hereof  it is agreed by and among
                                    the   parties   hereto   that   the   terms,
                                    conditions  and  provisions  of the Sale and
                                    Purchase   Agreement  shall  be  amended  as
 follows:-

                                    (a)     In the fourth  recital the words "as
                                            amended by an agreement  amongst the
                                            same parties  dated on or around the
                                            final  date  of   execution  of  the
                                            Amendment   Agreement   (the   "LIFE
                                            Amendment   Agreement")"   shall  be
                                        inserted at the end thereof, and

                                    (b)     The  fifth recital shall be deleted,
           and

                                    (c)     In the sixth recital, the words "and
                                            the  Buyer   intends  to  place  the
                                            Company in  sufficient  funds on and
                                            following  Closing  to so redeem all
                                            of  the  CULS  in 12  equal  monthly
                                            payments  from  Closing  to the  day
                                            being    the    eleventh     monthly
                                            anniversary  of  the  Closing  Date"
                                            shall be  inserted  after  "July 23,
                                           1998" in the last line thereof, and

                                    (d)     In   the   Interpretation    Section
                                            (A)(i), the words "and the amendment
                                            agreement  entered  into  among  the
                                            Sellers,  the Buyer and the  Company
                                            dated on or around December 21, 1998
                                            in terms of which the parties hereto
                                            agreed  to amend  the  terms of this
                                            Agreement  with effect from the last
                                            date of execution  of the  amendment
                                            agreement      (the       "Amendment
                                            Agreement")"  shall  be added at the
                        end thereof, and

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                                    (e)     In the  Interpretation  Section (F),
                                            the second to seventh  lines thereof
                                            inclusive  shall be deleted  and the
                                            following  substituted therefor "the
                                            30,000     cumulative     redeemable
                                            preference  shares of (pound)1  each
                                            in  the   capital  of  the   Company
                                            registered   in  the   name  of  and
                                            beneficially    owned   by   Lothian
                                            Investment   Fund   for   Enterprise
                     Limited", and

                                    (f)     In   Section    1.2.1   the   number
                                            "2,675,401" shall be substituted for
                                            the  number  "5,800,000",   and  all
                                            references  to "c" shall be  deleted
                                            as well as the  words  from "and 'c'
                                            equals .......  Closing Date" in the
                                            tenth and  eleventh  lines  thereof,
           and

                                            the words  from  "Without  prejudice
                                            .............  Consideration"  shall
                                            be   deleted   and   the   following
                                            substituted  thereof  "In the  event
                                            that  the  condition  set  forth  in
                                            Section 8 (r)(ii)  is not  satisfied
                                            for  any   reason   whatsoever   the
                                            parties    explicitly    agree   and
                                            acknowledge  that  the  Buyer  shall
                                            have   the   option   in  its   sole
                                            discretion either (i) not to proceed
                                            to Closing  with no liability to the
                                            Buyer or the Sellers or (ii) proceed
                                            to  Closing   in  which   event  the
                                            aggregate consideration for the sale
                                            of the Shares  shall be reduced by a
                                            number   equal   to   15%   of   the
                                            Consideration  or in the event  that
                                            the  warranty  set out in clause 3.6
                                            of the Amendment Agreement is agreed
                                            or  proved  to  have  been  breached
                                            before     Closing    the    parties
                                            explicitly   agree  and  acknowledge
                                            that, that part of the Consideration
                                            attributable    to   the   Executive
                                            Directors  shall  be  reduced  by  a
                                            number  equal to the amount by which
                                            the management  accounts referred to
                                            in   clause   3.6  are   understated
                              divided by $2.75", and

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                                    (g)     In Section 1.4, the numbers "186206"
                                            "186206"  and  "93103"  respectively
                                            shall be substituted for the numbers
                                            "400,000",  "400,000"  and "200,000"
                                            where they  appear in the  eleventh,
                                            twelfth and fourteenth lines thereof
                                            and the  number  "465515"  shall  be
                                            substituted     for    the    number
                                            "1,000,000"  in the  twenty-  eighth
                                            line  thereof,  and  the  words  "as
                                            amended by the agreement amongst the
                                            Buyer,  the  Sellers,  the  Sellers'
                                            Representatives and the Escrow Agent
                                            annexed  hereto as  Exhibit  AA (the
                                            "Escrow Amendment  Agreement") shall
                                            be  inserted  after the words  "(the
                                            "Escrow  Agreement")"  in the thirty
                               third line thereof, and

                                    (h)     In  Section  2, the  words  and date
                                            "June 30, 1999" shall be substituted
                                            for the words and date "December 31,
                                            1998" in the fifth line thereof, and

                                    (i)     In Section 3.58,  all  references to
                                            "The Supplemental Disclosure Letter"
                             shall be deleted, and

                                    (j)     In Section 4 (including Sections 4.1
                                            to   4.26   and   the   introductory
                                            paragraph thereto) all references to
                                            Section  10.2  and the  Supplemental
                                            Disclosure  Letter shall be deleted;
           and

                                    (k)     In  Section  4 the  words  ", in the
                                            case  of  the  warranties  given  in
                                            Section  10.5,"  shall  be  inserted
                                            after the words  "Agreement  and" in
                                            the  fourth  line  thereof  and  the
                                            words  "in  each   case"   shall  be
                                            deleted from the third line thereof,
           and

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                                    (l)     In  Section  4.15 the words  "before
                                            or" shall be inserted after the word
                                            "done" on the third line thereof and
                                            the  words  "and the  Sellers  shall
                                            have   no   liability    under   the
                                            Warranties,  Section 10.5 or Section
                                            12  in  respect   of  such   knowing
                                            creation or  increase in  liability"
                                            shall be  inserted  after  the words
                                            "Section   12"  in  the  fifth  line
                     thereof , and

                                    (m)     In Section 4.24, the words "or under
                                            Sections  7.18  or  Schedule   7.18"
                             shall be deleted, and

                                    (n)     The  existing  Section 4.26 shall be
                                            deleted,     and    the    following
                                            substituted  therefor  "The  Sellers
                                            shall not be liable  for any  breach
                                            of  Warranty  where the  breach  has
                                            been solely and  directly  caused by
                                            the failure of the Buyer to meet its
                                            obligations   under   clauses   3.1,
                                            3.2(a)  and  3.3  of  the  Amendment
                                            Agreement  provided that the Buyer's
                                            failure   has  not  been  caused  by
                                            inaccurate  information  supplied to
                                            the  Buyer  for  the   purposes   of
                                            meeting such  obligations  or by any
                                            failure  to provide  information  in
                       due time.", and

                                    (o)     In  Section  5.1(c),  the words "the
                                            CULS  and the  sum of  (pound)40,000
                                            advanced as a loan by Michael  David
                                            Rutterford and another in the period
                                            prior  to  the   execution   of  the
                                            Amendment   Agreement   "  shall  be
                                            inserted  after  the word  "Date" on
                                  the last line thereof, and

                                    (p)     In Section 7, the following sentence
                                            shall  be  added  to the  end of the
                                            introductory  paragraph  immediately
                            prior to Section 7.1

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                                            "Where the Executive Directors,  the
                                            Company   or  one  or  more  of  the
                                            Sellers  covenant(s) or undertake(s)
                                            to do or not to omit to do  anything
                                            in  terms  of this  Section  7,  the
                                            Buyer  shall  not   voluntarily  and
                                            deliberately  do anything  and shall
                                            use its best  endeavors  to  procure
                                            that its officers  and  employees do
                                            not  voluntarily or  deliberately do
                                            anything which it/they know would of
                                            itself   obstruct,    interfere   or
                                            inhibit  in any way the  performance
                                            of such covenant or  undertaking  by
                                            the Executive Directors, the Company
                                            or the Sellers (as  appropriate) and
                                            in so far as the  Buyer or others as
                                            aforesaid  shall  be  guilty  of any
                                            such   voluntary,   deliberate   and
                                            knowing  act  prior  to the  date on
                                            which Closing would  otherwise  have
                                            occurred  the  Buyer  shall  not  be
                                            entitled to rely on non  performance
                                            of   the   relevant    covenant   or
                                            undertaking  as a reason to  decline
                                            to  proceed  to  Closing in terms of
                                    Sections 8(b) and 13.1", and

                                    (q)     In Section 7.1 the words "and in any
                                            event the Buyer  hereby  consents to
                                            the   conversion   of  the  warrants
                                            referred  to in Section 8 (p)" shall
                                        be added at the end thereof, and

                                    (r)     In Section 7.7 the words "unless the
                                            Buyer or its  officers or  employees
                                            are already  actually  aware of such
                                            occurrence  or  incidence"  shall be
                                            inserted  after  the word  "loss" in
                                  the last line thereof, and

                                    (s)     In Section 7.14, the words "with the
                                            prior  written  consent of the Buyer
                                            (such consent not to be unreasonably
                   withheld or

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                                            delayed)"  shall be substituted  for
                                            the  words   "for  the   purpose  of
                                     .......... Section 7.18," and

                                    (t)     Section  7.18 shall be  deleted  and
                                           the following substituted therefor:

"7.18    Additional Undertakings                                                
                           7.18.1   The Company  undertakes  to the Buyer in the
                                    period  between the date of final  execution
                                    of  the  Amendment   Agreement  to  Closing,
                                    without prejudice to but notwithstanding the
                                    foregoing  provisions  of this  Section,  as
 follows:-

                                    (a)     to  deliver  to the  Buyer  ten (10)
                                            days in  advance  of  each  calendar
                                            month a revenue and  capital  budget
                                            for the calendar  month  immediately
                                            following and to adopt the same only
                                            with the prior approval of the Buyer
                                            (given or refused  within  three (3)
                                            business  days  (meaning  a day when
                                            banks in  Scotland  and New  Jersey,
                                            U.S.A.   are  open  for  all  normal
                                            banking  business)  of  delivery  of
                                            such budget by the  Company.  In the
                                            event of refusal the Buyer shall set
                                            out in reasonable detail its reasons
                                            for  refusing  and where the Company
                                            then  resubmits the relevant  budget
                                            the   foregoing   provisions  as  to
                                            approval or refusal shall apply) and
                                            to ensure that the operations of the
                                            Company  during  that  month  do not
                                            result  in any  expenditure  or loss
                                            having an adverse impact (meaning by
                                            more than  $50,000) on the projected
                                            figures  contained in such  budgets,
           and

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                                    (b)     to deliver  to the Buyer  within ten
                                            (10)   days   of  the  end  of  each
                                            calendar  month  monthly  management
                                            accounts  including  profit and loss
                                            accounts for the calendar  month and
                                            year  to  date  with  comparison  to
                                            budget,  cash flow for the  calendar
                                            month   and   year  to   date   with
                                            comparison  to budget,  and  balance
                                            sheet  with   comparison  to  budget
                                            together  with  a  report  by  Peter
                                            MacLaren  whom  failing  one  of the
                                            other  Executive  Directors  of  the
                                            Company  commenting  specifically on
                                            the key  features of the  management
                                            accounts,   reasons  for  variations
                                            from budget and any proposed  action
                                           to rectify negative variations, and

                                    (c)     to procure that there is e-mailed to
                                            the chief  financial  officer of the
                                            Buyer  on  the  Monday   immediately
                                            following  the end of each  calendar
                                            week the opening  and  closing  cash
                                            balances  from the books of  account
                                            of the  Company  in  respect of that
                                            week and details of all movements of
                            cash in/out at bank.

                           7.18.2   The  Company  undertakes  to the Buyer that,
                                    without prejudice to but notwithstanding the
                                    foregoing  provisions of this Section or any
                                    other Section of this Agreement,  during the
                                    period from the date of final  execution  of
                                    the  Amendment  Agreement to Closing  except
                                    with the prior written  consent of the Buyer
                                    (such  consent  being  signed  by the  Chief
                               Financial Officer of the Buyer) not to:

                                    (a)     incur any  material  (meaning  of an
                                            amount   in   excess   of   $50,000)
                                            expenditure  or  commitment  on  any
                                            individual  item (or an aggregate of
                                            individual  items  in  respect  of a
                                            related  matter) of a capital nature
                                       not provided for in the budgets

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                                            approved by the Buyer as referred to
                                            in Section 7.18.1(a) and save in all
                                            events in  respect of  pursuance  of
                                            any obligation of and binding on the
                                            Company  pre-existing as at the last
                                            date of execution  of the  Amendment
                     Agreement, or

                                    (b)     dispose of or agree to dispose of or
                                            grant any  option in  respect of any
                                            part of its assets  other than stock
                                            in the  ordinary and usual course of
                   trading, or

                                    (c)     materially  vary  the  terms  of any
                                            Material  Contract  (as  defined  in
                        Section 3.6), or

                                    (d)     borrow any money (except  borrowings
                                            from  the  Buyer   banks  and  other
                                            institutions  under the arrangements
                                            currently  in  force  at the date of
                                            the  Amendment  Agreement and in any
                                            event  except  where  the  Buyer has
                                            failed  to  comply  with  any of its
                                            funding   obligations  in  terms  of
                                            clauses  3.1,  3.2(a) and 3.3 of the
                                            Amendment  Agreement)  or  make  any
                                            payments  out of or  drawings on its
                                            bank  accounts  other than  payments
                                            made  in  the   ordinary  and  usual
                              course of business, or

                                    (e)     grant  or issue or agree to grant or
                                            issue   any   mortgages,    charges,
                                            debentures or other  securities  for
                                            money or  redeem  or agree to redeem
                                            any such securities or give or agree
                                            to   give    any    guarantees    or
                                            indemnities  or similar  obligations
                                            (other  than  in  the  ordinary  and
                                      normal course of business), or

                                    (f)     appoint or dismiss  any  employee of
                                            the  Company  whose  entitlement  to
                                            basic  salary  under his contract or
                terms of

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                                            employment exceeds $50,000 per annum
                                            (save  in  the  case  of a  rightful
                                            dismissal  in terms of the  relevant
                                   contract of employment), or

                                    (g)     alter the  terms of any  consultancy
                                            contract  or offer  to enter  into a
                                            consultancy contract or contract for
                                            services  (which would be if entered
                                            into  by  the   Company  a  Material
                                            Contract   (as  defined  in  Section
                                           3.6)) with any person or entity, or

                                    (h)     acquire  any  business or acquire or
                                            constitute any company,  corporation
                                            or  body  corporate  or  acquire  or
                                            subscribe   for   shares   or  other
                                            securities or any interest  therein,
          or

                                    (i)     pay any fees or  commissions  to any
                                            persons  other than fees  payable on
                                            arms-length  terms to a third  party
                                            who has rendered or will render bona
                                            fide   service   or  advice  to  the
                                            Company or within the  ordinary  and
                                            usual course of business and save in
                                            all events in  respect of  pursuance
                                            of any  obligation  of  the  Company
                                            pre-existing  as at the last date of
                                            execution    of    the     Amendment
                     Agreement, or

                                    (j)     enter into or undertake any contract
                                            or  arrangement  other  than  in the
                                            ordinary   and   usual   course   of
                                            business    which    provides    for
                                            aggregate   payments  of  more  than
                                            $10,000 or enter  into any  contract
                                            or arrangement with its directors or
                                            any person or company  related to or
                                            connected  with any of its directors
                                            save for  contracts  referred  to in
                                        the Sale and Purchase Agreement.

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                                            and generally, but without prejudice
                                            to the foregoing to consult with the
                                            Buyer with  reasonable  frequency as
                                            regards  the day to day  conduct  of
                                            the  business of the Company and the
                                            Subsidiary  and  procure  compliance
                                            with    each   of   the    foregoing
                                            provisions   of  this  Section  7.18
                                            mutatis  mutandis on the part of the
                        Subsidiary," and

                                    (u)     In   Section   7.20.2,   the  number
                                            "2,675,401" shall be substituted for
                                            the number  "5,800,000" in the fifty
                                            first line thereof and the following
                                            shall be  inserted  as a new Section
               7.20.4:

                           "7.20.4          The Buyer hereby  undertakes to each
                                            of  Hugh  Evans,  Peter  Wilson  and
                                            Peter  MacLaren that in the event of
                                            the  consolidated  revenues  of  the
                                            Buyers' Group (meaning the Buyer and
                                            each of its  subsidiaries as defined
                                            in  the   Companies   Acts)  of  the
                                            Company as  verified  by the audited
                                            consolidated financial statements of
                                            the  Buyer's  Group  in  respect  of
                                            certain   financial  years  reaching
                                            certain  level then within  fourteen
                                            (14) days of the end of the relevant
                                            financial year, the Buyer will enter
                                            into a second Stock Option  Contract
                                            for  performance  based  option with
                                            each such party substantially in the
                                            form   annexed   as   Exhibit  H  as
                follows:

                                            In the  event  of  the  consolidated
                                            revenues  of the  Buyer's  Group for
                                            the financial  year ending March 31,
                                            2000  exceeding   $$30,000,000,   in
                                            respect of 60,000 options to each of
                                            Hugh Evens and Peter Wilson provided
                                            the  relevant  ones of then have not
                                            resigned or been given notice by the
                                            Company  of the  termination  of his
                         employment by the

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                                            Company  of the  termination  of his
                                            employment   with  the  Company  and
                                            30,000  options  to  Peter  MacLaren
                                            provided he is still an employee of,
                                            or  consultant  to, the Company and,
                                            similarly,   in  the  event  of  the
                                            consolidated revenues of the Buyer's
                                            Group for the financial  year ending
                                            March     31,     2001     exceeding
                                            $60,000,000,   the  same  number  of
                                            options  to  each  of the  foregoing
                                  persons all as aforesaid."

                                    (v)     In Section 7.26,  the words and date
                                            "June 30, 1999" shall bd substituted
                                            for the words and date "December 31,
                                            1998"   in   the   fourteenth   line
                                            thereof,  and  the  following  words
                                            shall be inserted  between the words
                                            "substantial."   and  "The"  on  the
                                  twenty-fifth line thereof:

                                            "In   addition   to   (and   not  in
                                            substitution    for)    the    other
                                            obligations  on the Buyer  contained
                                            in  this  Section  7.26,  the  Buyer
                                            undertakes  to  use  its  reasonable
                                            endeavours  to  effect   Closing  by
                                            March  31,  1999 and to  obtain  all
                                            requisite   shareholder   and  other
                                            approvals  in  connection  with  the
                                            transactions    pursuant    to    or
                                            contemplated   by   this   Agreement
                                            required under applicable state law,
                                            federal   law  and  the   rules  and
                                            regulations    of    the    National
                                            Association  of  Securities  Dealers
                                            Authorised  Quitation  System.  Such
                                            reasonable   endeavours   shall   be
                                            deemed to include, without prejudice
                                            to the foregoing generality:  (a) as
                                            soon as  practicable  after the date
                                            of the Amendment Agreement filing an
                                            Information  Statement with the U.S.
                                            Securities  and Exchange  Commission
                                            ("SEC");  (b)  responding as soon as
                                            reasonably  practicable  to any  and
                                            all   comments   received   on  such
                                            Information  Statement  for  SEC and
                                        thereafter as soon as reasonably

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                                            practicable amending the Information
                                            Statement  accordingly;  and  (c) as
                                            soon   as   reasonably   practicable
                                            filing  such   amended   version  or
                                            versions    of    the    Information
                                         Statement with the SEC."Statement

                                    (w)     In Section 7.30, the words from "and
                                            to .......... Section 7.18" shall be
                    deleted, and

                                  (x)     Section 7.33 shall be deleted, and

                                    (y)     In Section 7.36 the following  words
                                            shall be  inserted  after  the words
                                            "LIFE  Agreement" in the second line
                                            thereof  "as  amended  by  the  LIFE
                                 Amendment Agreement", and

                                  (z)     Section 8(a) shall be deleted, and

                                    (aa)    Section  8(b) shall be  deleted  and
                                            the following  substituted  therefor
                                            "Each  Seller  shall  so  far as the
                                            Buyer   is   actually   aware   have
                                            performed   and   complied   in  all
                                            material respects with all covenants
                                            and  undertakings   required  to  be
                                            performed  or complied  with by such
                                            Seller under this  Agreement and the
                                            Company  shall  have  so  far as the
                                            Buyer is actually  aware complied in
                                            all  respects  with  Section 7.18 of
                                            this  Agreement and no  notification
                                            shall  have been  given to the Buyer
                                            under Section 7.7 of this Agreement,
           and

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                                    (bb)    Section  8(c) shall be deleted,  and
                                            the following  substituted  therefor
                                            "Each   of   the    persons/entities
                                            referred  to  in  Section  14.1  and
                                            Schedule  14.1 shall have  confirmed
                                            to the Company in terms satisfactory
                                            to the Buyer that, in respect of the
                                            transactions   contemplated  hereby,
                                            there  will upon  payment in full as
                                            referred  to in  Section  14.1 be no
                                            grounds  upon which the  Company has
                                            or  could  have  any  obligation  or
                                            liability to pay any sums in respect
                                            of fees,  outlays  and/or charges to
                                            any such  persons  or  entities  and
                                            further  each  of  such  persons  or
                                            entities  shall have  confirmed,  in
                                            terms  satisfactory  to  the  Buyer,
                                            that so long as the  Buyer  complies
                                            with its  obligations  under Section
                                            14.1 to  make  monthly  payments  to
                                            such persons or entities, they shall
                                            not   instigate   any    proceedings
                                            (whether legal or otherwise) against
                                            the    Company    in    respect   of
                                            professional   fees  or  outlays  or
                                            charges  of any kind for a period of
                                            eleven   (11)    months    following
                     Closing", and

                                    (cc)    In  Section  8(m) the  words  "Keith
                                    Baker" shall be deleted, and

                                    (dd)    Section  8(p) shall be deleted,  and
                                            the following  substituted  therefor
                                            "All existing  warrants to subscribe
                                            for ordinary  shares of 1 pence each
                                            in the capital of the Company  shall
                                            have  been  exercised  in  full  and
                                            shall  otherwise  be of no  effect",
           and

                                    (ee)    Section  8(q) shall be deleted,  and
                                            the following  substituted  therefor
                                            "The terms of any loans from Michael
                                            David Rutterford and/or Barry Sealey
                             to the Company do not

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                                            conflict with the repayment terms in
                                            respect   thereof   referred  to  in
                          Section 14.1", and

                                    (ff)    Section  8(r) (i) shall be  deleted,
           and

                                   (gg)    Section 8 (u) shall be deleted, and

                               (hh)    Section 8 (v) shall be deleted.

                                    (ii)    In Section 8(x) the words  "pursuant
                                            to  Section  7.18"  shall be deleted
                                            and the word "not" shall be inserted
                                            between   the  words   "shall"   and
                                            "have",  and the words "at  Closing,
                                            and the  terms  of all  the  CULS in
                                            issue shall have been altered to the
                                            reasonable satisfaction of the Buyer
                                            to  provide  for  redemption  by the
                                            Company  over a period  of 12 months
                                            on Closing  and in 11 equal  monthly
                                            instalments thereafter with a waiver
                                            of the  former  rights to redeem set
                                            out in clause  10 of the loan  stock
                                            instrument   constituting  the  CULS
                                            dated July 23, 1998 and the right to
                                            convert  set out in clause 6 of that
                                            instrument  " shall  be added at the
                        end thereof, and

                                    (jj)    In Section  10.2 all  references  to
                                            "the     Supplemental     Disclosure
                                            Letter," the  "Warranties  set forth
                                            in  Section   3",  the   "Warranties
                                            contained in Section 3" and "Section
                                            10.3"  shall  be  deleted,  and  the
                                            words  "and  the  relevant   Sellers
                                            shall be  deemed  to so  warrant  in
                                            respect   of   clause   3.6  of  the
                                            Amendment  Agreement" shall be added
                                            after the  words "in all  respects",
                                            and the following  sentence shall be
                                            added  at the end  thereof  "For the
                                            avoidance  of doubt  the  Warranties
           set

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                                            forth in Section 3 are given only on
                                            signing  of this  Agreement  and are
                                            not  repeated  at  Closing or at any
                        other time", and

                                    (kk)    Section  10.3.1 and  Section  10.3.2
                             shall be deleted, and

                                    (ll)    In  the  introductory  paragraph  of
                                            Section    10.5   the   words   "the
                                            Warranties set out in Section 3 and"
                             shall be deleted, and

                                    (mm)    Section 10.5(b) shall be deleted and
                                            the following  substituted  therefor
                                            "All   warrants  to  subscribe   for
                                            shares in the capital of the Company
                                            have been  exercised in full and are
                                            otherwise  of no effect and with the
                                            exception of the Third Party Shares,
                                            the Shares  constitute  the whole of
                                            the  issued  share  capital  of  the
                                            Company, and the CULS constitute the
                                            only   loan    stocks   or   similar
                                            convertible    securities   in   the
                                    capital of the Company", and

                                    (nn)    In  Section  11, all  references  to
                                            "Section  13.2(a)" shall be deleted,
           and

                                    (oo)    In   Section   11.1  the  words  "or
                                            pursuant   to   clause   3  of   the
                                            Amendment  Agreement or Section 7.18
                                            of this Agreement (for breach of the
                                            latter  the Buyer  having  the right
                                            not to  close  pursuant  to  Section
                                            8(b) and not to any  other  remedy)"
                                            shall be  inserted  after  the words
                                            "the other  conditions  of Closing",
           and

                                    (pp)    In  Section  11.4,  the words "or in
                                            the case of the Company only, clause
                                            3 of the Amendment  Agreement" shall
                                            be inserted after the words "Section
                  14.4", and

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                                    (qq)    In  Section  11.5,  the  words  "(as
                                            updated  pursuant to Section  10.2)"
                                            and the words  "and  Schedule  7.18"
                                            shall be deleted, and the words "and
                                            (in the  case of those  Sellers  who
                                            are Executive Directors but no other
                                            Sellers) clause 3.6 of the Amendment
                                            Agreement   for  any   liability  in
                                            respect of a breach of Section  7.7"
                                            shall be  inserted  after  the words
                         "Section 12", and

                                    (rr)    In  Section   11.7  $2.75  shall  be
                                            substituted   for  $3.12   where  it
                                            appears in the first  line  thereof,
           and

                                    (ss)    In Section 11.11 the words "or under
                                            clause   3.6   of   the    Amendment
                                            Agreement  or for any  liability  in
                                            respect of a breach of Section  7.7"
                                            shall be added after the words "this
                                            Agreement"   in  the   second   line
                    thereof, and

                                    (tt)    In  Section  11.11.1  the  words "or
                                            claim   under   clause  3.6  of  the
                                            Amendment  Agreement  (for which the
                                            Executive  Directors shall be solely
                                            liable)  or  for  any  liability  in
                                            respect of a breach of  Section  7.7
                                            (for which the  Executive  Directors
                                            shall be  solely  liable)"  shall be
                                            added  after  the  words   "Relevant
                                            Claim"  in the first  line  thereof,
           and

                                    (uu)    In  Section  11.11.3,   the  numbers
                                            "186,206",   "186,206"  and  "93103"
                                            respectively  shall  be  substituted
                                            for the numbers "400,000", "400,000"
                                            and  "200,000"  where they appear in
                                            the fourth,  sixth and eighth  lines
                    thereof, and

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                                    (vv)    In  Section   11.11.5,   the  number
                                            "465515"  shall be  substituted  for
                                            the   number   "1,000,000"   in  the
                                            twelfth line thereof and the numbers
                                            "186,206",   "186,206"  and  "93103"
                                            shall be substituted for the numbers
                                            "400,000",  "400,000"  and "200,000"
                                            respectively   in  the   fourteenth,
                                            fifteenth   and   sixteenth    lines
                    thereof, and

                          (ww)    [intentionally blank], and

                                    (xx)    In  Section  11.16  the words "or in
                                            the  case  of  the  Buyer  $600,000"
                                            shall  be  added  after  the  figure
                                            "$400,000" where first used, and the
                                            following  shall be added at the end
                                            thereof "In the event of Closing not
                                            occurring  any liability on the part
                                            of the Buyer  for any  breach of any
                                            obligations  incumbent upon it under
                                            the  Amendment  Agreement  shall  be
                                            limited  to  and  shall  not  exceed
                                            $600,000  and the Buyer's  aggregate
                                            liability   for  breach   under  the
                                            Amendment  Agreement  and for breach
                                            of  Section  7.26  in the  event  of
                                            Closing  not   occurring   shall  be
                                            limited  to  $600,000  such  sum  or
                                            sums,  if payable,  to be payable to
                                            the  Sellers'   Representatives  for
                                            distribution  amongst the  Sellers",
           and

                                    (yy)    In Section  13.1(a) (ii),  (iii) and
                                            (iv),  the words and date  "June 30,
                                            1999" shall be  substituted  for the
                                            words and date  "December  31, 1998"
                                            where  they  appear  in  the  third,
                                            second  and  third   lines   thereof
                         respectively, and

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                                    (zz)    In  Section  13.2,  the words  "this
                                            Section  13.2(a)  and" and from "The
                                            parties agree that if this Agreement
                                            ..............    their   respective
                                            names  in  Section  7.18"  shall  be
                    deleted, and

                                    (aaa)   In Section 14.1, the words "in equal
                                            monthly instalments over a period of
                                            12  months  commencing  on  Closing"
                                            shall be  inserted  after  the words
                                            "arrangements  to pay" and the words
                                            "in the aggregate  amounts delivered
                                            to the Buyer on or  around  the date
                                            of   execution   of  the   Amendment
                                            Agreement"  shall be inserted  after
                                            the  words  "Schedule  14.1" and the
                                            words  "subject  to the Buyer  being
                                            reasonably satisfied  ..............
                                            has been  received  by the  Company"
                                            shall be deleted,  and the following
                                            sentence  shall  be added at the end
                                            thereof  "On Closing the Buyer shall
                                            make  arrangements  to pay in  equal
                                            monthly  instalments  at Closing and
                                            on  each  of  the  following  eleven
                                            monthly  anniversaries  thereof  the
                                            amount of (pound)40,000 owing by the
                                            Company to Michael David  Rutterford
                                            and  Barry  Sealey  jointly  against
                                            delivery to the Buyer of a waiver in
                             the agreed form", and

                                    (bbb)   the whole of Schedule  7.18 shall be
                    deleted, and

                                    (ccc)   In Section 14.11 the words "or under
                                            the  Amendment  Agreement"  shall be
                                            inserted after the word  "hereunder"
                                            on the fourth  line  thereof and the
                                            word  "hereunder"  in the tenth line
                                            thereof and the word  "Agreement" in
                                            the  twelfth  line  thereof  and the
                                            words  "or   under   the   Amendment
                                            Agreement (as appropriate)" shall be
                                            inserted after the word  "hereunder"
                                   on the eighth line thereof.

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         2.2      Save as aforesaid the terms,  conditions and provisions of the
                  Sale and  Purchase  Agreement  shall  remain in full force and
effect.                                     

3.       NEW UNDERTAKINGS                                                       

                           3.1      The  Buyer  has  prior  to the  date  hereof
                                    advanced   and  will   continue  to  advance
                                    certain  sums to the  Company  to meet  cash
                                    requirements  of the Company for the purpose
                                    of     enabling     it    to    meet     its
                                    obligations/arrangements  to the Buyer under
                                    a   contract(s)   for  the  supply  of  RMON
                                    technology     and    Networx     technology
                                    constituted  by a  course  of  dealing.  The
                                    Buyer   undertakes  to  continue  to  supply
                                    certain   sums  to  the   Company   for  the
                                    foregoing   purposes   and  to  the   extent
                                    reasonably   required   for  the   foregoing
                                    purposes  in the  period  up to  Closing.  A
                                    certificate  under  the  hand  of the  chief
                                    financial  officer of the Buyer shall in the
                                    absence of manifest  error be conclusive and
                                    binding  on  the  parties  hereto  as to the
                                    aggregate  amount so advanced at any time by
                                    the  Buyer  to the  Company.  The  aggregate
                                    amount   so   advanced   at  any   time   is
                              hereinafter referred to as "the loan".

                           3.2      The  following provisions shall apply to the
loan:-  

                                    (a)     the loan shall be interest  free and
                                            the    whole    principal     amount
                                            outstanding  of the loan or any part
                                            thereof   shall  be  repayable   and
                                            repaid on demand served by the Buyer
                                            on the Company provided that no such
                                            demand in  respect of any amount not
                                            currently  due to the  Buyer  at the
                                            relevant  time  by  the  Company  on
                                            trading  account  (for the supply of
                                            goods or  services on an arms length
                                            basis)  shall be served by the Buyer
                                            prior to  Closing.  In the  event of
                                 Closing not occurring the

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                                            Company  agrees to deliver up to the
                                            Buyer  (at the cost and  expense  of
                                            the  Company) in  repayment  or part
                                            repayment of the loan all materials,
                                            equipment,  cards  and  other  items
                                            prepared  for  supply  to the  Buyer
                                            under the foregoing  agreement(s) in
                                            respect  of which  the Buyer has not
                                            exercised  its  rights of set off or
                                            counter   claim   with    subsequent
                                            delivery  to the Buyer and valued at
                                            the normal sale price  therefor and,
                                            in any event,  the loan shall be and
                                            become immediately due and repayable
                                            and the Buyer  shall be  entitled to
                                            demand immediate  repayment  thereof
                                            in the event of the appointment of a
                                            receiver or receiver  and manager or
                                            administrative      receiver      or
                                            administrator   in  respect  of  the
                                            whole    or   any    part   of   the
                                            undertaking,  property and/or assets
                                            of the  Company,  or if an  order is
                                            made or an effective  resolution  is
                                            passed   for  the   winding   up  or
                                            liquidation   of  the  Company,   or
                                            (provided   the   following  is  not
                                            solely  and  directly  caused  by  a
                                            breach by the Buyer) if the  Company
                                            defaults  in the  payment  when  due
                                            under  the  terms  of  any  relevant
                                            agreement  of  any  principal  of or
                                            interest  on any other  indebtedness
                                            of or assumed by the Company, or the
                                            Company  becomes  bound to repay any
                                            other  indebtedness prior to its due
                                            date in  consequence of a default by
                                            the Company. The Company agrees that
                                            until Closing all such materials and
                                            others as aforesaid shall be held by
                                            the     Company     separate     and
                                            identifiable and to the order of the
                  Buyer, and

                                    (b)     The  Buyer is hereby  authorized  to
                                            deduct   or  set   off   and   plead
                                            compensation    or    balancing   of
                                            accounts  in  respect  of any amount
                                            owed  by it to the  Company  for any
                          arm's length trade

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                                            supplies  made and  invoiced  by the
                                            Company to the Buyer in the ordinary
                                            course of  business  of the  Company
                                            between  the  period  from  the last
                                            date of execution  of the  Amendment
                                            Agreement   to  Closing   from  sums
                                            advanced to the Company by the Buyer
                                            by way of loan  under  clauses  3.1,
                                            3.2(a)  or  3.3  of  this  Amendment
                  Agreement.

                           3.3      The  Buyer  undertakes  on  the  same  terms
                                    mutatis mutandis as set out in the foregoing
                                    clause 3.2 (but for these purposes excluding
                                    all references to the delivery of materials,
                                    equipment  and  similar  items)  to fund the
                                    monthly  operating  costs of the Company set
                                    out  in the  budgets  approved  pursuant  to
                                    Section  7.18.1 (a) of the Sale and Purchase
                                    Agreement in the period  between the date of
                           final execution hereof and Closing.

                           3.4      is expected  that during the three (3) month
                                    period  following the last date of execution
                                    of this Amendment  Agreement the obligations
                                    of the Buyer under the foregoing  provisions
                                    of this  clause 3 shall be between  $200,000
     and $300,000.

                           3.5      The Buyer undertakes to ensure that upon and
                                    after Closing the Company is in funds to the
                                    extent   necessary  to  redeem   outstanding
                                    principal  and  interest on the CULS and the
                                    Buyer shall  ensure  that the Company  shall
                                    redeem the same in terms of Section  8(x) of
                        the Sale and Purchase Agreement.

                           3.6      The Executive  Directors  hereby  warrant to
                                    the Buyer that the  management  accounts  of
                                    the Company and the Subsidiary as at October
                                    31 1998, delivered to the Buyer on or around
         the date of final

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                                    execution hereof, were properly prepared and
                                    the  accounting  principles,   policies  and
                                    procedures  applied  in the  preparation  of
                                    such  accounts  were  applied  in  a  manner
                                    consistent   with   that   adopted   in  the
                                    preparation of the last audited  accounts of
                                    the  Company  and the  Subsidiary  and  such
                                    management  accounts are not  misleading  in
                                    any   significant    respect   and   neither
                                    significantly  overstate  the  value  of the
                                    assets  nor  significantly   understate  the
                                    liabilities   of   the   Company   and   the
                                    Subsidiary  as at the date  thereof  and for
                                    these purposes  "significant"  shall mean by
                                    or of an amount in  excess  of  $50,000.  No
                                    claim may be made for breach of this  clause
                                    3.6 after the date falling 30 days after the
     Closing Date.

4.       GOVERNING LAW AND JURISDICTION                                         

         This  Amendment  Agreement  shall be construed in  accordance  with and
         governed by the laws of Scotland.  Any action or proceedings seeking to
         enforce any  provision  of, or based on any right  arising out of, this
         Amendment  Agreement  as so  construed  and  governed  shall be brought
         against any of the parties in the Court of Session, Edinburgh, Scotland
         and each of the parties  hereby  submits in respect of such  matters to
         the exclusive jurisdiction of such Court (and the appropriate appellate
         Court) in any such action or proceeding. The Buyer hereby undertakes to
         each of the parties hereto that it shall observe the provisions of this
         Clause 4 and it shall not raise any  action or  proceeding  seeking  to
         enforce any  provision  of, or based on any right  arising out of, this
         Amendment  Agreement  in respect of such matter in any Court other than
the Court of Session in Edinburgh.                            

5.       NOTICES                                                                

         All notices,  demands and other communications hereunder shall be given
         or served by  personal  delivery or by  registered  or  certified  mail
(return receipt requested), postage                           

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         prepaid,  or by facsimile to the parties at the following addresses (or
         at such other address for a party as shall be specified by like notice,
         provided  that notices of a change of address  shall be effective  only
upon receipt thereof):                                        

If to the Buyer, to:                                          

MicroFrame, Inc.                            
21 Meridian Avenue                          
Edison, New Jersey 08820                    
Attention: Stephen B Gray                   
Fax No.: 001-732-494-4570                   

with copies to:                                               

James Alterbaum, Esq.                       
Parker Chapin Flattau & Klimpl, LLP         
1211 Avenue of the Americas                 
New York, New York 10036                    
Fax No.: 001-212-704-6288                   

Kathleen Stewart                            
Semple Fraser W.S.                          
10 Melville Crescent                        
Edinburgh EH3 7LU                           
Fax No.: 0131-623-7201                      

If to the Company, to:                                        

SolCom Systems Limited                      
SolCom House                                
Meikle Road                                 
Kirkton Campus                              
Livingston EH54 7DE                         
Scotland                                    
Fax No.: 01506-461-717                      

If to the  Sellers or any of the  Sellers,  to each of them at their  respective
addresses set out in the Schedule with a copy to:                               

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Michael Sloyer Esq                          
Mayer Brown Platt                           
1675 Broadway, New York, New York           
1009 5820                                   
Fax No.: 001-212-262-1910                   

and                                         

Marian Glen                                 
Shepherd & Wedderburn                       
155 St Vincent Street                       
Glasgow  G2 5WR                             
Scotland, UK                                
Fax No.: 0141-565-1222                      

All such notices and other  communications shall be deemed given or delivered or
served when  received,  or 48 hours after mailing,  or 24 hours after  facsimile
whichever  occurs first and in proving  service by mail it shall be necessary to
prove that the  communication  was duly addressed and posted in accordance  with
this clause.                                                                    

         IN WITNESS WHEREOF this Amendment Agreement  consisting of this and the
preceding twenty two pages has been executed as follows:                        

SUBSCRIBED at Edinburgh on                                                      
for and on behalf of                                                            
Anderson Strathern Nominees Limited                                             
by John Kerr, Director                                                          
in the presence of:                                                             

SUBSCRIBED at Edinburgh on                                                      
for an on behalf of                                                             
Frances  Loretta De Laura by Peter Atholl Wilson her duly appointed  attorney in
the presence of:                                                                

SUBSCRIBED at Edinburgh on                                                      
for and on behalf of                                                            

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Andrew Edward Sealey, Helen                                                     
Sealey, Brian Souter, Lady                                                      
Margaret  Elliott  and Ann Heron  Gloag by Barry  Sealey,  their duly  appointed
attorney in the presence of:                                                    

SUBSCRIBED  at  Edinburgh  on by William  Hugh Evans a trustee of The Hugh Evans
Family Trust constituted by Declaration of Trust dated September 13, 1997 in the
presence of:                                                                    

SUBSCRIBED at Edinburgh on by Keith Laing in the presence of:                   

SUBSCRIBED  at  Edinburgh  on by Keith Laing for and on behalf of Colin Laing as
his duly appointed attorney in the presence of:                                 

SUBSCRIBED  at Edinburgh  on by Peter James  MacLaren for himself and for and on
behalf of  Elizabeth  Marie  McQuillan  as her duly  appointed  attorney  in the
presence of:                                                                    

SUBSCRIBED  at Edinburgh on by John Kerr as the duly  appointed  attorney of EFG
Reads Trustees Limited the present and sole trustee of Mrs JG Rutterford's  1991
Trust                                                                           
in the presence of:                                                             

SUBSCRIBED  at Edinburgh on by John Kerr as the duly  appointed  attorney of EFG
Reads Trustees Limited the present and sole trustee of                          

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MD Rutterford's 1991 Trust in the presence of:                                  

SUBSCRIBED at Edinburgh on                                                      
by William Hugh Evans in                                                        
the presence of:                                                                

SUBSCRIBED at Edinburgh on                                                      
by John Kerr as the duly appointed                                              
attorney of June Georgina Rutterford                                            
in the presence of:                                                             

SUBSCRIBED  at Edinburgh on by John Kerr as the duly  appointed  attorney of Ali
Reza Taheri in the presence of:                                                 

SUBSCRIBED at Edinburgh on                                                      
by Peter Atholl Wilson for himself                                              
and separately as guardian of                                                   
Alison Elizabeth Wilson in the presence of:                                     

SUBSCRIBED at Edinburgh on                                                      
by Michael David Rutterford in                                                  
the presence of:                                                                

SUBSCRIBED at Edinburgh on                                                      
for and on behalf of the Company                                                
by Peter Atholl Wilson, Director                                                
in the presence of:                                                             

SUBSCRIBED at on for and on behalf of MicroFrame, Inc by John McTigue, its Chief
Financial Officer in the presence of:                                           

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SCHEDULE

SHAREHOLDERS OF SOLCOM SYSTEMS LIMITED
 (ordinary shares)

Name                           Address                                          
W. Hugh Evans                  19 Pentland Drive, Edinburgh EH10 6PU            
William Hugh Evans, Ruth       19 Pentland Drive, Edinburgh EH10 6PU            
Evans  and David James                                                          
Thomas Henderson as                                                             
trustees of the Hugh Evans                                                      
Family Trust                                                                    
Keith Laing                    43 Wester Bankton                                
 Livingston EH54 9DY
Colin Laing                    72 Gateside Avenue                               
Haddington        
East Lothian      
Peter J. MacLaren              2 Glencairn Crescent                             
Edinburgh EH12 5BS
E Marie McQuillan              2 Glencairn Crescent                             
Edinburgh EH12 5BS
Peter A Wilson                 6 Hermand Gardens,                               
  West Calder EH55 8BT
Alison Wilson                  6 Hermand Gardens,                               
  West Calder EH55 8BT
Lady Margaret Elliott          8 Howe Street                                    
Edinburgh EH3 6TD 
Ann H. Gloag                   Balcraig House, Scone,                           
Perth PH2 7PJ     

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EFG Reads Trustees Ltd as     PO Box 641                                        
Trustee of MD Rutterford's    1 Seaton Place, St. Helier,                       
Trust                         Jersey, JE4 8YJ                                   

EFG Reads Trustees Ltd as     PO Box 641                                        
Trustee of Mrs J.G.           1 Seaton Place, St. Helier,                       
Rutterford's 1991 Trust       Jersey, JE4 8YJ                                   
Michael David Rutterford      Sherwood, 28 Redford Road, Edinburgh EH12 0AA     
June Georgina Rutterford      Sherwood, 28 Redford Road, Edinburgh EH13 0AA     
Andrew Sealey                 The Coach House, 99 Blackheath Park, Blackheath,  
London SE3 0EU      
Helen Sealey                  4 Castlelaw Road, Edinburgh EH13 0DN              
Brian Souter                  Murrayfield House, St. Magdalene's Road, Perth PH2
0BT                 
Ali Taheri                    29 North Gyle Terrace, Edinburgh EH12 8JT         
Ms Fran De Laura              9061 Blarney Stone Drive, Springfield,            
VA 22152 U.S.A.     
Anderson Strathern            48 Castle Street,                                 
Nominees Limited              Edinburgh                                         
EH2 3LX             

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                                                                       EXHIBIT A

ESCROW AGREEMENT

 among

 (1) MICROFRAME, INC

 (2) CERTAIN OF THE SHAREHOLDERS OF SOLCOM SYSTEMS LIMITED

 (3) THE SELLERS' REPRESENTATIVES (ON BEHALF OF CERTAIN OF THE
 SHAREHOLDERS OF SOLCOM SYSTEMS LIMITED)

 and

(4) DUNDAS & WILSON CS

relating to the deposit of shares of
 the Common Stock of MicroFrame Inc.

Shepherd & Wedderburn WS    
 155 St Vincent Street
GLASGOW G2 5NR
 [GRAPHIC OMITTED]

Tel: 0141-566-9900
Fax: 0141-565-1222

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 AGREEMENT

among   

                                    MICROFRAME,  INC. a New Jersey  corporation,
                                    having its principal place of business at 21
                                    Meridian  Avenue,  Edison,  New Jersey 08820
                         (hereinafter called the "Buyer");

and     

                                    THE  INDIVIDUALS  whose names and  addresses
                                    are set out in Part I of the  Schedule  (the
                "Selling Shareholders');

and     

                                    BARRY SEALEY AND PETER  WILSON  (hereinafter
                                    called the "Sellers'  Representatives" which
                                    expression  shall include any replacement or
                                    replacements and their respective alternates
                                    in terms of the Share Purchase Agreement (as
                                    defined  below)) acting for and on behalf of
                                    the Selling Shareholders whose addresses are
                          set out in Part 1 of the Schedule;

and     

                                    DUNDAS & WILSON  CS,  having  its  principal
                                    place  of  business  at  Saltire  Court,  20
                                    Castle    Terrace,    Edinburgh   EH1,   2EN
                                (hereinafter called the "Escrow Agent").

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

WHEREAS                                                                         

(A)               Pursuant  to an  agreement  dated 13 August  1998 (the  "Share
                  Purchase Agreement") among the Buyer, the Selling Shareholders
                  and SolCom (as defined  below) and  pursuant to certain  other
                  agreements, the Buyer is acquiring all of the issued shares in
                  SolCom Systems  Limited,  a company  incorporated  in Scotland
                  under the  Companies  Act (number SC 129008)  ("SolCom")  from
                  inter alios the Selling Shareholders in exchange for shares of

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                  Common Stock,  par value $.001 per share, of the Buyer ("Buyer
                  Stock") and completion of the Agreement ("Closing") is subject
to the fulfilment of certain conditions.    

(B)               The Share  Purchase  Agreement  provides  that the Buyer  will
                  deliver to the Escrow  Agent  Escrowed  MicroFrame  Shares (as
                  hereinafter defined) to be held by the Escrow Agent on deposit
                  and  released  subject  as  hereinafter  set out on the  first
                  anniversary   of  the  date  on  which  Closing   occurs  (the
"Termination Date").                        

(C)               The Sellers'  Representatives  are duly authorized pursuant to
                  the Share Purchase Agreement by the Selling Shareholders inter
                  alia to enter into this Escrow  Agreement and act on behalf of
                  the  Selling  Shareholders  and  to  deal  with  the  Escrowed
                  MicroFrame  Shares (as  hereinafter  defined)  on the terms of
this Escrow Agreement.                      

NOW THEREFORE IT IS HEREBY AGREED as follows                                    

1.                Delivery of Escrowed MicroFrame Shares      

                           1.1      On the date of Closing (the "Closing Date"),
                                    the  Buyer  shall  deposit  with the  Escrow
                                    Agent on behalf of the Selling  Shareholders
                                    stock  certificates  in  the  names  of  the
                                    Selling Shareholders in respect of the Buyer
                                    Stock to be  placed in  escrow  pursuant  to
                                    Section 1.4 of the Share Purchase Agreement.
                                    The  shares  so  deposited  are  hereinafter
                                    referred  to  as  the  "Escrowed  MicroFrame
Shares".

                           1.2      The  Escrow   Agent  agrees  to  accept  the
                                    Escrowed  MicroFrame  Shares and to hold and
                                    distribute   them  in  the  manner  provided
herein. 

                           1.3      Not later than three Business Days after the
                                    Closing  Date,  the Buyer  and the  Sellers'
                                    Representatives shall jointly deliver to the
                                    Escrow  Agent a list in the  form set out in
                                    Part  3 of  the  Schedule  signed  by  or on
                                    behalf  of  the   Buyer  and  the   Sellers'
                                    Representatives   showing   inter  alia  the
                                    number   of   Escrowed   MicroFrame   Shares
                                    attributable to each Selling Shareholder and
                                    a percentage  figure  opposite  such Selling
                                    Shareholder's   name,   being  such  Selling
                                    Shareholder's   "Pro  Rata  Share"  for  the
                                    purposes of Clause 7 only of this  Agreement
                                    (such  list   together   with  any  and  all
                                    supplementary  lists  delivered by the Buyer
                                    to the  Escrow  Agent  with  a  copy  to the
                                    Sellers'  Representatives  from time to time
                                    being   referred   to   as   the   "Escrowed
                                    MicroFrame Share Allocation  List"). For the
                                    purposes of this Agreement, "Pro Rata Share"
                                    shall  mean  with  respect  to each  Selling
                                    Shareholder,   the  percentage  obtained  by
                                    dividing   the  total   number  of  Escrowed
                                    MicroFrame  Shares allocated to such Selling
                                    Shareholder in the Escrowed MicroFrame Share
                                    Allocation  List delivered  under Clause 1.3
                                    (as modified  (if at all) by the  provisions
                                    of any of  Clauses  6.1,  6.2(v) and 7.4) by
                                    the total of all Escrowed  MicroFrame Shares
                                    shown  in  such  Escrowed  MicroFrame  Share
                                    Allocation  List.  Provided that it has been
                                    copied to the Sellers'  Representatives  and
                                    this has been  confirmed  in  writing to the
                                    Escrow Agent by the Buyer,  the Escrow Agent
                                    may  rely  on a  Escrowed  MicroFrame  Share
                                    Allocation  List for all purposes unless and
 until the

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                                    Sellers'    Representatives    deliver    an
                                    objection  thereto  in writing  pursuant  to
  Clause 11.

2.                Voting and Other Rights                     

                           (a)      If a meeting  of  stockholders  of the Buyer
                                    occurs  or there  is a  tender  offer or any
                                    other  offer by a third party to acquire the
                                    shares of common stock of the Buyer in whole
                                    or in part (an "Offer"),  in each case while
                                    this Agreement is still in effect, the Buyer
                                    shall  promptly  notify the Escrow  Agent of
                                    such  fact  and  the  Escrow   Agent   shall
                                    promptly     send     to    the     Sellers'
                                    Representatives   for  distribution  to  the
                                    Selling  Shareholders copies of any notices,
                                    documents,  proxies and proxy materials,  if
                                    any,   received  by  the  Escrow   Agent  in
                                    connection with such meeting or offer. It is
                                    acknowledged  and agreed by all parties that
                                    notwithstanding that the Escrowed MicroFrame
                                    Shares are held by the  Escrow  Agent on the
                                    terms of this Agreement, each of the Selling
                                    Shareholders   shall  be   entitled  to  (i)
                                    exercise all rights as members in respect of
                                    such  shares;  and (ii) execute and deliver,
                                    up to the  whole  number  of  such  Escrowed
                                    MicroFrame  Shares  held on  behalf  of such
                                    Selling  Shareholder  on  acceptance  of any
                                    Offer   for   such   Selling   Shareholder's
                                    Escrowed  MicroFrame  Shares  and the Escrow
                                    Agent  shall  release  and  deliver  up  the
                                    relevant stock  certificates to the Sellers'
                                    Representatives on receipt of a joint notice
                                    from   the    Buyer    and   the    Sellers'
                                    Representatives which has been agreed by the
                                    Buyer and the Sellers'  Representatives.  It
                                    is  further  agreed and  acknowledged  that,
                                    without  prejudice to the foregoing,  at all
                                    times,  each  of  the  Selling  Shareholders
                                    shall  continue  to  be  entitled  to  vote,
                                    attend   meetings   and  receive   dividends
                                    (whether in cash or scrip) in respect of his
                                    Escrowed  MicroFrame  Shares  and to receive
                                    from  the  Buyer  all  notices,   documents,
                                    proxies and proxy  materials as shareholders
     in the Buyer.

3.                Dividends and Distributions                 

                           3.1      For the  avoidance of doubt the Buyer agrees
                                    that any Buyer Stock  issued by the Buyer in
                                    respect of the Escrowed MicroFrame Shares of
                                    a Selling  Shareholder  shall  not  become a
                                    part of the Escrowed  MicroFrame  Shares and
                                    shall be delivered  directly by the Buyer to
                                    such Selling  Shareholder save for any Buyer
                                    Stock  which is issued by way of scrip issue
                                    in respect  of  Escrowed  MicroFrame  Shares
                                    which shall be delivered to the Escrow Agent
                                    and held in escrow on behalf of the relevant
                                    Selling   Shareholders   pursuant   to  this
                                    Agreement   and  the   provisions   of  this
                                    Agreement  regarding the delivery of revised
                                    Escrowed  MicroFrame  Share Allocation Lists
                     shall apply mutatis mutandis.

                           3.2      For the avoidance of doubt, the Buyer agrees
                                    that any cash,  securities or other property
                                    (not being Buyer Stock) paid or  distributed
                                    or  issued by the  Buyer in  respect  of the
                                    Escrowed  MicroFrame  Shares  of  a  Selling
                                    Shareholder  shall be paid  directly to such
            Selling Shareholder.

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4.                Claims Procedure - (1) Notice of Claim      

                           4.1      If the Buyer has any claim under  Section 11
                                    in  respect  of  Section  5,  Section  10.5,
                                    Section  3 as  updated  by  Section  10.2 or
                                    Section  12 or  under  Schedule  7.18 of the
                                    Share  Purchase   Agreement  (each  for  the
                                    purposes   of  this   Agreement,   a  "Buyer
                                    Claim"),  the Buyer shall  deliver a written
                                    notice  thereof to (i) the Escrow  Agent and
                                    (ii)  the  Sellers'  Representatives.   Such
                                    notice (a "Notice of Claim") shall contain a
                                    brief  description of the basis of the claim
                                    and the other matters set out in Section 4.1
                                    of the  Share  Purchase  Agreement.  For the
                                    avoidance of doubt it is agreed  between the
                                    Buyer and the Sellers'  Representatives that
                                    such Notice of Claim shall be  delivered  in
                                    addition to the relevant  notice required to
                                    be  delivered  by the  Buyer to the  Sellers
                                    with a copy to the Sellers'  Representatives
                                    under  Section  4.1  of the  Share  Purchase
  Agreement.

                           4.2      No  Notice   of  Claim   may  be   delivered
                                    hereunder  after 5.00 pm on the Business Day
                                  immediately prior to the Termination Date.

                           4.3      In this  Agreement,  a "Business  Day" means
                                    any day upon which the Escrow  Agent is open
                                    for  the  transaction  of  all  business  in
  Edinburgh.

5.                Claims Procedure - (2) Notice of Objection  

                           5.1      If  the  Seller's  Representatives  wish  to
                                    object to a Notice  of Claim for any  reason
                                    (whether  as  to  liability  or  the  amount
                                    claimed for or  otherwise),  they shall give
                                    written notice to the Buyer,  with a copy to
                                    the Escrow Agent, within 14 Business Days of
                                    receipt  of such  notice of claim,  advising
                                    the Buyer that they  object to the Notice of
                        Claim (a "Notice of Objection").

                           5.2      If  no  timeous   Notice  of   Objection  is
                                    received  by the Buyer and the Escrow  Agent
                                    from the Sellers' Representatives, the Buyer
                                    may  deliver  to the  Escrow  Agent a notice
                                    advising  the Escrow  Agent to  release  and
                                    deliver  to the  Buyer  in  accordance  with
                                    Clause 6 hereof and  Section 11 of the Share
                                    Purchase   Agreement   from   each   Selling
                                    Shareholder    such   number   of   Escrowed
                                    MicroFrame  Shares, if any, (rounded upwards
                                    to the  nearest  whole  number  of  Escrowed
                                    MicroFrame  Shares)  as  have  an  aggregate
                                    value  (such  value  being   calculated   as
                                    specified in Clause 5.5) equal to the amount
                                    claimed for in the Notice of Claim for which
                                    such  Selling  Shareholder  is liable  under
                                    Section 11 of the Share Purchase  Agreement,
                                    and  the  Escrow  Agent  shall  release  and
                                    deliver  to the Buyer  such  shares  rounded
                                    upwards  to  the  nearest  whole  number  of
                                    shares from the Selling  Shareholders in the
                                    manner  provided  in Clause 6.2. If any such
                                    notice  is to be  delivered  by the Buyer it
                                    shall  be   countersigned  by  the  Sellers'
                                    Representatives  to signify their  agreement
                                    and  the  Sellers'   Representatives  hereby
                                    agree to  countersign  a valid  notice . The
                                    Escrow  Agent  shall be  entitled to rely on
                                    the  calculation  of the number of  Escrowed
                                    MicroFrame   Shares  to  be   released   and
                                    delivered  as set  out in the  joint  notice
                                    from   the    Buyer    and   the    Sellers'
        Representatives.

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                           5.3      If a timeous Notice of Objection is received
                                    by   the    Buyer    from    the    Sellers'
                                    Representatives,  and if the  Buyer  and the
                                    Sellers'  Representatives are able to settle
                                    the  relevant  claim,  in  whole or in part,
                                    they  shall  document  such   settlement  in
                                    writing  and  immediately  thereafter  shall
                                    deliver to the Escrow  Agent a joint  notice
                                    instructing  the Escrow Agent to release and
                                    deliver  from each Selling  Shareholder  (if
                                    such  Selling   Shareholder   is  liable  in
                                    respect  of  the  claim)   such   number  of
                                    Escrowed  MicroFrame  Shares to the Buyer as
                                    have an  aggregate  value  (such value being
                                    calculated as specified in Clause 5.5) equal
                                    to the amount of such agreed claim for which
                                    such  Selling  Shareholder  is liable  under
                                    Section 11 of the Share  Purchase  Agreement
                                    and  the  Escrow  Agent  shall  release  and
                                    deliver such shares  rounded  upwards to the
                                    nearest whole number of shares in the manner
                              and otherwise as provided in Clause 6.

                           5.4      If a timeous Notice of Objection is received
                                    by   the    Buyer    from    the    Sellers'
                                    Representatives,  and if the  Buyer  and the
                                    Sellers' Representatives are unable to reach
                                    an  agreement  pursuant to Clause 5.3 within
                                    three weeks after the delivery of the Notice
                                    of Objection  then the Buyer or the Sellers'
                                    Representatives  may  raise  proceedings  in
                                    respect  of the  matter  in  dispute  in the
                                    Court of Session  in  Scotland  which  shall
                                    have  exclusive  jurisdiction  in respect of
                                    such matter. If the Court of Session renders
                                    a final judgement or decree or if there is a
                                    final  settlement that the Buyer is entitled
                                    to recover  any or all of a disputed  amount
                                    of  claim,  the  Buyer  shall  deliver  such
                                    written  judgement,  decree or settlement to
                                    the Escrow  Agent.  Such written  judgement,
                                    decree  or   settlement   shall   constitute
                                    instructions   to  the  Escrow   Agent  when
                                    delivered to the Escrow Agent  together with
                                    the joint notice  served  pursuant to Clause
                                    5.3 advising the Escrow Agent to release and
                                    deliver  to  the  Buyer  from  each  of  the
                                    Selling Shareholders such number of Escrowed
                                    MicroFrame  Shares  specified in the written
                                    judgement,  decree  or  settlement  or where
                                    this  is  not  specified,   such  number  of
                                    Escrowed  MicroFrame Shares (rounded upwards
                                    to the  nearest  whole  number  of  Escrowed
                                    MicroFrame  Shares)  as  have  an  aggregate
                                    value  (such  value  being   calculated   as
                                    specified   in  Clause  5.5)  equal  to  the
                                    amount, if any, which the written judgement,
                                    decree or settlement  specifies the Buyer is
                                    entitled  to  recover   from  such   Selling
                                    Shareholder,  and  the  Escrow  Agent  shall
                                    release  and  deliver  such  shares  in  the
                                    manner and  otherwise  as provided in Clause
                                    6. The Escrow  Agent  shall be  entitled  to
                                    rely on the  calculation  of the  number  of
                                    Escrowed MicroFrame Shares to be transferred
                                    as set out in a joint  notice from the Buyer
                                    and  the  Sellers  Representatives  and  the
                                    Sellers'  Representatives agree to execute a
                                    valid notice prepared by the Buyer within 48
                                    hours  of  delivery  of the  same to each of
them.   

                           5.5      For the purposes of this Agreement the value
                                    of a Escrowed MicroFrame Share shall be that
                                    set  out  in  Section   11.9  of  the  Share
                                    Purchase  Agreement.   Where  there  is  any
                                    subdivision or consolidation and division of
                                    the Buyer Stock  following  the date of this
                                    Agreement,   the   value   of  an   Escrowed
                                    MicroFrame  Share and the number of Escrowed
                                    MicroFrame  Shares for the  purposes of this
                                    Agreement shall be adjusted appropriately in
                                    a manner  which is agreed  between the Buyer
and the 

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                                    Sellers'  Representatives  within 2 weeks of
                                    the event or failing agreement  certified in
                                    writing  by  PriceWaterhouseCoopers  LLP (or
                                    such  other  firm of  accountants  as may be
                                    agreed  between  the Buyer and the  Sellers'
                                    Representatives    or   failing    agreement
                                    nominated by the  President of the Institute
                                    of Chartered  Accountants in Scotland).  The
                                    Escrow Agent shall be notified in writing by
                                    the Buyer and the  Sellers'  Representatives
          of any adjustment.

6.                Transfer of Escrowed MicroFrame Shares      

                           6.1      The Buyer  shall only  deliver to the Escrow
                                    Agent   stock    certificates    which   are
                                    denominated in amounts which are equal to or
                                    less than 200,000 shares of Buyer Stock.  If
                                    the Escrow  Agent is  required  pursuant  to
                                    Clauses  5.2,  5.3,  5.4 or 7 to release and
                                    deliver Escrowed  MicroFrame  Shares, and if
                                    the Escrow Agent is able only to release and
                                    deliver in respect of a Selling  Shareholder
                                    to the  Buyer  stock  certificates  for  the
                                    Escrowed  MicroFrame  Shares as specified in
                                    Clause 6 for Buyer  Stock  which is  greater
                                    than  the  amount  for  which  such  Selling
                                    Shareholder  is  liable,  the  Escrow  Agent
                                    shall only do so  against a letter  from the
                                    Buyer  addressed to the Escrow Agent and the
                                    Sellers   Representatives   undertaking   to
                                    redeliver  to  the  Escrow  Agent  balancing
                                    certificates in the appropriate names of the
                                    relevant Selling  Shareholders  representing
                                    the  balance of shares of Buyer  Stock which
                                    will  remain  Escrowed   MicroFrame  Shares.
                                    Within five Business Days after the transfer
                                    of  Escrowed  MicroFrame  Shares  under this
                                    Clause 6, the  Buyer  shall  deliver  to the
                                    Escrow     Agent     and    the     Sellers'
                                    Representatives     a    revised    Escrowed
                                    MicroFrame Share  Allocation List.  Provided
                                    that  it has  been  copied  to the  Sellers'
                                    Representatives  and this has been confirmed
                                    in writing to the Escrow Agent by the Buyer,
                                    the Escrow  Agent may rely upon such revised
                                    Escrowed  MicroFrame  Share  Allocation List
                                    unless     and    until     the     Sellers'
                                    Representatives deliver an objection thereto
   in writing.

                           6.2      Where any Escrowed  MicroFrame Shares are to
                                    be released  and  delivered  to the Buyer in
                                    respect  of any  claim  where no  Notice  of
                                    Objection is  delivered  under Clause 5.2 or
                                    which is either  in whole or in part  agreed
                                    between   the   Buyer   and   the   Sellers'
                                    Representatives   under  Clause  5.3  or  is
                                    resolved in favour of the Buyer under Clause
                                    5.4 (any such claim  being  referred to as a
                                    "successful claim") the following provisions
    shall apply:

                                    (i)   all   successful   claims   shall   be
                                    denominated in US dollars in accordance with
                     the Share Purchase Agreement;

                                    (ii) the value  attributable  to an Escrowed
                                    MicroFrame  Share  shall be  ascertained  in
                   accordance with Clause 5.5;

                                    (iii) the Escrowed  MicroFrame  Shares shall
                                    be released and delivered  from the relevant
                                    Selling   Shareholders  in  respect  of  any
                  successful claim or claims

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                                    in the manner and  proportions  specified by
                     the Share Purchase Agreement;

                                    (iv) the Buyer  shall  deliver to the Escrow
                                    Agent  a  notice  in  writing  (a  "Recovery
                                    Notice")   signed   by  the  Buyer  and  the
                                    Sellers' Representatives which shall set out
                                    the   names   of   each   of   the   Selling
                                    Shareholders  and  the  number  of  Escrowed
                                    MicroFrame  Shares,  if any, which the Buyer
                                    is  entitled  to  recover  in respect of the
                                    successful    claim    from   the    Selling
                                    Shareholders    in   accordance   with   the
                                    provisions   of  Section  11  of  the  Share
                                    Purchase    Agreement   and   the   Sellers'
                                    Representatives  agree  to  execute  a valid
                                    Recovery Notice prepared by the Buyer within
                                    48 hours of  delivery of the same to each of
them;   

                                    (v) at the time of delivery of the  Recovery
                                    Notice,  the  Buyer  shall  deliver  to  the
                                    Escrow     Agent     and    the     Sellers'
                                    Representatives     a    revised    Escrowed
                                    MicroFrame Share  Allocation List.  Provided
                                    that  it has  been  copied  to the  Sellers'
                                    Representatives  and this has been confirmed
                                    in writing to the Escrow Agent by the Buyer,
                                    the Escrow  Agent may rely upon such revised
                                    Escrowed  Share  Allocation  List unless and
                                    until the Sellers'  Representatives  deliver
                                    an objection  thereto in writing pursuant to
  Clause 11.

7.                Expenses of the Sellers' Representatives    

                           7.1      If a claim is  submitted  by the Buyer,  the
                                    Sellers'  Representatives  and the Buyer may
                                    from time to time by joint written notice to
                                    the Escrow  Agent  request  the  release and
                                    delivery  to the  Buyer  of such  number  of
                                    Escrowed  MicroFrame  Shares as the Sellers'
                                    Representatives  in their reasonable opinion
                                    consider  necessary  to meet the  reasonable
                                    professional   fees   and   other   expenses
                                    together with the Sellers'  Representatives'
                                    out of pocket expenses  incurred in properly
                                    performing  their   obligations  under  this
                                    Agreement and the Share  Purchase  Agreement
                                    so as to enable a bankers draft to be issued
                                    by the Buyer in accordance  with Clause 7.3.
                                    Such transfer of Escrowed  MicroFrame Shares
                                    shall  be  transferred   from  each  Selling
                                    Shareholder  pro rata with any  fractions of
                                    shares being rounded  upwards to the nearest
                                    whole   number  of  shares  such  that  each
                                    Selling Shareholder shall only be liable for
                                    his Pro Rata  Share of the  relevant  amount
                                    and shall take place in accordance  with the
                                    same  procedures  as are set out in Clause 6
         mutatis mutandis.

                           7.2      For the  purposes  of  determining  how many
                                    Escrowed  MicroFrame  Shares to release  and
                                    deliver   pursuant  to  Clause   7.1,   each
                                    Escrowed    MicroFrame    Share   shall   be
                                    attributed a value  calculated in accordance
        with Clause 5.5.

                           7.3      In exchange for  certificates  in respect of
                                    Escrowed   MicroFrame   Shares  pursuant  to
                                    Clause  7.1 (in  accordance  with  the  same
                               procedures as are set out in Clause 6.1

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                                    as amended by Clause 7.1  mutatis  mutandis)
                                    the  Buyer  shall  promptly  issue a bankers
                                    draft in US$ to the Sellers' Representatives
                                    in an amount  calculated in accordance  with
                     the provisions of Clause 7.2.

                           7.4      Within five Business Days after the transfer
                                    of the Escrowed  MicroFrame  Shares in terms
                                    of this Clause 7, the Buyer shall deliver to
                                    the   Escrow    Agent   and   the   Sellers'
                                    Representatives     a    revised    Escrowed
                                    MicroFrame Share  Allocation List.  Provided
                                    that  it has  been  copied  to the  Sellers'
                                    Representatives  and this has been confirmed
                                    in writing to the Escrow  Agent,  the Escrow
                                    Agent may rely upon  such  revised  Escrowed
                                    MicroFrame  Share Allocation List unless and
                                    until the Sellers'  Representatives  deliver
                        an objection thereto in writing.

                           7.5      The  maximum   amount   which  the  Sellers'
                                    Representatives shall be entitled to recover
                     hereunder shall be US$20,000.

8.                The Escrow Agent                            

                           8.1      The Escrow Agent  undertakes to perform only
                                    such duties as are  specifically  set out in
                                    or  contemplated  by  this  Agreement.   The
                                    Escrow   Agent   shall   maintain    records
                                    separately    identifying    the    Escrowed
                                    MicroFrame  Shares  and shall  hold the same
                                    separate from any other  investments held by
                                    them and in safe  custody.  The Escrow Agent
                                    will  not  during  the   currency   of  this
                                    Agreement lend or release  possession of any
                                    Escrowed   MicroFrame   Shares   nor  borrow
                                    against any such property nor deposit any of
               the same as collateral.

                           8.2      The  Escrow  Agent  may  rely  and  shall be
                                    protected  in  acting  or  refraining   from
                                    acting or relying  upon any written  notice,
                                    direction, request, waiver, consent, receipt
                                    or other paper or document  which the Escrow
                                    Agent  believes  in good faith to be genuine
                                    and to have been signed or  presented by the
                                    proper  party or parties.  The Escrow  Agent
                                    will not act upon oral instructions.  Within
                                    three  Business Days of the Closing Date the
                                    Buyer  shall  provide  to the  Escrow  Agent
                                    details of persons authorised to sign on its
                                    behalf together with specimen signatures and
                                    the Sellers'  Representatives  shall provide
                                    to the Escrow Agent a specimen signature and
                                    details of any other  persons  authorised to
                                    sign a Notice of Objection or other document
                                    hereunder  on  their  behalf  together  with
                                    specimen  signatures  and the  Escrow  Agent
                                    shall  provide to the Buyer and the Sellers'
                                    Representatives     details    of    persons
                         authorised to sign on its behalf.

                           8.3      The Escrow Agent shall not be liable for any
                                    error of  judgement,  or for any act done or
                                    step  taken or  omitted  by it in good faith
                                    for any  mistake  in  fact  or  law,  or for
                                    anything  which  it may do or  refrain  from
                                    doing in  connection  with  this  Agreement,
                                    except if and only to the extent such error,
                                    act or  mistake  is the  result  of its  own
                                    negligence,    wilful   misconduct,   wilful
             default or bad faith.

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                           8.4      The  Escrow  Agent may seek the  advice of a
                                    solicitor  and/or  counsel  of its choice in
                                    the event of any  dispute or  question as to
                                    the construction of any of the provisions of
                                    this Agreement or its duties hereunder,  and
                                    it will incur no liability and will be fully
                                    protected  in respect  of any action  taken,
                                    omitted or  suffered  by it in good faith in
                                    accordance   with   the   opinion   of  such
             solicitor or counsel.

                           8.5      The Escrow  Agent shall be  remunerated  for
                                    its services hereunder on the basis of a fee
                                    of  (pound)1,000  plus  VAT  per  annum  and
                                    reasonable  out-of-pocket  expenses  or such
                                    other  sum  as  may be  agreed  between  the
                                    Escrow   Agent  and  the   Buyer   plus  all
                                    reasonable out-of-pocket expenses (including
                                    for  the  avoidance  of  doubt  professional
                                    expenses)  incurred by it in connection with
                                    its review and  negotiation  of the terms of
                                    this  Agreement  and   performance  of  this
                                    Agreement (including the reasonable fees and
                                    costs of lawyers or agents which it may find
                                    necessary to engage in performing its duties
                                    under this  Agreement).  The Buyer  shall be
                                    responsible  for  payment  of  such  fee and
                                    reimbursement of such expenses,  such fee to
                    be paid annually in advance.

                           8.6      The Escrow Agent shall be indemnified by the
                                    Buyer against all losses, costs and expenses
                                    (including reasonable legal costs) which may
                                    be  incurred by it as a result of or arising
                                    out  of  this   Agreement,   including   its
                                    involvement in any  litigation  arising from
                                    performance   of  its   duties   under  this
                                    Agreement,  other than litigation  resulting
                                    from or with  respect to any action taken or
                                    omitted  by the  Escrow  Agent  for which it
                                    will have been adjudged grossly negligent or
                                    guilty of wilful  misconduct  or bad  faith.
                                    Such    indemnification     shall    survive
                      termination of this Agreement.

         9.               Distribution of Escrowed MicroFrame Shares to Sellers'
Representatives             

                           9.1      On the  first  Business  Day  following  the
                                    Termination  Date,  the Escrow  Agent  shall
                                    release   and   deliver   to  the   Sellers'
                                    Representatives  stock  certificates for and
                                    in the name of each Selling Shareholder with
                                    respect to such Escrowed  MicroFrame  Shares
                                    to  which  each   Selling   Shareholder   is
                                    entitled   in   accordance   with  the  then
                                    existing    Escrowed     MicroFrame    Share
                                    Allocation  List  at  such  address  as  the
                                    Sellers    Representatives   shall   direct,
                                    PROVIDED THAT the Escrow Agent shall exclude
                                    from  such  number  of  Escrowed  MicroFrame
                                    Shares such  number of  Escrowed  MicroFrame
                                    Shares subject to (i) any  unresolved  claim
                                    where a  Notice  of Claim  has been  validly
                                    delivered  prior  to  5.00  pm on  the  last
                                    Business  Date  immediately   preceding  the
                                    Termination  Date or (ii) a  resolved  claim
              still to be satisfied.

                           9.2      If,  following the Termination Date there is
                                    an  outstanding  unresolved  claim  where  a
                                    Notice of Claim has been  validly  delivered
                                    prior  to 5.00 pm on the last  Business  Day
                                    immediately  preceding the Termination Date,
                                    the  Escrow  Agent  shall  continue  to hold
                                    stock   certificates  in  the  name  of  the
                                    relevant Selling  Shareholders  representing
                                    the aggregate number of Escrowed  MicroFrame
                                    Shares as to which  claims  are  outstanding
                                    and not  resolved  in  accordance  with this
  Agreement.

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                           9.3      The Buyer shall procure that, where there is
                                    an  unresolved  claim  or a  resolved  claim
                                    still to be  satisfied,  there are delivered
                                    timeously   to  the   Escrow   Agent   stock
                                    certificates to enable it to comply with its
                duties under Clause 9.1.

                           9.4      The Escrow  Agent shall  retain any Escrowed
                                    MicroFrame  Shares for the relevant  Selling
                                    Shareholders  on the terms of this Agreement
                                    which would otherwise have been delivered to
                                    the   relevant   Selling   Shareholders   in
                                    accordance    with    Clause   9.1   pending
                                    resolution  of  outstanding  and  unresolved
                              claims on the terms of this Agreement.

10.               Disputes                                    

                           10.1     If a dispute  arises  between two or more of
                                    the parties to this  Agreement as to whether
                                    or not the Escrow Agent will  distribute any
                                    of the Escrowed  MicroFrame Shares, or as to
                                    any other matters arising out of or relating
                                    to the  Escrowed  MicroFrame  Shares  or the
                                    operation  of  this  Agreement,  the  Escrow
                                    Agent shall not be required to determine the
                                    matter  in  dispute  and  need  not make any
                                    distribution  of  the  Escrowed   MicroFrame
                                    Shares  but may  retain  the  same  until it
                                    receives a joint  notice in writing from the
                                    Buyer  and  the   Sellers'   Representatives
                                    confirming  the parties  have  resolved  the
                                    dispute or the rights of the  parties to the
                                    dispute have finally been  determined by the
                     Court of Session in Scotland.

         11.               Any  dispute  regarding a Escrowed  MicroFrame  Share
                           Allocation  List  shall  be  resolved  in the  manner
                           specified  in  Clause 5 with  respect  to a  disputed
                           claim and if the Sellers'  Representatives deliver an
                           objection to an Escrowed  MicroFrame Share Allocation
                           List  under the terms of this  Agreement,  the Escrow
                           Agent  shall  not  be  obliged  to  take  any  action
                           hereunder until such objection or dispute is resolved
                           and it  receives a joint  notice in writing  from the
                           Buyer  and  the  Sellers'   Representatives  to  this
effect.                   

12.               Escrowed MicroFrame Share Allocation Lists  

                           (a)      Where under this  Agreement  the Buyer is to
                                    deliver   an   Escrowed   MicroFrame   Share
                                    Allocation  List to the  Escrow  Agent,  the
                                    Buyer shall two Business  Days prior to such
                                    delivery,  deliver a copy of the same to the
                 Sellers' Representatives.

13.               Notices                                     

                           13.1     Any  notice to a party  hereto  pursuant  to
                                    this Agreement shall be in writing and shall
                                    be delivered by hand,  mailed by first class
                                    post (air mail if sent  internationally)  or
    sent by fax:

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                (i)     If to the Buyer:

              (a)     MicroFrame Inc
                          21 Meridian Avenue
                                Edison, New Jersey 08820
                                  Attention:  Stephen B Gray
                             Fax No:  732-494-4570

                       with copies to:

                           James Alterbaum Esq
                                           Parker Chapin Flattau & Klimpl, LLP
                                   1211 Avenue of the Americas
                                New York, New York 10056
                             Fax No:  212-704 6288

                        Kathleen Stewart
                        Semple Fraser WS
                            10 Melville Crescent
                         Edinburgh EH3 7LU
                              Fax No:  0131-623-7201

                           (ii)     If to the Selling  Shareholders,  to them at
                                    their  respective  addresses  as set  out in
  Schedule 1

                           (iii)    If to the Sellers'  Representatives  (with a
                                    copy to their  alternates)  to them at their
                                    respective  addresses as set out in Schedule
2:      

                                         with a copy to:

                                     Marian Glen
                                               Shepherd & Wedderburn
                                               155 St Vincent Street
                                 Glasgow
                                G2 5NR
                                            Fax: 0141-565-1222

                           (iv)             If to the  Escrow  Agent:  Dundas  &
                                            Wilson  CS  Saltire  Court 20 Castle
                                            Terrace  Edinburgh EH1 2EN Fax: 0131
                228 8838

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                         FAO:  Michael Polson/David Hardie

                                            (a)      or to such other address or
                                                     individuals   as   may   be
                                                     designated  by notice given
                                                     by any party to the others.
                                                     Notices  under this  Clause
                                                     12 shall be deemed given if
                                                     delivered  to  the  parties
                                                     personally  or by  mail  as
                                              aforesaid or by fax.

14.               Replacement of Escrow Agent                 

                           14.1     The Escrow Agent may resign (without stating
                                    any  reason)  by  giving  30  days'  written
                                    notice  of  such  resignation  to the  other
                  parties to this Agreement.

                           14.2     The Escrow Agent may be removed and replaced
                                    following  the  giving  of  30  days'  prior
                                    written  notice to the  Escrow  Agent by the
                               Buyer and the Sellers' Representatives.

                           14.3     In  either  of  the  foregoing  events,  the
                                    duties of the Escrow Agent shall  terminate,
                                    and the appointment of any successor  Escrow
                                    Agent shall become effective, when, and only
                                    when,  save as provided in Clause 14.4, such
                                    successor  has  notified all parties that it
                                    accepts  the   appointment   (or  upon  such
                                    earlier date as may be mutually agreed); and
                                    the Escrow Agent shall on  settlement of all
                                    outstanding  fees and  expenses due to it in
                                    terms of this  Agreement  then  release  and
                                    deliver the Escrowed  MicroFrame  Shares, if
                                    any, to such successor. The successor shall,
                                    subject to Clause 14.4, be appointed jointly
                                    by    the    Buyer    and    the    Sellers'
                                    Representatives  by written instrument and a
                                    copy thereof  shall be delivered to the then
            acting Escrow Agent.

                           14.4     If    the    Buyer    and    the    Sellers'
                                    Representatives  are  unable to agree upon a
                                    successor   Escrow   Agent   prior   to  the
                                    expiration of 30 days  following the date of
                                    receipt  of the  notice  of  resignation  or
                                    removal,  the then acting  Escrow Agent may,
                                    in its sole discretion,  release and deliver
                                    the  Escrowed   MicroFrame  Shares  to  such
                                    person as may be nominated by the  President
                       of the Law Society of Scotland.

                           14.5     Upon receipt by the  successor  Escrow Agent
                                    or such  person as may be  nominated  by the
                                    President of the Law Society of Scotland, as
                                    the case may be, of the Escrowed  MicroFrame
                                    Shares,  the predecessor  Escrow Agent shall
                                    thereupon  be fully  relieved of all duties,
                                    responsibilities  and obligations under this
                                    Agreement,  except with  respect to previous
                                    acts or  omissions  of such Escrow Agent and
                                    except as provided in Clause 14.6.  Upon the
                                    appointment  of any  successor  Escrow Agent
                                    becoming  effective,  the  successor  Escrow
                                    Agent  shall  succeed to and be vested  with
                                    all the  rights,  powers  and  duties of the
                                    predecessor  Escrow  Agent  as if a party to
                                    this Agreement in the capacity of the Escrow
                                    Agent.  The  predecessor  Escrow Agent shall
                                    continue  to have the benefit of Clause 8 of
                                    this  Agreement  in  respect  of the  period
                  while it was Escrow Agent.

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                           14.6     A retiring  Escrow Agent shall,  at the cost
                                    of  the  Buyer,   make   available   to  the
                                    successor  Escrow Agent such  documents  and
                                    records, and provide such assistance, as the
                                    successor   Escrow   Agent  may   reasonably
                                    request  for the purpose of  performing  its
                                    functions  as the  Escrow  Agent  under this
  Agreement.

15.               Termination of Agreement                    

                           (a)      Except as may otherwise be agreed in writing
                                    by all of the parties hereto, this Agreement
                                    shall  terminate  by  delivery to the Escrow
                                    Agent of a joint  notice  from the Buyer and
                                    the  Sellers'  Representatives  if the Share
                                    Purchase    Agreement   is   terminated   in
                                    accordance  with  Section 13 thereof or upon
                                    the delivery and  disbursement by the Escrow
                                    Agent in accordance  with this  Agreement of
                                    all of the Escrowed MicroFrame Shares in its
                                    possession  in terms of  Clauses  6 and/or 9
                                    provided  always that the Buyer shall within
                                    5 business days of such  termination  settle
                                    all  outstanding  fees and  expenses  of the
     Escrow Agent.

16.               Miscellaneous                               

                           16.1     Assignation:   Without   prejudice   to  the
                                    operation  of  Clause  14.4,  no  party  may
                                    assign  its  rights or  delegate  its duties
                                    hereunder  without the prior written consent
                    of the other parties hereto.

                           16.2     Successors  and  assignees:  This  Agreement
                                    shall inure to the benefit of and be binding
                                    upon the  successors,  assignees,  heirs and
                                    personal   representatives  of  the  parties
                                    hereto and to the Sellers.  Any reference to
                                    the Sellers'  Representatives  or the Escrow
                                    Agent  shall be  construed  so as to include
                                    any person or persons for the time being the
                                    Sellers'  Representatives  pursuant  to  the
                                    Share Purchase Agreement,  or any person for
                                    the time being the Escrow  Agent  under this
               Agreement respectively.

                           16.3     Complete agreement:  This Agreement sets out
                                    the  complete   agreement  between  (i)  the
                                    Escrow Agent and (ii) the Buyer, the Sellers
                                    and  the  Sellers'   Representatives,   with
                                    respect  to the  subject  matter  hereof and
                                    supersedes   all  other   oral  or   written
                                    understandings  and agreements  with respect
                          to the matters referred to herein.

                           16.4     Sellers' Representatives: The appointment of
                                    new   Sellers'   Representatives   or  their
                                    alternates  pursuant  to the Share  Purchase
                                    Agreement  will  be of no  force  or  effect
                                    under or in relation to this Agreement until
                                    the Buyer  and the  Escrow  Agent  have each
                                    been   delivered   written  notice  of  such
                                    appointment   in   accordance    with   this
                                    Agreement   specifying   the   identity  and
                                    address of the new Sellers'  Representatives
                                    (or  alternates),  and  the  Buyer  and  the
                                    Escrow  Agent  will be  entitled  to rely on
                                    such   notice    without    conducting    an
                                investigation into the contents thereof.

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                                    (a)     Any  action  taken  by, or notice or
                                            instruction   received   from,   the
                                            Sellers'  Representatives  or  their
                                            alternates  shall  be  deemed  to be
                                            action by, or notice or  instruction
                                            from,  each  and all of the  Selling
                                            Shareholders and shall be binding on
                    the Sellers.

                                    (b)     The Buyer may,  and the Escrow Agent
                                            will,   disregard   any   notice  or
                                            instruction    received   from   any
                                            Selling  Shareholder  other than the
                                            then acting Sellers' Representatives
                                      with regard to this Agreement.

                           16.5     Variations of Agreement:  This Agreement may
                                    only be amended in writing  signed by, or by
                                    the duly authorized  representatives of, all
parties.

                           16.6     Interpretation:  In  this  Agreement, unless
                       the context otherwise requires:

                                    (i) words  importing the singular only shall
                               also include the plural and vice versa;

                                    (ii) the headings and  sub-headings  in this
                                    Agreement shall not be deemed part hereof or
                                    be   taken   into   consideration   in   the
                              interpretation or construction hereof;

                                    (iii) all  references  to  Clauses  shall be
                               construed as Clauses of this Agreement;

                                    (iv) all references to documents include all
                                    amendments  and  replacements   thereof  and
            supplements thereto;

                                    (v) all references to this  Agreement  shall
                                    be a reference to this  document,  including
            the Schedule hereto;

                                    (vi)  a  reference  to a  time  of  day is a
                 reference to London time;

                                    (vii) $ denotes  the lawful  currency of the
                     United States of America; and

                                    (viii) all  references to any gender include
                   a reference to all genders.

                           16.7     Severability:      The     invalidity     or
                                    unenforceability  of any  provision  of this
                                    Agreement  shall not affect the  validity or
                              enforceability of any other provision.

                           16.8     Governing  law:  This  Agreement   shall  be
                                    governed  by,  interpreted  and  enforced in
                             accordance with the laws of Scotland.

                           16.9     Jurisdiction:   The  Court  of   Session  in
                                    Scotland shall have  exclusive  jurisdiction
                                    to settle any  disputes  which may arise out
                                    of or in connection with this Agreement. The
                                    Buyer  hereby  undertakes  that it will  not
                              raise any action or proceeding seeking

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                                    to enforce any provision of, or based on any
                                    right arising out of, this  Agreement in any
                                    court  other  than the Court of  Session  in
  Edinburgh:

                  IN WITNESS WHEREOF this Agreement  consisting of this page and
the preceding  thirteen  pages together with the Schedule is executed as follows
at Edinburgh on August 1998 (unless otherwise stated below):-                   

It is SUBSCRIBED for and on behalf of the said                                  
MicroFrame, Inc. at                            on the                           
day of August Nineteen hundred    
and ninety eight as follows:-                                                   

-------------------------------------    -------------------------------------  
         Witness
-------------------------------------                                           
Full Name                                -------------------------------------  
           Full Name

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

                                       -------------------------------------
         Address

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

It is  SUBSCRIBED  by the said                                                  
Barry Sealey and the said Peter                                                 
Atholl  Wilson at Edinburgh on                                                  
the day of August Nineteen                                                      
hundred and ninety eight as follows:-                                           

-------------------------------------                                           
Barry Sealey                                                                    
                                        ------------------------------------
           Witness

                                        ------------------------------------
             Full Name

-------------------------------------     ------------------------------------  
Peter Atholl Wilson                                                             
                                        ------------------------------------
           Address

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

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It is subscribed by the following persons-                                      

                                   all before this witness:-

------------------------------------                                            
Barry Sealey as attorney for:-               -----------------------------------
Andrew Edward Sealey                      )  Witness                            
Helen Sealey                              )                                     
Brian Souter                              )                                     
Lady Margaret Elliot                      )  -----------------------------------
Ann Heron Gloag                           )  Full Name                          
                                             -----------------------------------

------------------------------------      )  -----------------------------------
William Hugh Evans as Trustee of the      )  Address                            
Family Trust                              )                                     
     )
                                          )  -----------------------------------
------------------------------------      )  Hugh Evans                         
Keith Laing                               )                                     
     )
     )
------------------------------------      )                                     
Peter James MacLaren                                                            

------------------------------------      )                                     
William Hugh Evans                                                              

------------------------------------      )                                     
John Kerr as attorney for:-               )                                     
EFG Read's Trustees Limited as Trustees of)                                     
Mrs J G Rutterford's Trust,               )                                     
EFG Read's Trustees Limited as Trustees of}                                     
Mr M D Rutterford's Trust,                )                                     
June Georgina Rutterford                  )                                     
Ali Reza Taheri                           )                                     
     )
     )
------------------------------------      )                                     
Michael David Rutterford                  )                                     
     )
     )
------------------------------------      )                                     
Keith Laing as attorney for               )                                     
Colin Laing                               )                                     

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) 
) 
------------------------------------   )                                        
Peter Atholl Wilson                                                             

------------------------------------   )                                        
Peter Atholl Wilson as guardian of                                              
Alison Wilson and as attorney for                                               
Frances Loretta DeLaura                                                         

------------------------------------   )                                        
Peter MacLaren as attorney for:-                                                
Frances Loretta deLaura                                                         
Elizabeth Marie McQuillan                                                       

------------------------------------  )                                         
John Kerr                                                                       
as Director of Anderson Strathern Nominees                                      
Limited                                                                         

It is SUBSCRIBED for and on behalf of the said                                  
Dundas & Wilson CS at Edinburgh on the                                          
day of August Nineteen hundred                                          
and ninety eight as follows,                                                    
the firm name being adhibited by                                                
, one of its partners                                     

-------------------------------------                                           
Dundas & Wilson CS                     ------------------------------------     
     Witness

                                   -------------------------------------
       Full Name
                                   -------------------------------------

                                   -------------------------------------
     Address

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

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 This is the Schedule referred to in the foregoing Agreement
 between MicroFrame Inc, Barry Sealey and Peter Wilson as Sellers'
Representatives, the Selling Shareholders and Dundas &
 Wilson CS as Escrow Agent
dated 13 August 1998

Schedule

Part 1

Selling Shareholders

1.       Andrew Edward Sealey                                                   
The Coach House                                               
99 Blackheath Park                                            
London                                                        
SE3 0EU                                                       

2.       Helen Sealey                                                           
4 Castlelaw Road                                              
Edinburgh                                                     
EH13 0DN                                                      

3.       Brian Souter                                                           
Murrayfield House                                             
St Magdalene's Road                                           
Perth                                                         
PH2 0BT                                                       

4.       Lady Margaret Elliott                                                  
8 Howe Street                                                 
Edinburgh                                                     
EH3 6TD                                                       

5.       Ann Heron Gloag                                                        
Balcraig House                                                
Scone                                                         
Perth                                                         
PH2 7PJ                                                       

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6.       William Hugh Evans, Ruth Evans and David James Thomas Henderson as     
Trustees of                                                   
The Hugh Evans Family Trust                                   
19 Pentland Drive                                             
Edinburgh                                                     
EH10 6PU                                                      

7.       Keith Laing                                                            
43 Wester Bankton                                             
Livingston                                                    
EH54 9DY                                                      

8.       Peter James MacLaren                                                   
2 Glencairn Crescent                                          
Edinburgh                                                     
EH12 5BS                                                      

9.       EFG Read's Trustees Limited (Mrs JG Rutterford's 1991 Trust)           
PO Box 641                                                    
1 Seaton Place                                                
St Helier                                                     
Jersey                                                        
JE4 8YJ                                                       

10.      EFG Read's Trustees Limited (MD Rutterford's 1991 Trust)               
PO Box 641                                                    
1 Seaton Place                                                
St Helier                                                     
Jersey                                                        
JE4 8YJ                                                       

11.      Michael David Rutterford                                               
Sherwood                                                      
28 Redford Road                                               
Edinburgh                                                     
EH13 0AA                                                      

12.      June Georgina Rutterford                                               
Sherwood                                                      
28 Redford Road                                               
Edinburgh                                                     
EH13 0AA                                                      

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13.      Ali Reza Taheri                                                        
29 North Gyle Terrace                                         
Edinburgh                                                     
EH12 8JT                                                      

14.      Colin Laing                                                            
72 Gateside Avenue                                            
Haddington                                                    
East Lothian                                                  

15.      Peter Atholl Wilson                                                    
6 Hermand Gardens                                             
West Calder                                                   
EH55 8BT                                                      

16.      Frances Loretta de Laura                                               
9061 Blarney Stone Drive                                      
Springfield                                                   
VA 22152                                                      
USA                                                           

17.      Elizabeth Marie McQuillan                                              
2 Glencairn Crescent                                          
Edinburgh                                                     
EH12 5BS                                                      

18.      Anderson Strathern Nominees Limited                                    
48 Castle Street                                              
Edinburgh                                                     
EH2 3LX                                                       

19.      William Hugh Evans                                                     
19 Pentland Drive                                             
Edinburgh EH10 6PU.                                           

20.      Alison Wilson                                                          
6 Hermand Gardens                                             
West Calder                                                   
EH55 8BT.                                                     

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Part 2

Details of Sellers' Representatives and their alternates

Sellers Representatives                                                         

Barry Sealey                                                                    
4 Castlelaw Road                                                                
Edinburgh                                                                       
EH13 0DN                                                                        

Fax No. 0131 228 2995                                                           

Peter Wilson                                                                    
6 Hermand Gardens                                                               
West Calder                                                                     
EH55 8BT                                                                        

Alternates                                                                      

For Barry Sealey                   Mike Rutterford            
                         111 George Street
                 Edinburgh

                             Fax No. 0131 441 4224

For Peter Wilson                   Hugh Evans                 
                         19 Pentland Drive
                 Edinburgh
                EH10 6PU

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Schedule 3

 Form of Escrowed MicroFrame Share Allocation List

Name of Seller         Address      Number of Escrowed        Pro Rata Share    
--------------         -------      ------------------        --------------    
Shareholder                          MicroFrame Shares                          
--------------                      ------------------                          

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                                                           EXHIBIT B

 AGREEMENT

 among

 PETER ATHOLL WILSON

 and

SOLCOM SYSTEMS LIMITED

 and

 MICROFRAME, INC

Semple Fraser W.S.
10 Melville Crescent
 Edinburgh EH3 7LU

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 AGREEMENT

among   

                                    PETER ATHOLL  WILSON,  residing at 6 Hermand
                                    Gardens, West Calder EH55 8BT ("Mr. Wilson")
           (Of the First Part)

and     

                                    SOLCOM  SYSTEMS   LIMITED   (Company  Number
                                    129008)  having  its  registered  office  at
                                    SolCom House,  Meikle Road,  Kirkton Campus,
                                    Livingston  ("the  Company")  (Of the Second
Part)   

and     

                                    MICROFRAME,    INC   a   New   Jersey,   USA
                                    corporation and having its principal  office
                                    at 21 Meridian  Avenue,  Edison,  New Jersey
                                08820 ("MicroFrame") (of the Third Part)

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

WHEREAS                                                                         

(A)               Mr.  Wilson  and  the  Company  entered  into  a  contract  of
                  employment  on 17th  March  1993 as  amended  by  Supplemental
                  Letter from the Company to Mr.  Wilson  dated and  accepted by
          Mr. Wilson on 28th June 1996 ("the Service Contract").

(B)               The parties  hereto  have agreed to amend  further the Service
                  Contract  and  consequently  have  and  do  hereby  agree  and
undertake as follows:-                      

1.                Salary                                                        

                  With effect on and from the date of Closing of the acquisition
                  of  the  entire   issued  share  capital  of  the  Company  by
                  MicroFrame  ("date of Closing")  Mr.  Wilson's  salary will be
                  increased  to  (pound)70,000  per annum.  Such  salary will be
                  reviewed  annually  on the  first  anniversary  of the date of
                  Closing and each anniversary thereafter and shall be increased
                  by  whichever  is the  lower of 5% or the  amount by which the
                  Retail  Prices  Index   published  by  or  on  behalf  of  the
                  Department of  Employment  of the UK government  has increased
                  between  the date of  Closing  and such first  anniversary  or
                  between the relevant anniversary and the following anniversary
as the case may be.                         

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2.                With effect on and from the date of Closing all  references to
                  the period of notice applicable to Mr. Wilson shall be deleted
and the following substituted therefor:-    

                  "The period of notice  applicable  to Mr.  Wilson  shall be 12
                  months by notice  given by Mr.  Wilson  or by the  Company  to
                  expire on or at any time after the second  anniversary  of the
     date of Closing subject as hereinafter provided."

3.                Restrictive Covenant                                          

                  With  effect on and from date of  Closing  all  references  in
                  Clause 15 of the Company's  Employees  Handbook and Clause 9.2
                  and  9.3  of  the   schedule  to  the   Service   Contract  to
                  non-solicitation  of employees or prohibition on inducement to
                  move business  after the date of termination of the employment
                  of Mr.  Wilson shall be delete and the  following  substituted
therefor:-                                  

                  15.1     "In  these provisions the following expressions shall
   have the following meanings:-

                           "Business"  shall mean any business carried on by any
                           Relevant  Group  Member  at the  Termination  Date or
                           within one year prior thereto in which Mr. Wilson has
                           been directly concerned at any time during the period
                of one year prior to the Termination Date.

                           "Protected  Information"  shall mean all  information
                           which  is at the  Termination  Date  confidential  in
                           relation to the Business including, for the avoidance
                           of  doubt,  all  business,  financial,   operational,
                           customer  and  marketing  information,   intellectual
                           property  (including,  without  limitation,  computer
                           programmes and codes,  software and others in respect
                           of which, in all cases,  intellectual property rights
                           subsist or are capable of  subsisting  subject to the
                           making   of   the    appropriate    application    or
                           registration),  and trade  secrets in relation to the
        Business but excepting therefrom:-

                           (a)      information which is in or enters the public
                                    domain other than as a result of a breach of
                     this Agreement by Mr. Wilson;

                           (b)      information known to Mr. Wilson prior to his
                  employment by the Company;

                           (c)      information  which Mr. Wilson is required to
                                    disclose by law or by the regulations of any
                      recognised stock exchange; and

                           (d)      information  which Mr. Wilson receives after
                                    the  Termination  Date from any third  party
                       which is free to disclose same.

                           "Relevant  Group Member" shall mean any member of the
                           Group  (meaning the Company any  subsidiary or parent
          company of the Company and any other

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                           subsidiary of that parent (as such are defined in the
                           Companies Act 1985)) at the Termination Date in whose
                           business  Mr.  Wilson  has  been  directly  concerned
                           pursuant to the provisions of the Service Contract as
                           amended and further amended herein at any time during
                           the period of one year prior to the Termination Date.

                           "Restricted  Period"  shall  mean  the  period  of 12
                months commencing on the Termination Date.

                           "Termination Date"  shall  mean the date on which the
employment terminates.    

                  15.2     Since  Mr.  Wilson  is  likely  to  obtain  Protected
                           Information  in  the  course  of the  employment  and
                           personal  knowledge of and influence over  suppliers,
                           customers  and  employees of the Company and Relevant
                           Group  Members,  Mr.  Wilson  agrees with the Company
                           that in addition to the other terms of his employment
                           and without prejudice to other  restrictions  imposed
                           upon him by law, he will, save with the prior written
                           consent of the Company, be bound by the covenants set
out below:-               

                  (a)      Mr. Wilson hereby  undertakes that he will not during
                           the Restricted Period directly or indirectly canvass,
                           solicit or  interfere  with or  endeavor  to canvass,
                           solicit or interfere with either on his own behalf or
                           for  any  other  person,   firm,   company  or  other
                           undertaking  competing with the Business,  the custom
                           of any person, firm, company or other undertaking who
                           at any time during the last year of his service  with
                           the  Company  was a  customer  of, or in the habit of
                           dealing  with or  supplying,  the  Company or (as the
                           case may be) any Relevant  Group Member and with whom
                           Mr.  Wilson shall have been  personally  concerned or
  have had personal knowledge;

                  (b)      Mr. Wilson hereby  undertakes that he will not during
                           the Restricted Period either on his own behalf or for
                           any other person, firm, company or other undertaking,
                           directly or indirectly  solicit or endeavor to entice
                           away from the Company or any  relevant  Group  Member
                           any  person  who is an  employee,  director,  office,
                           agent or  consultant  of the Company or any  Relevant
           Group Member at the Termination Date;

                  (c)      Mr.  Wilson  hereby  undertakes  that  he  shall  not
                           following   the   Termination    Date   directly   or
                           indirectly,  divulge  or  make  use of any  Protected
                           Information  in  relation  to, or for the benefit of,
                           any  business  competing  with  the  Business  unless
                           ordered   to   do  so  by  a   court   of   competent
jurisdiction;             

                  (d)      Mr.  Wilson  hereby  undertakes  that  he  shall  not
                           following the Termination  Date represent  himself as
                           being in any way  connected  with the business of the
                           Company or that of any Relevant Group Member (save as
                           a  shareholder  in or option holder of the Company or
                     the Relevant Group Member, as the case may be);

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                  (e)      Mr.   Wilson  hereby   undertakes   that  during  the
                           Restricted  Period  he will  not be  employed  in any
                           business  in  Scotland  or United  States of  America
                           which is engaged in the manufacture  and/or marketing
                           and/or  distribution of and/or  provision of products
                           in and/or services in competition with the Company or
                           any  Relevant  Group  Member.  He will not during the
                           Restricted Period carry on for his own account either
                           alone or with others or be  concerned  as a director,
                           employee,  agent, consultant or in any other capacity
                           whatsoever in or assist any company, entity or person
   engaged in any such business.

4.       Services                                                               

         Mr. Wilson hereby agrees that in the  performance  of his functions and
         duties  under  the  Service  Contract  he  shall,  in  addition  to the
         performance of his functions and duties as Vice President  Marketing of
         the Company  exercise  such powers and perform such duties of a similar
         status in relation to the  Company's  business and exercise such powers
         and perform  such duties in  relation to the  business of any  Relevant
         Group  Member as may from time to time be  assigned to or vested in him
         by the Board of Directors  of the Company and that in the  discharge of
         such duties and in the exercise of such powers he shall  observe,  obey
         and comply with all lawful resolutions, regulations and directions from
         time to time  made or given by or under the  authority  of the Board of
         Directors of the Company and promptly, whenever required so to do, give
         a full  account to the Board of  Directors  of the  Company or a person
        duly authorised by the same of all matters with which he is entrusted.

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5.       Motor Car                                                              

         In addition to his salary  outlined  above it is agreed that Mr. Wilson
         shall be  entitled  to receive  and shall  receive  from the Company an
         allowance of (pound)5,000 per annum payable monthly towards the use for
         business  purposes  of the motor car owned and used by him for  private
purposes.                                                     

6.       0ptions                                                                

         MicroFrame undertakes as soon as reasonably  practicable after the date
         of Closing to grant to Mr. Wilson an option or options to subscribe for
         50,000  shares of common stock par value $.001 per share at fair market
        value at date of grant under the 1998 Stock Option Plan of MicroFrame.

7.       Continuation of Agreement                                              

         All other  provisions  of the  Service  Contract as amended and further
amended hereby shall continue in full force and effect.       

IN WITNESS WHEREOF                                                              

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                                                                       EXHIBIT C

 AGREEMENT
 among

WILLIAM HUGH EVANS
 and

SOLCOM SYSTEMS LIMITED
 and
 MICROFRAME, INC

Semple Fraser W.S.
10 Melville Crescent
 Edinburgh EH3 7LU

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 AGREEMENT

among   

                                    WILLIAM HUGH EVANS,  residing at 19 Pentland
                                    Drive,  Edinburgh  EH10 ("Mr Evans") (Of the
   First Part)

and     

                                    SOLCOM  SYSTEMS   LIMITED   (Company  Number
                                    129008)  having  its  registered  office  at
                                    SolCom House,  Meikle Road,  Kirkton Campus,
                                    Livingston  ("the  Company")  (Of the Second
Part)   

and     

                                    MICROFRAME,    INC   a   New   Jersey,   USA
                                    corporation and having its principal  office
                                    at 21 Meridian  Avenue,  Edison,  New Jersey
                               08820 ("MicroFrame")(of the Third Part)

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

WHEREAS                                                                         

         A.       Mr Evans and the Company entered into a contract of employment
                  on 17th March 1993 as amended by Supplemental  Letter from the
                  Company  to Mr Evans  dated and  accepted  by Mr Evans on 28th
June 1996 ("the Service Contract").         

         B.       The parties  hereto  have agreed to amend  further the Service
                  Contract  and  consequently  have  and  do  hereby  agree  and
undertake as follows:-                      

1.       Salary                             

         With effect on and from the date of Closing of the  acquisition  of the
         entire  issued  share  capital of the Company by  MicroFrame  ("date of
         Closing")  Mr Evans'  salary will be  increased  to  (pound)70,000  per
         annum.  Such salary will be reviewed  annually on the first anniversary
         of the date of Closing  and each  anniversary  thereafter  and shall be
         increased  by  whichever  is the lower of 5% or the amount by which the
         Retail  Prices  Index  published by or on behalf of the  Department  of
         Employment  of the UK  government  has  increased  between  the date of
         Closing and such first anniversary or between the relevant  anniversary
and the following anniversary as the case may be.             

                  2.       With  effect  on and  from the  date of  Closing  all
                           references  to the period of notice  applicable to Mr
                           Evans shall be deleted and the following  substituted
therefor:-                

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         "The  period of  notice  applicable  to Mr Evans  shall be 12 months by
         notice  given by Mr Evans or by the Company to expire on or at any time
         after  the  second  anniversary  of the  date  of  Closing  subject  as
hereinafter provided"                                         

3.       Restrictive Covenant               

         With effect on and from date of Closing all  references  in Clauses 9.2
         and 9.3 of the schedule to the Service Contract and in Clause 15 of the
         Company's  Employees  Handbook  to  non-solicitation  of  employees  or
         prohibition   on  inducement  to  move  business   after  the  date  of
         termination  of the  employment  of Mr Evans  shall be  delete  and the
following substituted therefor:-                              

         15.1     "In these provisions the following expressions shall  have the
following meanings:-                        

                  "Business"  shall mean any business carried on by any Relevant
                  Group Member at the Termination  Date or within one year prior
                  thereto in which Mr Evans has been  directly  concerned at any
                  time  during the  period of one year prior to the  Termination
Date.                                       

                  "Protected Information" shall mean all information which is at
                  the Termination Date  confidential in relation to the Business
                  including,   for  the   avoidance  of  doubt,   all  business,
                  financial,  operational,  customer and marketing  information,
                  intellectual property (including, without limitation, computer
                  programmes and codes, software and others in respect of which,
                  in all  cases,  intellectual  property  rights  subsist or are
                  capable of subsisting subject to the making of the appropriate
                  application or registration), and trade secrets in relation to
the Business but excepting therefrom:-      

                           a.       information which is in or enters the public
                                    domain other than as a result of a breach of
                   this Agreement by Mr Evans;

                           b.       information  known  to Mr Evans prior to his
                  employment by the Company;

                           c.       information  which Mr Evans  is  required to
                                    disclose by law or by the regulations of any
                      recognized stock exchange; and

                           d.       information  which Mr Evans  receives  after
                                    the  Termination  Date from any third  party
                       which is free to disclose same.

                  "Relevant  Group  Member"  shall  mean any member of the Group
                  (meaning the Company any  subsidiary or parent  company of the
                  Company and any other  subsidiary  of that parent (as such are
                  defined in the Companies Act 1985)) at the Termination Date in
                  whose business Mr Evans has been directly  concerned  pursuant
                  to the  provisions  of the  Service  Contract  as amended  and
                  further  amended  herein at any time  during the period of one
year prior to the Termination Date.         

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                  "Restricted  Period"  shall  mean  the  period  of  12  months
commencing on the Termination Date.         

                  "Termination Date" shall mean the date on which the employment
terminates.                                 

         15.2     Since Mr Evans is likely to obtain  Protected  Information  in
                  the course of the  employment  and  personal  knowledge of and
                  influence  over  suppliers,  customers  and  employees  of the
                  Company and Relevant Group  Members,  Mr Evans agrees with the
                  Company that in addition to the other terms of his  employment
                  and without prejudice to other  restrictions  imposed upon him
                  by law, he will,  save with the prior  written  consent of the
      Company, be bound by the covenants set out below:-

                           a.       Mr Evans hereby  undertakes that he will not
                                    during the  Restricted  Period  directly  or
                                    indirectly  canvass,  solicit  or  interfere
                                    with or  endeavor  to  canvass,  solicit  or
                                    interfere  with  either on his own behalf or
                                    for any other person, firm, company or other
                                    undertaking competing with the Business, the
                                    custom of any person, firm, company or other
                                    undertaking  who at any time during the last
                                    year of his  service  with the Company was a
                                    customer of, or in the habit of dealing with
                                    or  supplying,  the  Company or (as the case
                                    may be) any  Relevant  Group Member and with
                                    whom Mr Evans  shall  have  been  personally
                                 concerned or have had personal knowledge;

                           b.       Mr Evans hereby  undertakes that he will not
                                    during the  Restricted  Period either on his
                                    own  behalf or for any other  person,  firm,
                                    company or other  undertaking,  directly  or
                                    indirectly  solicit  or  endeavor  to entice
                                    away from the Company or any relevant  Group
                                    Member  any  person  who  is  an   employee,
                                    director, office, agent or consultant of the
                                    Company or any Relevant  Group Member at the
         Termination Date;

                           c.       Mr Evans hereby undertakes that he shall not
                                    following the  Termination  Date directly or
                                    indirectly,  divulge  or  make  use  of  any
                                    Protected Information in relation to, or for
                                    the benefit of, any business  competing with
                                    the  Business  unless  ordered to do so by a
                        court of competent jurisdiction;

                           d.       Mr Evans hereby undertakes that he shall not
                                    following  the  Termination  Date  represent
                                    himself as being in any way  connected  with
                                    the  business  of the Company or that of any
                                    Relevant Group Member (save as a shareholder
                                    in or option  holder of the  Company  or the
                                   Relevant Group Member, as the case may be);

                           e.       Mr Evans hereby  undertakes  that during the
                                    Restricted Period he will not be employed in
                                    any business in Scotland or United States of
                                    America which is engaged in the  manufacture
                                    and/or  marketing  and/or   distribution  of
                                    and/or   provision  of  products  in  and/or
                        services in competition with the

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                                    Company or any  Relevant  Group  Member.  He
                                    will not during the Restricted  Period carry
                                    on for his own account  either alone or with
                                    others  or  be   concerned  as  a  director,
                                    employee,  agent, consultant or in any other
                                    capacity   whatsoever   in  or  assist   any
                                    company,  entity  or person  engaged  in any
      such business.

4.       Services                           

         Mr Evans hereby  agrees that in the  performance  of his  functions and
         duties  under  the  Service  Contract  he  shall,  in  addition  to the
         performance of his functions and duties as Vice  President  Engineering
         of the  Company  exercise  such  powers and  perform  such  duties of a
         similar status in relation to the Company's  business and exercise such
         powers and  perform  such  duties in  relation  to the  business of any
         Relevant Group Member as may from time to time be assigned to or vested
         in him by the  Board  of  Directors  of the  Company  and  that  in the
         discharge  of such  duties and in the  exercise of such powers he shall
         observe,  obey and comply with all lawful resolutions,  regulations and
         directions from time to time made or given by or under the authority of
         the Board of Directors of the Company and promptly,  whenever  required
         so to do, give a full  account to the Board of Directors of the Company
         or a person duly authorized by the same of all matters with which he is
entrusted.                                                    

5.       Motor Car                          

         In  addition  to his salary  outlined  above it is agreed that Mr Evans
         shall be  entitled  to receive  and shall  receive  from the Company an
         allowance of (pound)5,000 per annum payable monthly towards the use for
         business  purposes  of the motor car owned and used by him for  private
purposes.                                                     

6.       Options                            

         MicroFrame undertakes as soon as reasonably  practicable after the date
         of Closing to grant to Mr Evans an option or options to  subscribe  for
         50,000  shares of common stock par value $.001 per share at fair market
        value at date of grant under the 1998 Stock Option Plan of MicroFrame.

7.       Continuation of Agreement          

         All other  provisions  of the  Service  Contract as amended and further
amended hereby shall continue in full force and effect.       

IN WITNESS WHEREOF                                                              

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                                                                       EXHIBIT D

 AGREEMENT
 amongst
 KEITH LAING
 and
SOLCOM SYSTEMS LIMITED
 and
 MICROFRAME, INC

 -----

Semple Fraser W.S.
10 Melville Crescent
 Edinburgh EH3 7LU

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 AGREEMENT

among   

                                    KEITH LAING,  residing at 43 Wester Bankton,
                                    Livingston,  EH54 9DY ("Mr.  Laing") (Of the
   First Part)

and     

                                    SOLCOM  SYSTEMS   LIMITED   (Company  Number
                                    129008)  having  its  registered  office  at
                                    SolCom House,  Meikle Road,  Kirkton Campus,
                                    Livingston  ("the  Company")  (Of the Second
Part)   

and     

                                    MICROFRAME,   INC.   a   New   Jersey,   USA
                                    corporation and having its principal  office
                                    at 21 Meridian  Avenue,  Edison,  New Jersey
                                08820 ("MicroFrame") (Of the Third Part)

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

WHEREAS                                                                         
(A)               Mr.  Laing  and  the  Company   entered  into  a  contract  of
             employment on 26 September 1995 ("the Service Contract").

(B)               The parties  hereto  have agreed to amend  further the Service
                  Contract  and  consequently  have  and  do  hereby  agree  and
undertake as follows:-                      

1.                Period of Notice                                              

                  All  express  or  implied  references  to a period  of  notice
                  required to terminate  the  employment  of Mr. Laing under the
                  Service  Contract  referring  either  to  notice  by him or to
                  notice  by the  Company  shall be  deleted  and the  following
substituted therefor:-                      

                  "The  employment of Mr. Laing shall continue until  terminated
                  by Mr. Laing giving to the Company 3 months' notice in writing
                  or by the  Company  giving to Mr.  Laing 3  months'  notice in
writing to expire at any                    

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                  time on or after  the date  falling  3 months  after the first
                  anniversary  of the date of  Closing  subject  as  hereinafter
provided."                                  

2.       Salary                                             

                    With  effect  on and  from the  date of  acquisition  of the
                    entire  issued  share  capital of the Company by  MicroFrame
                    ("the date of Closing") Mr. Laing's salary will be increased
to (pound)55,000 per annum.             

3.       Restrictive Covenant                             

                    With effect on and from the date of Closing  all  references
                    in the Service Contract to  non-solicitation of employees or
                    prohibition on inducement to remove  business after the date
                    of  termination  of the  employment  of Mr.  Laing  shall be
       delete and the following substituted therefor:-

                    "In these  provisions the following  expressions  shall have
the following meanings:-                

                    "Business"  shall  mean  any  business  carried  on  by  any
                    Relevant  Group Member at the  Termination  Date or within 6
                    months prior  thereto in which Mr.  Laing has been  directly
                    concerned at any time during the period of 6 months prior to
the Termination Date.                   

                    "Protected  Information" shall mean all information which is
                    at the  Termination  Date  confidential  in  relation to the
                    Business   including,   for  the  avoidance  of  doubt,  all
                    business,  financial,  operational,  customer and  marketing
                    information,   intellectual   property  including,   without
                    limitation,  computer  programmes  and codes,  software  and
                    others in  respect  of  which,  in all  cases,  intellectual
                    property rights subsist or are capable of subsisting subject
                    to  the   making   of   the   appropriate   application   or
                    registration, and trade secrets in relation to the Business.

                    "Relevant  Group  Member" shall mean any member of the Group
                    (meaning the Company,  any  subsidiary or parent  company of
                    the Company and any other subsidiary of that parent (as such
                    are defined in the Companies  Act 1985)) at the  Termination
                    Date in whose business Mr. Laing has been directly concerned
                    pursuant  to the  provisions  of  the  Service  Contract  as
                    amended  and further  amended  herein at any time during the
         period of 6 months prior to the Termination Date.

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                    "Restricted  Period"  shall  mean  the  period  of 3  months
commencing on the Termination Date.     

                    "Termination   Date"  shall  mean  the  date  on  which  the
                    employment  terminates.  Since Mr. Laing is likely to obtain
                    Protected  Information  in the course of the  employment and
                    personal   knowledge  of  and  influence   over   suppliers,
                    customers  and  employees of the Company and Relevant  Group
                    Members,  Mr. Laing agrees with the Company that in addition
                    to the other terms of his employment  and without  prejudice
                    to other restrictions imposed upon him by law, he will, save
                    with the prior written  consent of the Company,  be bound by
the covenants set out below:-           

                    (a)    Mr. Laing hereby  undertakes  that he will not during
                           the Restricted Period directly or indirectly canvass,
                           solicit or  interfere  with or  endeavor  to canvass,
                           solicit or interfere with either on his own behalf or
                           for  any  other  person,   firm,   company  or  other
                           undertaking  competing with the Business,  the custom
                           of any person, firm, company or other undertaking who
                           at any time  during the last 6 months of his  service
                           with the Company  was a customer  of, or in the habit
                           of dealing with or supplying,  the Company or (as the
                           case may be) any Relevant  Group Member and with whom
                           Mr.  Laing shall have been  personally  concerned  or
  have had personal knowledge;

                    (b)    Mr. Laing hereby  undertakes  that he will not during
                           the Restricted Period either on his own behalf or for
                           any other person, firm, company or other undertaking,
                           directly or indirectly  solicit or endeavor to entice
                           away from the Company or any  Relevant  Group  Member
                           any person  who is an  employee,  director,  officer,
                           agent or  consultant  of the Company or any  Relevant
           Group Member at the Termination Date;

                    (c)    Mr.  Laing  hereby   undertakes  that  he  shall  not
                           following   the   Termination    Date   directly   or
                           indirectly,  divulge  or  make  use of any  Protected
                           Information  in  relation  to, or for the benefit of,
                           any  business  competing  with  the  Business  unless
                           ordered   to   do  so  by  a   court   of   competent
Jurisdiction;             

                    (d)    Mr.  Laing  hereby   undertakes  that  he  shall  not
                           following the Termination  Date represent  himself as
                           being in any way  connected  with the business of the
                   Company or that of any Relevant Group Member;

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                    (e)    Mr.   Laing   hereby   undertakes   that  during  the
                           Restricted  Period  he will  not be  employed  in any
                           business  in  Scotland  or United  States of  America
                           where he will be directly  involved with any products
                           which  are  directly  competitive  with  any  of  the
                           Company's   products   with   which  he  had   direct
                           involvement at any time during the period of 6 months
                           prior to the Termination Date. He will not during the
                           same  Restricted  Period carry on for his own account
                           either  alone or with  others  or be  concerned  as a
                           director, employee, agent, consultant or in any other
                           capacity whatsoever in or assist any company,  entity
                           or  person   engaged   or  about  to  be  engaged  in
                           producing,   marketing  or   distributing   any  such
products as aforesaid."   

4.   Services                                                       

           Mr. Laing hereby agrees that in the  performance of his functions and
           duties  under the  Service  Contract  he shall,  in  addition  to the
           performance of his functions and duties as Senior Manager of Research
           of the  Company  exercise  such  powers and  perform  such  duties in
           relation to the  Company's  business and that of any  Relevant  Group
           Member  as may from time to time be  assigned  to or vested in him by
           the Board of  Directors  of the Company and that in the  discharge of
           such duties and in the exercise of such powers he shall observe, obey
           and comply with all lawful  resolutions,  regulations  and directions
           from  time to time  made or given by or under  the  authority  of the
           Board of Directors of the Company and promptly,  whenever required so
           to do, give a full  account to the Board of  Directors of the Company
           or a person duly  authorised by the same of all matters with which he
is entrusted.                                             

5.    Options                                                         

           MicroFrame  undertakes  as soon as reasonably  practicable  after the
           date of  Closing  to  grant to Mr.  Laing an  option  or  options  to
           subscribe  for 7,500 shares of common stock par value $.001 per share
           at fair  market  value at date of grant  under the 1998 Stock  Option
Plan of MicroFrame.                                       

6.    Continuation of Agreement                                       

           All other  provisions of the Service  Contract as amended and further
amended hereby shall continue in full force and effect.   

IN WITNESS WHEREOF                                                              

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                                                                     EXHIBIT E

 REGISTRATION RIGHTS AGREEMENT

Dated , 1998

               AGREEMENT,   by  and  among   MicroFrame,   Inc.,  a  New  Jersey
corporation (the "Company") and the Sellers (as hereinafter defined).           

               WHEREAS,  simultaneously  with the execution and delivery of this
Agreement,  pursuant  to that  certain  share  purchase  agreement  dated  as of
________,  1998 (the  "Share  Purchase  Agreement")  by and  among the  Company,
certain  Sellers (as such term is defined in the Share  Purchase  Agreement) and
SolCom Systems  Limited,  the Sellers are acquiring  shares of common stock, par
value $.001 per share of the Company (the "Common Stock").                      

               WHEREAS,  subject  to the terms and  conditions  set forth in the
Share Purchase Agreement,  the Company desires to provide to the Sellers certain
rights regarding the registration of the Common Stock issued to the Sellers (the
"Shares"), all upon the terms and conditions set forth below.                   

It is therefore agreed as follows:                

1.     Piggyback/Limited Demand Registration.                   

1.1    Right to Include Registrable Securities.   

               (a) Subject to Section 1.1(c), if the Company at any time through
and  including the first  anniversary  of the date hereof,  but not  thereafter,
proposes  to  register  any of its Common  Stock  under the  Securities  Act (as
defined below) by  registration on Forms S-1, S-2, S-3, SB-1 or any successor or
similar  form(s)  (except  registrations  on such Forms or similar  form(s)  for
registration  of securities in connection  with (i) an employee  benefit plan or
dividend  reinvestment  plan,  (ii)  merger,  consolidation  or  sale  of all or
substantially  all of the assets of the  Company (on Form S-4 or  otherwise)  or
(iii) debt securities that are not  convertible  into Common Stock),  whether or
not for sale for its own  account,  it shall,  each such time until the  Holders
have exercised their right to a Request (as defined below),  give written notice
to each Holder (as defined  below) of its intention to do so and of the Holders'
rights  under this  Section 1 at least twenty (20) days prior to the filing of a
registration statement with respect to such registration with the Commission (as
defined  below),  which notice shall describe in reasonable  detail the proposed
registration and distribution and, subject to the provisions hereof, shall offer
the Holder the  opportunity  to register  that  number of shares of  Registrable
Securities  (as defined  below) that the Holder  shall  request,  subject to the
limitations  set forth  herein.  Upon the written  request of any Holder that is
delivered to the Sellers'  Representatives (as such term is defined in the Share
Purchase Agreement) within ten (10) days after the receipt of the aforementioned
notice and subsequently delivered to the Company by the Sellers' Representatives
within five (5) days  thereafter (a "Request"),  which Request shall specify the
Registrable Securities (as defined below)                                       

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intended to be  registered  and disposed of by such Holder,  the Company  shall,
subject  to the  provisions  hereof,  use all  reasonable  efforts to effect the
registration  under the Securities Act of all  Registrable  Securities  that the
Company has been so requested  to register by such  Holder,  except as otherwise
provided  herein,   and,  subject  to  the  provisions   hereof,  to  cause  the
underwriters,  if any,  to permit  the  Holders  of  Registrable  Securities  to
participate in such offering on the same terms and conditions as the Company.   

               (b) In the event that the Company breaches any covenant contained
in Section 5 hereof (a  "Breach"),  and only in such  event,  subject to Section
1.1(c),  through and including the first anniversary of the date hereof, but not
thereafter,  Holders of at least a majority of the Registrable  Securities shall
have one (1) "demand"  registration  right  pursuant to which,  upon notice from
such  Holders  to the  Sellers'  Representatives  within ten (10) days after the
event giving rise to the Breach,  and provided that, such notice is subsequently
delivered to the Company within five (5) days  thereafter (a "Demand  Request"),
which Demand  Request shall specify the  Registrable  Securities  intended to be
registered and disposed of by such Holders,  the Company  shall,  subject to the
provisions  hereof,  use all reasonable efforts to effect the registration under
the Securities Act of all  Registrable  Securities  that the Company has been so
requested to register by such Holders pursuant to such Demand Request, except as
otherwise provided herein.                                                      

               (c) If, at any time after giving  written notice of its intention
to register any securities  and prior to the effective date of the  registration
statement  filed in connection  with such  registration,  the Company or, in the
case of an  underwritten  offering,  the  underwriter,  shall  determine for any
reason not to register or to delay registration of such securities,  the Company
may, at its election,  give written notice of such determination to the Sellers'
Representatives  and upon giving that notice (i) in the case of a  determination
not to register, the Company shall be relieved of its obligation to register any
Registrable  Securities in connection with such  registration  (but not from any
obligation of the Company to pay the Registration Expenses (as defined below) in
connection   therewith),   without  prejudice;   and  (ii)  in  the  case  of  a
determination  to delay  registering,  the Company  shall be  permitted to delay
registering  any  Registrable  Securities  for the same  period  as the delay in
registering such other securities.                                              

               (d) The Company shall pay all  Registration  Expenses (as defined
below) in connection  with  registration  of  Registrable  Securities  requested
pursuant to this Section 1.                                                     

               (e) As used in this Agreement (i) "Registrable  Securities" means
the Registrable Shares and any other securities issuable in connection therewith
or in replacement thereof by way of a dividend, distribution,  recapitalization,
exchange,  merger,  consolidation,  reorganization  or other  transaction,  (ii)
"Registrable  Shares"  includes  the Shares  held by the Sellers  including  the
Escrow  Shares (to the extent that such Escrow  Shares have been  released  from
Escrow),  provided that,  any such Shares shall cease to be  Registrable  Shares
when (A) a registration statement with respect to the public sale of such Shares
shall have become  effective under the Securities Act, (B) such Shares have been
disposed of, or are eligible for  disposable  as permitted by, and in compliance
with, Rule 144 (or successor provision)  promulgated under the Securities Act or
(C) such Shares shall have ceased to be  outstanding,  (iii) "Holder" means each
Seller,  and (iv)  "Securities  Act" shall mean the  Securities  Act of 1933, as
amended, or any subsequent                                                      

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similar  federal  statute,  and the rules and  regulations  of the United States
Securities  and  Exchange  Commission  or any other  federal  agency at the time
administering the Securities Act (the "Commission").                            

               (f) As used in this Agreement,  "Registration Expenses" means all
expenses  incident  to the  Company's  performance  of or  compliance  with  the
provisions of Section 1, Section 2 and Section 3 including,  without limitation,
all registration,  filing and National  Association of Securities Dealers,  Inc.
fees, all listing fees,  all fees and expenses of complying  with  securities or
blue sky laws (including, without limitation,  reasonable fees and disbursements
of counsel for the  underwriters in connection with blue sky  qualifications  of
the  Registrable  Securities),  all word  processing,  duplicating  and printing
expenses, messenger and delivery expenses, the fees and disbursements of counsel
for the  Company  and each  Seller and of its  independent  public  accountants,
including  the  expenses of  "comfort"  letters  required by or incident to such
performance  and  compliance,  and any fees and  disbursements  of  underwriters
customarily  paid  by  issuers  of  securities;  provided  that,  such  expenses
attributable solely to the Holders,  including without  limitation,  any and all
expenses in connection with a Demand Request,  shall not in the aggregate exceed
$1,500, and further provided that, Registration Expenses shall exclude, and each
Holder shall pay,  underwriters fees and underwriting  discounts and commissions
and transfer taxes in respect of the Registrable Securities being registered for
such  Holder as well as any fees and  expenses  of counsel to such Holder of the
Registrable Securities.                                                         

               1.2  Decrease in Amount of  Registrable  Securities.  Anything in
Section  1.1  to  the  contrary  notwithstanding,  if a  registration  hereunder
involves an  underwritten  offering  and the  managing  underwriter  advises the
Company that, in its opinion,  the number of securities  proposed to be included
in such  registration  should  be  limited  due to market  conditions,  then the
Company will include in such  registration (i) first, the securities the Company
proposes to sell and (ii) second the  Registrable  Securities  requested  by the
Sellers to be included in such registration that, in the opinion of the managing
underwriter,  can be sold, such amount to be allocated  among the  participating
Sellers on a pro rata  basis.  Notwithstanding  any  provision  to the  contrary
contained herein, including without limitation Section 1.1(e)(ii),  in the event
of any such cutback by the underwriters in the number of securities  included in
a registration,  any Registrable  Securities of the Sellers so excluded from the
registration shall remain Registrable Securities.                               

        2. Registration  Procedures.  In connection with the registration of any
Registrable  Securities  under the  Securities Act as provided in Section 1, the
Company shall:                                                                  

                      (i)  prepare and file with the  Commission  as promptly as
        practicable  (but in the event of a Demand  Request,  not later than 180
        days  after   receipt  of  such  Demand   Request   from  the   Sellers'
        Representatives)  the  requisite  registration  statement to effect such
        registration  and thereafter  use all  reasonable  efforts to cause such
        registration statement to become and remain effective (subject to clause
(ii) below);                                                    

                      (ii) prepare and file with the Commission  such amendments
        and supplements to such  registration  statement and the prospectus used
        in  connection  therewith as may be necessary to keep such  registration
statement effective and to comply with the provisions           

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        of the Securities Act with respect to the disposition of all Registrable
        Securities  covered by such  registration  statement for a period of not
        less than 9 months,  which period shall  terminate when all  Registrable
 Securities covered by such Registration Statement have been sold;

                      (iii)  furnish to each  Holder  such  number of  conformed
        copies of such  registration  statement  and of each such  amendment and
        supplement thereto (in each case including all exhibits), such number of
        copies  of the  prospectus  contained  in  such  registration  statement
        (including each preliminary  prospectus and any summary  prospectus) and
        any other documents for delivery in conformity with the  requirements of
        the Securities Act, as such Holder may reasonably  request,  in order to
        facilitate  the  public  sale or other  disposition  of the  Registrable
Securities;                                                     

                      (iv) use all reasonable efforts (x) to register or qualify
        all  Registrable   Securities  and  other  securities  covered  by  such
        registration  statement under such other  securities or Blue Sky laws of
        such states of the United  States of America  where an  exemption is not
        available and as the Holders shall reasonably  request,  but in no event
        greater  than five (5) such  states,  (y) to keep such  registration  or
        qualification  in  effect  for so long as  such  registration  statement
        remains in effect,  and (z) to take any other action that may reasonably
        be  necessary  or  advisable  to enable the  Holders to  consummate  the
        disposition  in such  jurisdictions  of the securities to be sold by the
        Holders,  except  that the  Company  shall not for any such  purpose  be
        required to qualify generally to do business as a foreign corporation in
        any jurisdiction  wherein it would not, but for the requirements of this
        paragraph (iv), be obligated to be so qualified or to consent to general
service of process in any such jurisdiction;                    

                      (v) use all  reasonable  efforts to cause all  Registrable
        Securities covered by such registration  statement to be registered with
        or  approved  by such other  federal or state  governmental  agencies or
        authorities as may be necessary in the opinion of counsel to the Company
        to  consummate  the  disposition  of  such  Registrable   Securities  in
accordance with their intended method of disposition;           

                      (vi) promptly notify each Holder of Registrable Securities
covered by such registration  statement,  at any time when a prospectus relating
thereto is required to be delivered  under the  Securities Act during the period
mentioned  in  Section  2(ii)  above,  if the  Company  becomes  aware  that the
prospectus included in such registration  statement, as then in effect, includes
an untrue  statement  of a  material  fact or omits to state any  material  fact
required to be stated  therein or necessary to make the  statements  therein not
misleading in the light of the circumstances then existing,  and, at the request
of any such  Holder,  deliver a  reasonable  number of copies of an  amended  or
supplemental  prospectus as may be necessary so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus shall not include
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements  therein not misleading
in the light of the circumstances then existing.                                

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                      (vii) otherwise use all reasonable  efforts to comply with
all applicable rules and regulations of the Commission; and     

                      (viii)  use all  reasonable  efforts  to  cause  all  such
        Registrable Securities to be listed on each securities exchange on which
   similar securities issued by the Company are then listed or quoted.

               It is expressly  agreed by the parties that as a condition to the
performance of the Company's  obligations  hereunder,  the Holders shall furnish
the Company such  information  regarding the Holders and the distribution of the
Holders' Registrable  Securities as the Company may from time to time reasonably
request in writing.                                                             

3.     Underwritten Offerings.                                  

               3.1 Piggyback Underwritten  Offerings. If the Company proposes to
register any of its  securities  under the  Securities  Act as  contemplated  by
Section 1 and such  securities  are to be  distributed by or through one or more
underwriters,  the Company  will,  subject to and in  accordance  with Section 1
(including,  without  limitation,  the  provisions  of Section 1.2  hereof),  if
requested by any Holders and the Sellers'  Representatives  in  accordance  with
Section 1 hereof,  arrange for such  underwriters to include all the Registrable
Securities  to be offered and sold by such  Holders with the  securities  of the
Company to be  distributed  by such  underwriters.  Such  Holders  shall  become
parties to the underwriting  agreement  negotiated  between the Company and such
underwriters  and shall make all  representations  and  warranties  to and shall
enter  into all  agreements  with the  Company or the  underwriters  as shall be
reasonably  requested  of them  including  all  representations  and  warranties
customarily given by selling shareholders in an underwritten public offering.   

               3.2 Holdback  Agreements.  In connection with any registration of
Registrable  Securities pursuant to an underwritten public offering, the Company
and each Holder shall, if requested by the underwriter,  agree to reasonable and
customary  restrictions  relating to the sale or distribution of the Registrable
Securities  or any  other  securities  as are  imposed  by  the  underwriter  or
underwriters for such underwritten public offering.                             

               3.3 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each  registration  statement under the Securities Act
pursuant  to  this  Agreement,   the  Company  shall  give  the  Holders,  their
underwriters,   if  any,  and  their  respective  counsel  and  accountants  the
opportunity to participate in the  preparation of such  registration  statement,
each  prospectus  included  therein  or  filed  with  the  Commission,  and each
amendment  thereof or supplement  thereto,  and give each of them such access to
its books and records, such opportunities to discuss the business of the Company
with officers and the  independent  public  accountants  who have  certified its
financial  statements as shall be necessary,  in the opinion of the Holders' and
such underwriters'  respective  counsel,  to conduct a reasonable  investigation
within the meaning of the Securities Act.                                       

               3.4 Comfort Letter.  In the event the offering is an underwritten
offering,  the  Company  shall  use all  reasonable  efforts  to  obtain a "cold
comfort" letter from the independent                                            

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public  accountants  for the Company in customary form and covering such matters
of the  type  customarily  covered  by  such  letters  as the  Sellers  of  such
Registrable Securities reasonably request.                                      

4.     Indemnification.                                         

               4.1   Indemnification  by  the  Company.  In  the  event  of  any
registration  statement  filed  pursuant  to Section 1, the Company  shall,  and
hereby does,  indemnify  and hold harmless each of the Holders and each of their
directors, officers, partners, agents, attorneys, representatives and affiliates
(each of the  foregoing,  a "Holder  Indemnitee"),  insofar as  losses,  claims,
damages,  or  liabilities  (or  actions or  proceedings,  whether  commenced  or
threatened,  in  respect  thereof)  arise  out of or are based  upon any  untrue
statement or alleged untrue statement of any material fact contained in any such
registration statement, any preliminary prospectus, final prospectus, or summary
prospectus  contained therein,  or any amendment or supplement  thereto,  or any
omission or alleged  omission to state  therein a material  fact  required to be
stated  therein  or  necessary  to make the  statements  therein in light of the
circumstances  in which they were made not  misleading,  and the  Company  shall
reimburse  each Holder  Indemnitee  for any legal or any other  fees,  costs and
expenses  reasonably  incurred  by  them in  connection  with  investigating  or
defending any such loss, claim, liability, action or proceeding;  provided, that
the  Company  shall not be liable in any such case to the  extent  that any such
loss, claim,  damage,  liability (or action or proceeding in respect thereof) or
expense  arises out of or is based upon an untrue  statement or omission made in
reliance  upon and in  conformity  with  written  information  furnished  to the
Company by or on behalf of any Holder for use in the  preparation  thereof;  and
provided, further, that the Company shall not be liable to any Holder Indemnitee
in any such case to the extent that any such loss, claim, damage,  liability (or
action or proceeding in respect thereof) or expense arises out of such person or
entity's failure to send or give a copy of the final prospectus, as the same may
be then  supplemented  or amended,  to the person or entity  asserting an untrue
statement  or alleged  untrue  statement  or omission or alleged  omission at or
prior to the written confirmation of the sale of Registrable  Securities to such
person or entity if such  statement  or  omission  was  corrected  in such final
prospectus so long as such final  prospectus,  and any amendments or supplements
thereto, have been furnished to such Holder.                                    

               4.2  Indemnification by the Holders.  Each Holder severally,  and
not jointly,  hereby  indemnifies  and holds harmless (in the same manner and to
the same extent as set forth in Section 4.1 above) the  Company,  each  director
and  officer  of  the  Company,   each  of  their   respective   attorneys   and
representatives  and each  other  person or entity,  if any,  who  controls  the
Company  within  the  meaning of the  Securities  Act,  with  respect to (i) any
statement  contained in, or omission  from,  such  registration  statement,  any
preliminary  prospectus,   final  prospectus  or  summary  prospectus  contained
therein,  or any amendment or supplement  thereto,  if such statement or alleged
statement  or omission  or alleged  omission  was made in  reliance  upon and in
conformity  with  written  information  furnished  to the Company by such Holder
specifically  stating that it is for use in the preparation of such registration
statement,   preliminary  prospectus,  final  prospectus,   summary  prospectus,
amendment or  supplement or (ii) the breach of any agreement or covenant by such
Holder contained herein.                                                        

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               4.3  Notice  of  Claims,   Etc.  Promptly  after  receipt  by  an
indemnified  party of notice of the  commencement  of any  action or  proceeding
involving a claim  referred to in Sections 4.1 or 4.2,  such  indemnified  party
will, if a claim in respect thereof is to be made against an indemnifying party,
promptly give written notice to the latter of the  commencement  of such action;
provided,  however,  that the failure of any indemnified party to give notice as
provided  herein  shall not  relieve  the  indemnifying  party of its  indemnity
obligations,  except  to the  extent  that the  indemnifying  party is  actually
prejudiced  by such failure to give  notice.  In case any such action is brought
against an indemnified  party,  unless in such  indemnified  party's  reasonable
judgment a conflict  of  interest  between  such  indemnified  and  indemnifying
parties  may exist in respect of such  claim,  the  indemnifying  party shall be
entitled to participate in and to assume the defense  thereof,  jointly with any
other indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying  party to such  indemnified  party of its election so to assume
the  defense  thereof,  the  indemnifying  party  shall  not be  liable  to such
indemnified party for any legal or other expenses  subsequently  incurred by the
latter in  connection  with the  defense  thereof  other than  reasonable  costs
related to the indemnified  party's  cooperation  with the  indemnifying  party,
unless in such indemnified  party's  reasonable  judgment a conflict of interest
between such  indemnified  and  indemnifying  parties  arises in respect of such
claim after the assumption of the defense thereof.  No indemnifying  party shall
be liable for any  settlement of any action or proceeding  effected  without its
written  consent,   which  consent  shall  not  be  unreasonably   withheld.  No
indemnifying party shall,  without the consent of the indemnified party, consent
to entry of any judgment or enter into any  settlement  that does not include as
an  unconditional  term  thereof the giving by the claimant or plaintiff to such
indemnified  party of a release  from all  liability in respect to such claim or
litigation.                                                                     

               4.4 Contribution. If indemnification shall for any reason be held
by a court to be  unavailable  to an  indemnified  party  under  Section  4.1 or
Section 4.2 in respect of any loss, claim, damage or liability, or any action in
respect  thereof,  then, in lieu of the amount paid or payable under Section 4.1
or Section 4.2, as applicable,  the indemnified party and the indemnifying party
shall  contribute  to the  aggregate  losses,  claims,  damages and  liabilities
(including  legal or other  expenses  reasonably  incurred  in  connection  with
investigating the same), (i) in such proportion as is appropriate to reflect the
relative  fault of the Company on the one hand and such Holder on the other hand
that resulted in such loss,  claim,  damage or  liability,  or action in respect
thereof, with respect to the statements or omissions that resulted in such loss,
claim,  damage or liability,  or action in respect thereof, as well as any other
relevant equitable considerations or (ii) if the allocation provided by item (i)
above  is not  permitted  by  applicable  law,  in such  proportion  as shall be
appropriate to reflect the relative  benefits received by the Company on the one
hand and such  Holder on the  other.  No person or entity  guilty of  fraudulent
misrepresentation  (within the meaning of the Securities  Act) shall be entitled
to contribution  from any person or entity who was not guilty of such fraudulent
misrepresentation.  In  addition,  no  person or entity  shall be  obligated  to
contribute  hereunder any amounts in payment for any settlement of any action or
claim, effected without such person or entity's consent, which consent shall not
be unreasonably withheld.                                                       

               4.5  Other  Indemnification.   Indemnification  and  contribution
similar to that  specified in the  preceding  provisions of this Section 4 (with
appropriate modifications) shall be                                             

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given by the Company and, severally and not jointly, by each Holder with respect
to any required  registration  or other  qualification  of securities  under any
federal or state law or regulation of any governmental  authority other than the
Securities Act.                                                                 

        5. Rule 144.  With a view to making  available  the  benefits of certain
rules and  regulations of the Commission that may at any time permit the sale of
the  Registrable  Securities  to the public  without  registration,  the Company
shall:                                                                          

               (a)  use  all   reasonable   efforts  to  make  and  keep  public
information  available,  as those terms are  understood  and defined in Rule 144
promulgated under the Securities Act at all times;                              

               (b) use all  reasonable  efforts to file with the Commission in a
timely manner all reports and other documents  required of the Company under the
Securities  Act and the  Securities  Exchange Act of 1934,  as amended,  and the
rules and regulations of the Commission thereunder ("Exchange Act"); and        

               (c)  deliver a written  statement  as to whether it has  complied
with  such  requirements  of this  Section,  to the  Holders  upon any  Holder's
request.                                                                        

6.     Miscellaneous.                                           

               (a) Notices.  All notices,  instructions and other communications
in  connection  with  this  Agreement  shall be in  writing  and may be given by
personal delivery or mailed,  certified mail, return receipt requested,  postage
prepaid or by a nationally  recognized  overnight  courier to the parties at the
addresses set forth in the Share Purchase  Agreement (or at such other addresses
as the parties may specify in a notice made in accordance with this Section).   

               (b) No Waiver.  No course of dealing  and no delay on the part of
any party  hereto in  exercising  any right,  power or remedy  conferred by this
Agreement shall operate as a waiver thereof or otherwise  prejudice such party's
rights,  powers and remedies  conferred by this  Agreement or shall preclude any
other or further exercise thereof or the exercise of any other right,  power and
remedy.                                                                         

               (c)  Binding  Effect;  Assignability.  This  Agreement  shall  be
binding upon and shall inure to the benefit of the respective  parties and their
permitted  successors and assigns.  The registration rights contained herein may
be transferred to any subsequent holder of Registrable Securities, provided that
(i) such holder has not acquired such  securities in a transaction  with respect
to which a registration  statement  under the Securities Act is effective at the
time or  pursuant to a sale in which Rule 144 is then  available  to such holder
and (ii) such holder executes and delivers a counterpart to this Agreement.     

               (d)  Severability.  Any  provision  of  this  Agreement  that  is
prohibited or unenforceable in any jurisdiction  shall, as to such jurisdiction,
be ineffective to the extent of such  prohibition  or  unenforceability  without
invalidating  the  remaining  provisions  hereof,  and any such  prohibition  or
unenforceability   in  any   jurisdiction   shall  not   invalidate   or  render
unenforceable                                                                   

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such provision in any other jurisdiction.  To the extent permitted by applicable
law, the parties  hereby waive any provision of law which renders any provisions
hereof prohibited or unenforceable in any respect.                              

               (e)  Modification.  No term or provision of this Agreement may be
amended,  altered,  modified,  rescinded or  terminated  except upon the express
written consent of the party against whom the same is sought to be enforced.    

               (f) Law  Governing.  This  Agreement  shall  be  governed  by and
construed in  accordance  with the laws of the State of New York without  giving
effect to conflict or choice of law principles thereof.                         

               (g) Headings. All headings and captions in this Agreement are for
purposes of  reference  only and shall not be  construed  to limit or affect the
substance of this Agreement.                                                    

               (h) Entire Agreement.  This Agreement  contains,  and is intended
as, a  complete  statement  of all the  terms of the  arrangements  between  the
parties  with  respect to the matters  provided  for,  supersedes  any  previous
agreements and understandings  between the parties with respect to those matters
and cannot be changed or terminated orally.                                     

               (i) Counterparts. This Agreement may be executed in counterparts,
each of which  shall  be  deemed  an  original,  and all of  which,  when  taken
together, shall constitute one and the same instrument.                         

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        IN WITNESS  WHEREOF,  the undersigned have executed this Agreement as of
the date first written above herein.                                            

          MICROFRAME, INC.

                                   By:______________________________________
             Name:
              Title:

  SELLERS:

                                 By:   Sellers' Representatives (as such
                                           term is defined in the Share Purchase
                                     Agreement), as attorney-in-fact

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

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

               [Name of each Seller]

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                                                                       EXHIBIT F

 AGREEMENT

 amongst

 KEITH BAKER

 and

SOLCOM SYSTEMS LIMITED

 and

 MICROFRAME, INC

 -----

Semple Fraser W.S.
10 Melville Crescent
 Edinburgh EH3 7LU

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 AGREEMENT

among   

                                    KEITH  BAKER  residing  at 4  Braehead  Row,
                                    Edinburgh  EH4 ("Mr  Baker")  (Of the  First
Part)   

and     

                                    SOLCOM  SYSTEMS   LIMITED   (Company  Number
                                    129008)  having  its  registered  office  at
                                    SolCom House,  Meikle Road,  Kirkton Campus,
                                    Livingston  ("the  Company")  (Of the Second
Part)   

and     

                                    MICROFRAME,   INC.   a   New   Jersey,   USA
                                    corporation and having its principal  office
                                    at 21 Meridian  Avenue,  Edison,  New Jersey
                                08820 ("MicroFrame") (Of the Third Part)

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

WHEREAS                                                                         

(A)      Mr Baker  and  the  Company  entered into a contract of employment on 9
January 1996 ("the Service Contract").                        

(B)      The parties  hereto have agreed to amend  further the Service  Contract
     and consequently have and do hereby agree and undertake as follows:

1.       Period of Notice                                                       

         All  express or implied  references  to a period of notice  required to
         terminate  the  employment  of Mr  Baker  under  the  Service  Contract
         referring  either to notice by him or to notice by the Company shall be
deleted and the following substituted therefor:-              

         "The employment of Mr Baker shall continue until terminated by Mr Baker
         giving to the  Company 3 months'  notice in writing  or by the  Company
         giving to Mr Baker 3 months' notice in writing to expire at any time on
         or after the date falling 3 months after the first  anniversary  of the
date of Closing subject as hereinafter provided."             

2.       Salary                                                                 

         With effect on and from the date of  acquisition  of the entire  issued
         share capital of the Company by  MicroFrame  ("the date of Closing") Mr
Baker's salary will be increased to (pound)43,000 per annum.  

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3.       Restrictive Covenant                                                   

         With  effect  on and from the date of  Closing  all  references  in the
         Service  Contract to non-  solicitation  of employees or prohibition on
         inducement  to remove  business  after the date of  termination  of the
         employment  of Mr Baker shall be delete and the  following  substituted
therefor:-                                                    

         "In these provisions the following expressions shall have the following
meanings:-                                                  

         "Business"  shall mean any business  carried on by any  Relevant  Group
         Member at the  Termination  Date or within 6 months  prior  thereto  in
         which Mr Baker  has been  directly  concerned  at any time  during  the
period of 6 months prior to the Termination Date.             

         "Protected  Information"  shall  mean all  information  which is at the
         Termination  Date  confidential in relation to the Business  including,
         for the  avoidance  of doubt,  all  business,  financial,  operational,
         customer and marketing  information,  intellectual  property including,
         without limitation,  computer programmes and codes, software and others
         in respect of which, in all cases, intellectual property rights subsist
         or are capable of subsisting  subject to the making of the  appropriate
         application  or  registration,  and trade  secrets in  relation  to the
Business.                                                     

         "Relevant Group Member" shall mean any member of the Group (meaning the
         Company,  any subsidiary or parent company of the Company and any other
         subsidiary  of that  parent (as such are defined in the  Companies  Act
         1985))  at the  Termination  Date in whose  business  Mr Baker has been
         directly  concerned  pursuant to the provisions of the Service Contract
         as amended and further  amended herein at any time during the period of
6 months prior to the Termination Date.                       

         "Restricted Period" shall mean the period of 3 months commencing on the
Termination Date.                                             

         "Termination  Date"  shall  mean  the  date  on  which  the  employment
terminates.                                                   

         Since Mr Baker is likely to obtain Protected  Information in the course
         of  the  employment  and  personal  knowledge  of  and  influence  over
         suppliers,  customers and  employees of the Company and Relevant  Group
         Members, Mr Baker agrees with the Company that in addition to the other
         terms of his  employment  and without  prejudice to other  restrictions
         imposed upon him by law, he will,  save with the prior written  consent
of the Company, be bound by the covenants set out below:-     

         (a)      Mr  Baker  hereby  undertakes  that he  will  not  during  the
                  Restricted Period directly or indirectly  canvass,  solicit or
                  interfere  with or endeavor to canvass,  solicit or  interfere
                  with either on his own behalf or for any other  person,  firm,
                  company or other undertaking competing with the Business,  the
                  custom of any person,  firm,  company or other undertaking who
                  at any time during the last 6 months of his  service  with the
                  Company was a customer  of, or in the habit of dealing with or
supplying, the                              

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                  Company or (as the case may be) any Relevant  Group Member and
                  with whom Mr Baker  shall have been  personally  concerned  or
have had personal knowledge;                

         (b)      Mr  Baker  hereby  undertakes  that he  will  not  during  the
                  Restricted  Period  either on his own  behalf or for any other
                  person,  firm,  company  or  other  undertaking,  directly  or
                  indirectly solicit or endeavor to entice away from the Company
                  or any  Relevant  Group  Member any person who is an employee,
                  director,  officer,  agent or consultant of the Company or any
  Relevant Group Member at the Termination Date;

         (c)      Mr Baker hereby  undertakes  that he shall not  following  the
                  Termination  Date directly or indirectly,  divulge or make use
                  of any  Protected  Information  in  relation  to,  or for  the
                  benefit of, any business  competing  with the Business  unless
          ordered to do so by a court of competent jurisdiction;

         (d)      Mr Baker hereby  undertakes  that he shall not  following  the
                  Termination  Date  represent  himself  as  being  in  any  way
                  connected  with the  business  of the  Company  or that of any
Relevant Group Member;                      

         (e)      Mr Baker hereby  undertakes that during the Restricted  Period
                  he will not be employed in any  business in Scotland or United
                  States of America where he will be directly  involved with any
                  products  which  are  directly  competitive  with  any  of the
                  Company's products with which he had direct involvement at any
                  time  during the period of 6 months  prior to the  Termination
                  Date. He will not during the same  Restricted  Period carry on
                  for  his  own  account  either  alone  or  with  others  or be
                  concerned as a director, employee, agent, consultant or in any
                  other capacity whatsoever in or assist any company,  entity or
                  person engaged or about to be engaged in producing,  marketing
    or distributing any such products as aforesaid."

4.       Services                                                               

         Mr Baker hereby  agrees that in the  performance  of his  functions and
         duties  under  the  Service  Contract  he  shall,  in  addition  to the
         performance of his functions and duties as Senior Hardware  Engineer of
         the Company exercise such powers and perform such duties in relation to
         the  Company's  business and that of any  Relevant  Group Member as may
         from  time to time be  assigned  to or  vested  in him by the  Board of
         Directors  of the Company and that in the  discharge of such duties and
         in the exercise of such powers he shall  observe,  obey and comply with
         all lawful  resolutions,  regulations  and directions from time to time
         made or given by or under the  authority  of the Board of  Directors of
         the  Company  and  promptly,  whenever  required  so to do, give a full
         account  to the Board of  Directors  of the  Company  or a person  duly
   authorised by the same of all matters with which he is entrusted.

5.       Options                                                                

         MicroFrame undertakes as soon as reasonably  practicable after the date
         of Closing to grant to Mr Baker an option or options to  subscribe  for
         7,500  shares of common  stock par value $.001 per share at fair market
        value at date of grant under the 1998 Stock Option Plan of MicroFrame.

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6.       Continuation of Agreement                                              

         All other  provisions  of the  Service  Contract as amended and further
amended hereby shall continue in full force and effect.       

IN WITNESS WHEREOF                                                              

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 AGREEMENT
 amongst
ROBERT STRUTHERS
 and
SOLCOM SYSTEMS LIMITED
 and
 MICROFRAME, INC

Semple Fraser W.S.
10 Melville Crescent
 Edinburgh EH3 7LU

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 AGREEMENT

among   

                                    ROBERT   STRUTHERS,   residing  at  Primrose
                                    Place,  Eliburn,  Livingston,  EH54 6RN ("Mr
                       Struthers") (Of the First Part)

and     

                                    SOLCOM  SYSTEMS   LIMITED   (Company  Number
                                    129008)  having  its  registered  office  at
                                    SolCom House,  Meikle Road,  Kirkton Campus,
                                    Livingston  ("the  Company")  (Of the Second
Part)   

and     

                                    MICROFRAME,   INC.   a   New   Jersey,   USA
                                    corporation and having its principal  office
                                    at 21 Meridian  Avenue,  Edison,  New Jersey
                                    08820  ("MicroFrame")  (Of the  Third  Part)

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

WHEREAS                                                                         

(A)      Mr Struthers and the Company  entered into a contract of' employment on
21 February 1995 ("the Service Contract").                    

(B)      The parties  hereto have agreed to amend  further the Service  Contract
        and consequently have and do hereby agree and undertake as therefor:-:

1.       Period of Notice                                                       

         All  express or implied  references  to a period of notice  required to
         terminate  the  employment of Mr Struthers  under the Service  Contract
         referring  either to notice by him or to notice by the Company shall be
deleted and the following substituted therefor:-              

         "The employment of Mr Struthers  shall continue until  terminated by Mr
         Struthers  giving to the Company 3 months'  notice in writing or by the
         Company giving to Mr Struthers 3 months' notice in writing to expire at
         any time on or  after  the  date  falling  3  months  after  the  first
      anniversary of the date of Closing subject as hereinafter provided."

2.       Salary                                                                 

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         With effect on and from the date of  acquisition  of the entire  issued
         share capital of the Company by  MicroFrame  ("the date of Closing") Mr
 Struthers' salary will be increased to (pound)43,000 per annum.

3.       Restrictive Covenant                                                   

         With  effect  on and from the date of  Closing  all  references  in the
         Service  Contract to non-  solicitation  of employees or prohibition on
         inducement  to remove  business  after the date of  termination  of the
         employment   of  Mr  Struthers   shall  be  delete  and  the  following
substituted therefor:-                                        

         "In these provisions the following expressions shall have the following
meanings:-                                                    

         "Business"  shall mean any business  carried on by any  Relevant  Group
         Member at the  Termination  Date or within 6 months  prior  thereto  in
         which Mr Struthers has been  directly  concerned at any time during the
period of 6 months prior to the Termination Date.             

         "Protected  Information"  shall  mean all  information  which is at the
         Termination  Date  confidential in relation to the Business  including,
         for the  avoidance  of doubt,  all  business,  financial,  operational,
         customer and marketing  information,  intellectual  property including,
         without limitation,  computer programmes and codes, software and others
         in respect of which, in all cases, intellectual property rights subsist
         or are capable of subsisting  subject to the making of the  appropriate
         application  or  registration,  and trade  secrets in  relation  to the
Business.                                                     

         "Relevant Group Member" shall mean any member of the Group (meaning the
         Company,  any subsidiary or parent company of the Company and any other
         subsidiary  of that  parent (as such are defined in the  Companies  Act
         1985)) at the Termination  Date in whose business Mr Struthers has been
         directly  concerned  pursuant to the provisions of the Service Contract
         as amended and further  amended herein at any time during the period of
6 months prior to the Termination Date.                       

         "Restricted Period" shall mean the period of 3 months commencing on the
Termination Date.                                             

         "Termination  Date"  shall  mean  the  date  on  which  the  employment
terminates.                                                   

         Since Mr Struthers  is likely to obtain  Protected  Information  in the
         course of the employment  and personal  knowledge of and influence over
         suppliers,  customers and  employees of the Company and Relevant  Group
         Members,  Mr Struthers  agrees with the Company that in addition to the
         other  terms  of  his  employment   and  without   prejudice  to  other
         restrictions  imposed  upon him by law,  he will,  save  with the prior
         written  consent  of the  Company,  be bound by the  covenants  set out
below:-                                                       

         (a)      Mr  Struthers  hereby  undertakes  that he will not during the
                  Restricted Period directly or indirectly  canvass,  solicit or
                  interfere  with or endeavor to canvass,  solicit or  interfere
                  with either on his own behalf or for any other  person,  firm,
                  company or other undertaking competing with the Business,  the
custom of any person, firm, company         

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                  or other  undertaking who at any time during the last 6 months
                  of his service  with the Company was a customer  of, or in the
                  habit of dealing  with or  supplying,  the  Company or (as the
                  case  may be) any  Relevant  Group  Member  and  with  whom Mr
                  Struthers  shall have been  personally  concerned  or have had
personal knowledge;                         

         (b)      Mr  Struthers  hereby  undertakes  that he will not during the
                  Restricted  Period  either on his own  behalf or for any other
                  person,  firm,  company  or  other  undertaking,  directly  or
                  indirectly solicit or endeavor to entice away from the Company
                  or any  Relevant  Group  Member any person who is an employee,
                  director,  officer,  agent or consultant of the Company or any
  Relevant Group Member at the Termination Date;

         (c)      Mr Struthers hereby undertakes that he shall not following the
                  Termination  Date directly or indirectly,  divulge or make use
                  of any  Protected  Information  in  relation  to,  or for  the
                  benefit of, any business  competing  with the Business  unless
          ordered to do so by a court of competent jurisdiction;

         (d)      Mr Struthers hereby undertakes that he shall not following the
                  Termination  Date  represent  himself  as  being  in  any  way
                  connected  with the  business  of the  Company  or that of any
Relevant Group Member;                      

         (e)      Mr  Struthers  hereby  undertakes  that during the  Restricted
                  Period he will not be employed in any  business in Scotland or
                  United  States of America  where he will be directly  involved
                  with any products which are directly  competitive  with any of
                  the Company's products with which he had direct involvement at
                  any  time  during  the  period  of  6  months   prior  to  the
                  Termination  Date.  He will not  during  the  same  Restricted
                  Period  carry  on for his own  account  either  alone  or with
                  others  or  be  concerned  as  a  director,  employee,  agent,
                  consultant  or in any other  capacity  whatsoever in or assist
                  any company,  entity or person  engaged or about to be engaged
                  in producing,  marketing or distributing  any such products as
aforesaid."                                 

4.       Services                                                               

         Mr Struthers hereby agrees that in the performance of his functions and
         duties  under  the  Service  Contract  he  shall,  in  addition  to the
         performance of his functions and duties as Software Development Manager
         of the Company exercise such powers and perform such duties in relation
         to the Company's  business and that of any Relevant Group Member as may
         from  time to time be  assigned  to or  vested  in him by the  Board of
         Directors  of the Company and that in the  discharge of such duties and
         in the exercise of such powers he shall  observe,  obey and comply with
         all lawful  resolutions,  regulations  and directions from time to time
         made or given by or under the  authority  of the Board of  Directors of
         the  Company  and  promptly,  whenever  required  so to do, give a full
         account  to the Board of  Directors  of the  Company  or a person  duly
   authorised by the same of all matters with which he is entrusted.

5.       Options                                                                

         MicroFrame  undertakes as soon as practicable after the date of Closing
         to grant to Mr Struthers  an option or options to  subscribe  for 7,500
shares of common stock par value $.001                        

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         per  share at fair  market  value at the date of grant  under  the 1998
Stock Option Plan of MicroFrame.                              

6.       Continuation of Agreement                                              

         All other  provisions  of the  Service  Contract as amended and further
amended hereby shall continue in full force and effect.       

IN WITNESS WHEREOF                          

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 AGREEMENT
 amongst
STEPHEN CONNELLY
 and
SOLCOM SYSTEMS LIMITED
 and
 MICROFRAME, INC

 -----

Semple Fraser W.S.
10 Melville Crescent
 Edinburgh EH3 7LU

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 AGREEMENT

among   

                                    STEPHEN  CONNELLY  residing  at Flat 3F1, 10
                                    Dalgety Avenue,  Meadowbank,  Edinburgh ("Mr
                      Connelly") (Of the First Part)

and     

                                    SOLCOM  SYSTEMS   LIMITED   (Company  Number
                                    129008)  having  its  registered  office  at
                                    SolCom House,  Meikle Road,  Kirkton Campus,
                                    Livingston  ("the  Company")  (Of the Second
Part)   

and     

                                    MICROFRAME,   INC.   a   New   Jersey,   USA
                                    corporation and having its principal  office
                                    at 21 Meridian  Avenue,  Edison,  New Jersey
                                08820 ("MicroFrame") (Of the Third Part)

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

WHEREAS                                                                         

(A)      Mr Connelly and the Company entered into a contract of employment on 21
February 1995 ("the Service Contract").                       

(B)      The parties  hereto have agreed to amend  further the Service  Contract
        and consequently have and do hereby agree and undertake as therefor:-:

1.       Period of Notice                                                       

         All  express or implied  references  to a period of notice  required to
         terminate  the  employment  of Mr Connelly  under the Service  Contract
         referring  either to notice by him or to notice by the Company shall be
deleted and the following substituted therefor:-              

         "The  employment of Mr Connelly shall  continue until  terminated by Mr
         Connelly  giving to the  Company 3 months'  notice in writing or by the
         Company  giving to Mr Connelly 3 months' notice in writing to expire at
         any time on or  after  the  date  falling  3  months  after  the  first
      anniversary of the date of Closing subject as hereinafter provided."

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2.       Salary                                                                 

         With effect on and from the date of  acquisition  of the entire  issued
         share capital of the Company by  MicroFrame  ("the date of Closing") Mr
 Connelly's salary will be increased to (pound)33,000 per annum.

3.       Restrictive Covenant                                                   

         With  effect  on and from the date of  Closing  all  references  in the
         Service  Contract to non-  solicitation  of employees or prohibition on
         inducement  to remove  business  after the date of  termination  of the
         employment of Mr Connelly shall be delete and the following substituted
therefor:-                                                    

         "In these provisions the following expressions shall have the following
meanings:-                                                    

         "Business"  shall mean any business  carried on by any  Relevant  Group
         Member at the  Termination  Date or within 6 months  prior  thereto  in
         which Mr Connelly  has been  directly  concerned at any time during the
period of 6 months prior to the Termination Date.             

         "Protected  Information"  shall  mean all  information  which is at the
         Termination  Date  confidential in relation to the Business  including,
         for the  avoidance  of doubt,  all  business,  financial,  operational,
         customer and marketing  information,  intellectual  property including,
         without limitation,  computer programmes and codes, software and others
         in respect of which, in all cases, intellectual property rights subsist
         or are capable of subsisting  subject to the making of the  appropriate
         application  or  registration,  and trade  secrets in  relation  to the
Business.                                                     

         "Relevant Group Member" shall mean any member of the Group (meaning the
         Company,  any subsidiary or parent company of the Company and any other
         subsidiary  of that  parent (as such are defined in the  Companies  Act
         1985)) at the  Termination  Date in whose business Mr Connelly has been
         directly  concerned  pursuant to the provisions of the Service Contract
         as amended and further  amended herein at any time during the period of
6 months prior to the Termination Date.                       

         "Restricted Period" shall mean the period of 3 months commencing on the
Termination Date.                                             

         "Termination  Date"  shall  mean  the  date  on  which  the  employment
terminates.                                                   

         Since Mr  Connelly  is likely to obtain  Protected  Information  in the
         course of the employment  and personal  knowledge of and influence over
         suppliers,  customers and  employees of the Company and Relevant  Group
         Members,  Mr Connelly  agrees with the Company  that in addition to the
         other  terms  of  his  employment   and  without   prejudice  to  other
         restrictions  imposed  upon him by law,  he will,  save  with the prior
         written  consent  of the  Company,  be bound by the  covenants  set out
below:                                                        

         (a)      Mr  Connelly  hereby  undertakes  that he will not  during the
                  Restricted Period directly or indirectly  canvass,  solicit or
     interfere with or endeavor to canvass, solicit or

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                  interfere  with  either  on his own  behalf  or for any  other
                  person, firm, company or other undertaking  competing with the
                  Business,  the custom of any  person,  firm,  company or other
                  undertaking  who at any time  during  the last 6 months of his
                  service with the Company was a customer of, or in the habit of
                  dealing with or supplying, the Company or (as the case may be)
                  any Relevant Group Member and with whom Mr Connelly shall have
             been personally concerned or have had personal knowledge;

         (b)      Mr  Connelly  hereby  undertakes  that he will not  during the
                  Restricted  Period  either on his own  behalf or for any other
                  person,  firm,  company  or  other  undertaking,  directly  or
                  indirectly solicit or endeavor to entice away from the Company
                  or any  Relevant  Group  Member any person who is an employee,
                  director,  officer,  agent or consultant of the Company or any
  Relevant Group Member at the Termination Date;

         (c)      Mr Connelly hereby  undertakes that he shall not following the
                  Termination  Date directly or indirectly,  divulge or make use
                  of any  Protected  Information  in  relation  to,  or for  the
                  benefit of, any business  competing  with the Business  unless
          ordered to do so by a court of competent jurisdiction;

         (d)      Mr Connelly hereby  undertakes that he shall not following the
                  Termination  Date  represent  himself  as  being  in  any  way
                  connected  with the  business  of the  Company  or that of any
Relevant Group Member;                      

         (e)      Mr  Connelly  hereby  undertakes  that  during the  Restricted
                  Period he will not be employed in any  business in Scotland or
                  United  States of America  where he will be directly  involved
                  with any products which are directly  competitive  with any of
                  the Company's products with which he had direct involvement at
                  any  time  during  the  period  of  6  months   prior  to  the
                  Termination  Date.  He will not  during  the  same  Restricted
                  Period  carry  on for his own  account  either  alone  or with
                  others  or  be  concerned  as  a  director,  employee,  agent,
                  consultant  or in any other  capacity  whatsoever in or assist
                  any company,  entity or person  engaged or about to be engaged
                  in producing  marketing or  distributing  any such products as
aforesaid."                                 

4.       Services                                                               

         Mr Connelly  hereby agrees that in the performance of his functions and
         duties  under  the  Service  Contract  he  shall,  in  addition  to the
         performance  of his  functions  and  duties  as Senior  Analyst  of the
         Company exercise such powers and perform such duties in relation to the
         Company's  business and that of any  Relevant  Group Member as may from
         time to time be assigned to or vested in him by the Board of  Directors
         of the  Company  and that in the  discharge  of such  duties and in the
         exercise  of such  powers he shall  observe,  obey and comply  with all
         lawful  resolutions,  regulations and directions from time to time made
         or given by or under the  authority  of the Board of  Directors  of the
         Company and promptly,  whenever  required so to do, give a full account
         to the Board of Directors of the Company or a person duly authorised by
the same of all matters with which he is entrusted.           

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5.       Options                                                                

         MicroFrame undertakes as soon as reasonably  practicable after the date
         of Closing to grant to Mr  Connelly  an option or options to  subscribe
         for  7,500  shares of  common  stock par value  $.001 per share at fair
         market  value at date of grant  under  the 1998  Stock  Option  Plan of
MicroFrame.                                                   

6.       Continuation of Agreement                                              

         All other  provisions  of the  Service  Contract as amended and further
amended hereby shall continue in full force and effect.       

IN WITNESS WHEREOF                                                              

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                                                                       EXHIBIT G

 Opinion Letter to be given by:-

 (i) Maclay Murray & Spens

 and

 (ii) Anderson Strathern

 Referable to Trustee Shareholders for
whom they act in the acquisition

Dear Sirs,                                                                      

[                                             ]  ("the Trust")                  

1.       The Trust is  constituted  by Declaration of Trust by [ ] dated [ ] and
         registered in Books of Council and Session on [ ]. The Trust is validly
         constituted  under Scots Law and the Trustees have all requisite powers
         to act in accordance  with the  provisions of the said  Declaration  of
Trust.                                                        

2.       The  [original/present]  Trustees  of the Trust are [ ] residing at [ ]
("the Trustees").                                             

3.       The  Trustees  have the  requisite  power and  authority to execute and
         deliver the Share Purchase  Agreement  with  MicroFrame Inc relative to
         the  acquisition  of the whole of the  issued  share  capital of SolCom
         Systems  Limited ("the Share  Purchase  Agreement")  dated of even date
         with this Opinion and to perform their obligations thereunder and grant
         warranties and indemnities  thereunder and consummate the  transactions
on its part contemplated thereby.                             

         The  execution  delivery and  performance  by the Trustees of the Share
         Purchase  Agreement and without  limitation  the granting of warranties
         and indemnities  thereunder and the consummation by the Trustees of the
         transactions  contemplated  thereby  have been duly  authorised  by all
necessary action on the part of the Trustees.                 

         The Share Purchase Agreement and all agreements delivered in connection
         therewith to which the Trustees are parties, have been duly and validly
         executed and delivered by the Trustees on behalf of the Trust, and each
         constitutes  a legal,  valid and  binding  obligation  of the  Trustees
         enforceable  against  the Trust in  accordance  with  their  respective
terms.                                                        

4.       The Escrow  Agreement,  and the  Registration  Rights  Agreement  to be
         entered into by the Trustees as applicable (the "Material  Agreements")
have been duly and validly executed and                       

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         delivered by the Trustees and constitute  the legal,  valid and binding
         obligation of the Trustees  enforceable against the Trust in accordance
with its terms.                                               

5.       The  execution  and  delivery  of  the  Material   Agreements  and  the
         performance  and  consummation  by the  Trustees  of  the  transactions
         contemplated  thereby do not  result in any  conflict  with,  breach or
         violation of or default, termination, forfeiture or lien under (or upon
         the failure to give  notice  over lapse of time or both,  result in any
         conflict  with,  breach  or  violation  of  or  default,   termination,
         forfeiture   or  lien  under)  any  terms  or  provisions  of  (i)  the
         Declaration  of Trust under which the  Trustees  are acting or (ii) any
Material Agreement.                                           

6.       This Opinion is given to Semple Fraser as legal  advisers to MicroFrame
         Inc solely in connection  with the entering into and performance of the
         Share  Purchase  Agreement and the Material  Agreements by the Trustees
         and is not to be  disclosed  to or  relied  upon by any  third  parties
without our express written consent.                          

Yours faithfully                                              

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The Directors                                                                   
MicroFrame, Inc                                                                 
21 Meridian Avenue                                                              
Edison                                                                          
New Jersey 08820 USA("the Buyer")                                               

Dear Sirs                                                                       

Scottish Legal Opinion                                                          
Share  Purchase  Agreement  amongst  MicroFrame,  Inc,  the  Sellers (as therein
defined),  and SolCom Systems  Limited ("the  Company")  dated August 1998 ("the
Agreement")                                                                     

1.       We have acted as the Company's  Scottish  legal  advisers in connection
with the Agreement.                                           

2.       We have  taken  instructions  from the  Company  and have  received  no
instructions from you.                                        

3.       All terms  defined in the  Agreement  shall,  unless the context  other
         requires,  have the same meanings in this letter.  This letter together
         with the Schedule ("the Schedule") annexed constitutes our formal legal
opinion (the "Opinion").                                      

4.       This Opinion is given in relation to the Company only.                 

5.       This Opinion is limited to Scots law as applied by the Scottish  courts
         as at the  date of  this  letter,  so far as  published  and  available
         publicly.  It is  given on the  basis  that the  matters  on which  our
         opinion is expressed  will be governed by and  construed in  accordance
         with Scots law. We express no opinion and have not  reviewed the law of
         any other  jurisdiction  which may apply to the  Agreement or to any of
the other parties to the Agreement.                           

6.       For the purposes of this Opinion,  we have examined only the documents,
         fiches,  drafts or copies specified in the Schedule to this letter.  No
         further  searches  against the Company  have been carried out since the
         date the fiches  referred to, were  obtained.  A search will be carried
         out by us prior to the  execution of the Agreement for any petition for
         the  appointment  of any  administrator,  liquidator or receiver to the
Company.                                                      

7.       For the purposes of this Opinion,  the following  assumptions have been
made:                                                         

7.1      the Agreement and the Material Agreements (as hereinafter  defined) and
         all other  related  documents  will be complete,  duly  executed by all
         parties other than the Company and conform to any final draft documents
presented to us;                                              

7.2      any original or execution copy documents  presented to us were complete
and have not been and will not be altered;                    

7.3      all  signatures  are or will be genuine and no  unlawful or  fraudulent
      acts have occurred or will occur in the obtaining of any signatures;

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7.4      no resolution  for the  appointment  of an  administrator,  liquidator,
         administrative  receiver  or  receiver  to the whole or any part of the
         business  or  undertaking  of the  Company  has been passed and no such
         person  has been  appointed  and no  petition  has been  lodged for the
appointment of any such person;                               

7.5      the  execution  of  the  Agreement  and  the  Material  Agreements  (as
         hereinafter defined) is in the best interests of each of the parties to
     the Agreement and the Material Agreements (as hereinafter defined);

7.6      the Agreement and the Material Agreements (as hereinafter defined) will
         constitute legally valid and binding obligations on each of the parties
other than the Company;                                       

7.7      the information contained in the fiches from the Registrar of Companies
relating to the Company is complete.                          

8.       In our opinion:                                                        

8.1      The Company is a company duly  incorporated  under the laws of Scotland
         and has all requisite corporate power and authority to own, operate and
         lease  its  properties  and/or  assets  and carry on its  business  and
undertaking as now conducted.                                 

8.2      The Company has the  requisite  corporate  power and  authority  to (1)
         execute and deliver the  Agreement,  and (ii)  perform its  obligations
         under the  Agreement.  The execution,  delivery and  performance by the
         Company  of  its  obligations   under  the  Agreement  have  been  duly
         authorised  by  all  necessary  corporate  action  on the  part  of the
         Company. The Agreement has been duly and validly executed and delivered
         by the Company, and constitutes the legal, valid and binding obligation
         of the Company,  enforceable against the Company in accordance with its
terms.                                                        

8.3      Each  Employment  Agreement  Amendment,  the  LIFE  Agreement  and  the
         Termination Agreements to be entered into by the Company ("the Material
         Agreements")  has been duly and validly  executed and  delivered by the
         Company and constitutes the legal,  valid and binding obligation of the
        Company, enforceable against the Company in accordance with its terms.

8.4      The  execution  and  delivery  of  the  Material  Agreements,  and  the
         performance by the Company of its obligations thereunder, do not result
         in any conflict with,  breach or violation of or default,  termination,
         forfeiture  or lien under (or upon the  failure  to give  notice or the
         lapse  of  time,  or both,  result  in any  conflict  with,  breach  or
         violation  of or default,  termination,  forfeiture  or lien under) any
         terms or provisions of the  Memorandum  and Articles of  Association of
the Company.                                                  

9.       The term "enforceable" as used above means that the obligations assumed
         by the Company  under the  Agreement or as the case may be the Material
         Agreements are of a type which the Scottish courts enforce. It does not
         mean  that  those  obligations  will  necessarily  be  enforced  in the
following circumstances:-                                     

 -4-

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9.1      enforcement may be limited by administration,  bankruptcy,  insolvency,
         liquidation,  receivership,  reorganisation  and other  laws of general
application relating to or affecting the rights of creditors; 

9.2      enforcement  may be limited  where  damages are not  considered  by the
         court to be an adequate  remedy or where  specific  performance  is not
considered by the court to be appropriate;                    

9.3      claims may become  barred  pursuant to the  Prescription  &  Limitation
         (Scotland) Act 1973, as amended, or may be or become subject to setoff,
retention or counterclaim;                                    

9.4      where  obligations  are  to  be  performed  in a  Jurisdiction  outside
         Scotland,  they may not be  enforceable  in Scotland to the extent that
performance would be illegal under the Law of Scotland.       

9.5      obligations  enforceable  outside  Scotland may not be  enforceable  in
         Scotland if a Scottish Court was to take the view that the  obligations
         were res judicata,  or would be illegal or contrary to public policy in
         Scotland.  Without limitation to the foregoing  generality,  a Scottish
         Court  might  take  the  view  that the  restrictive  covenants  in the
         Employment  Agreement  Amendments  were  contrary to public  policy and
         accordingly  such  restrictive  covenants  may  not be  enforceable  in
Scotland.                                                     

10.      This  Opinion is  addressed  to you,  the Buyer,  and is solely for the
         benefit  of the  Buyer  and is  given  only  for  the  purposes  of the
         Agreement. It shall not be transmitted or disclosed to any other person
         nor  shall it be  relied  upon by any  other  person  or for any  other
         purpose or quoted or referred  to in any public  document or filed with
anyone without our express written consent.                   

Yours faithfully,                                             

Murray Beith Murray W.S.                                      

Schedule

 Documents

1.       A draft copy of the Agreement dated [        ].                        

2.       Draft copies of the Material Agreements dated [    ].                  

3.       Copies of the documents  appearing on the fiche issued by the Registrar
of Companies for the Company dated [    ].                    

 -5-

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4.       Board Minutes for the Company.                                         

5.       Resolutions of the members of the Company.                             

 -6-

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                                                          ________________, 1998

Microframe, Inc.                                                                
[address]                                                                       

            Re:      SolCom Systems Limited and SolCom Systems, Inc.

Ladies and Gentlemen:                                                           

         We  have  acted  as   special   counsel   to  the   shareholders   (the
"Shareholders")  of SolCom Systems  Limited,  a corporation  organized under the
laws of Scotland (the  "Parent"),  which has a wholly-owned  subsidiary,  SolCom
Systems, Inc., a Delaware corporation (the "Subsidiary"), in connection with the
sale of all of the  issued  and  outstanding  capital  stock  of the  Parent  to
Microframe,  Inc., a New Jersey  corporation  (the "Buyer")  pursuant to a Share
Purchase Agreement, dated as of ) 1998 (the "Agreement"),  by and between Buyer,
Parent  and  the  Shareholders,  and  those  documents,   agreements  and  other
instruments  contemplated  thereby  or in  connection  therewith  (the  "Related
Agreements"). Capitalized terms used and not otherwise defined herein shall have
the meanings  assigned thereto in the Agreement.  We are delivering this opinion
to you pursuant to Section ___ of the Agreement.                                

         In connection  with this opinion we have examined and are familiar with
originals or copies of (i) the Certificate of  Incorporation  and By-Laws of the
Subsidiary,  each as amended to date and (ii) the corporate  proceedings  of the
Subsidiary and (iii) such other documents,  corporate  records,  certificates of
officers of the Subsidiary and other  instruments as we have deemed  relevant or
necessary as the basis of our opinions set forth herein.  We have been furnished
with, and have relied upon without independent verification, certificates of the
Subsidiary with respect to certain factual matters. In addition,  we have relied
upon without  independent  verification  certificates and assurances from public
officials as we have deemed for purposes of  expressing  the opinions  expressed
herein.                                                                         

         In our  examination,  and for all  purposes of the  opinions  expressed
herein,  we  have  assumed,  with  your  permission,   and  without  independent
investigation, that, as of the date hereof and (except as otherwise specifically
noted) at all relevant times thereafter:                                        

         1. the  signatures of individuals  signing all documents  which we have
examined,  on which we have relied or in  connection  with which this opinion is
rendered are genuine and authorized;                                            

         2. all documents  submitted to us as copies,  whether certified or not,
conform to authentic original documents;                                        

         Based  on  the   foregoing,   and  subject  to  the   limitations   and
qualifications stated herein, we are of the opinion that:                       

         1. The Subsidiary is a corporation  duly organized and validly existing
in good  standing  under the laws of the State of Delaware and has the requisite
corporate  power and authority to own,  operate and lease its  properties and to
carry on its business as now conducted.                                         

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________________, 1998                                                          
Page 2                                                                          

         The   opinions   set  forth   above  are   subject  to  the   following
qualifications:                                                                 

         A. Our opinions  expressed  herein are limited to the laws of the State
of New York, the Federal law of the United States,  and the General  Corporation
Law of the State of Delaware ("Delaware Corporation Law'), and we do not express
any opinion  concerning  any other law.  With respect to any matters  concerning
Delaware  Corporation Law involved in the opinions set forth above, we draw your
attention  to the fact that we are not  admitted to practice law in the State of
Delaware and are not experts in the law of such jurisdiction,  and that any such
opinions  concerning  Delaware  Corporation  Law are based  upon our  reasonable
familiarity  with  Delaware  Corporation  Law  and  as a  result  of  our  prior
involvement in transactions concerning such laws.                               

         B. For  purposes  of our  opinion  set forth in  paragraph 1 above with
respect to good standing,  we are relying solely on those  certificates  of good
standing  issued  by the  appropriate  governmental  agencies  of the  State  of
Delaware,  and we express no opinion  with to such  matters  beyond the dates of
which such certificates were issued.                                            

         The opinions expressed herein shall be effective only as of the date of
this opinion letter. We do not assume  responsibility  for updating this opinion
letter as of any date subsequent to the date of this opinion letter,  and assume
no  responsibility  for  advising you of any changes with respect to any matters
described in this opinion  letter that may occur  subsequent to the date of this
opinion  letter or from the  discovery  subsequent  to the date of this  opinion
letter of  information  not  previously  known to us  pertaining  to the  events
occurring prior to the date of this opinion letter.                             

         The foregoing opinions are being furnished to you pursuant to the terms
of the Agreement and are not to be used, referred to, furnished to any person or
relied upon by any other person without prior written consent.                  

                   Very truly yours,

                      MAYER, BROWN & PLATT

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________________, 1998                                                          
Page 3                                                                          

 Form of Buyer's Counsel Opinion

         1. The Buyer (i) is a corporation  duly organized and validly  existing
in good  standing  under the laws of the State of New  Jersey,  and (ii) has the
requisite  power and authority to own its material  property and to carry on its
business as now conducted and to enter into the Share Purchase Agreement and the
[Related  Agreements - insert  correct  defined  term for the various  ancillary
documents] and to carry out the terms thereof.                                  

         2. The  execution,  delivery and  performance by the Buyer of the Share
Purchase Agreement and each of the Related Agreements to which it is a party has
been duly authorized by all necessary corporation action.                       

         3. The Share Purchase  Agreement and each of the Related  Agreements to
which  the  Buyer is a party is a legal,  valid and  binding  obligation  of the
Buyer, enforceable in accordance with the terms thereof.                        

         4. The  execution,  delivery  and  performance  of the  Share  Purchase
Agreement and each of the Related  Agreements to which the Buyer is a party, and
the consummation of the transactions  contemplated  thereby by the Buyer, do not
and will not violate any provision of the Articles of Incorporation or Bylaws of
the Buyer.                                                                      

         5. The  authorized  capital  stock of the Buyer  consists  of  ________
shares of Common Stock, ___ par value. Except as disclosed in the Share Purchase
Agreement or the Buyer's  disclosure  schedules  pursuant  thereto,  none of the
shares of Common  Stock of the Buyer issued and prior to the Closing are subject
to any preemptive rights. Upon Closing, the issued and outstanding capital stock
of the Buyer  consists of shares of Common Stock,  ___ par value.  All shares of
Common Stock of the Buyer issued  pursuant to the Share  Purchase  Agreement are
duly authorized, validly issued, fully paid and nonassessable.                  

         6. An  aggregate  of  shares of  Common  Stock of the  Buyer  have been
reserved for issuance upon exercise of the options to be issued at the Closing. 

         7.  No  consent,  approval,   authorization,   order,  registration  or
qualification  of or with any court or  governmental  agency or body is required
for the issue and sale of the Common Stock of the Buyer or the  consummation  by
the Buyer of the  transactions  contemplated by the Share Purchase  Agreement or
the Related Agreements,  except for compliance with any applicable  requirements
of the Securities Act, the Exchange Act, state  securities or Blue Sky laws, and
the rules and regulations of NASDAQ.                                            

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                                                                       EXHIBIT H

1998 STOCK OPTION PLAN
 STOCK OPTION CONTRACT

               THIS STOCK OPTION CONTRACT  entered into as of  _____________  by
and between  MICROFRAME,  INC., a New Jersey  corporation (the  "Company"),  and
____________ (the "Optionee").                                                  

W I T N E S S E T H:

               1. The Company,  in  accordance  with the  allotment  made by the
Compensation/Stock  Option Committee (the  "Committee") and subject to the terms
and conditions of the 1998 Stock Option Plan of the Company (the "Plan"), grants
on the date  hereof to the  Optionee  an  option to  purchase  an  aggregate  of
________  shares of the common stock,  $.001 par value per share, of the Company
("Common  Stock") at an exercise  price of $_______ per share.  This Option is a
[nonqualified  stock option or  incentive  stock  option]  within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").      

               2. The term of this  Option  shall be [period  of time  remaining
with respect to each original SolCom option grant,  not to exceed ten (10) years
from  respective  date of  grant]  from  the date  hereof,  subject  to  earlier
termination  as  provided  in the  Plan.  [Vesting  to  the  extent  of,  and in
accordance with, original SolCom option grants]. The right to purchase shares of
Common Stock under this Option shall be  cumulative,  so that if the full number
of shares  purchasable  in a period shall not be  purchased,  the balance may be
purchased  at any  time or  from  time to time  thereafter,  but not  after  the
expiration of this Option. Notwithstanding any of the foregoing, in no event may
a fraction  of a share of Common  Stock be  exercised  or  purchased  under this
Option.                                                                         

               3. This Option shall be exercised by giving written notice to the
Company at its principal office,  presently located at 21 Meridian Road, Edison,
New Jersey 08820, Attention:  Compensation/Stock Option Committee,  stating that
the Optionee is exercising the Option hereunder, specifying the number of shares
being  purchased and  accompanied  by payment in full of the aggregate  purchase
price therefor in cash or by certified check.                                   

               4. The Company may withhold cash and/or shares of Common Stock to
be  issued  to the  Optionee  in the  amount  which the  Company  determines  is
necessary to satisfy its obligation,  if any, to withhold taxes or other amounts
incurred by reason of the grant or exercise of this Option or the disposition of
the underlying  shares of Common Stock.  Alternatively,  the Company may require
the Optionee to pay the Company such amount in cash promptly upon demand.       

               5. Notwithstanding the foregoing, shares of Common Stock issuable
upon  exercise of this  Option  shall not be sold by the  Optionee  unless (a) a
Registration  Statement  under  the  Securities  Act of 1933,  as  amended  (the
"Securities Act") with respect to the shares of Common Stock to be received upon
the  exercise  of this  Option  shall be  effective  and  current at the time of
exercise or (b) there is an                                                     

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exemption  from  registration  under the  Securities Act for the issuance of the
shares of Common Stock upon such exercise.  The Optionee  hereby  represents and
warrants to the Company that, unless such a Registration  Statement is effective
and current at the time of exercise of this  Option,  the shares of Common Stock
to be issued upon the  exercise of this Option will be acquired by the  Optionee
for his own account,  for  investment  only and not with a view to the resale or
distribution thereof. In any event, the Optionee shall notify the Company of any
proposed  resale of the shares of Common  Stock  issued to him upon  exercise of
this Option.  Any subsequent resale or distribution of shares of Common Stock by
the Optionee shall be made only pursuant to (x) a Registration  Statement  under
the  Securities  Act which is effective  and current with respect to the sale of
shares  of  Common  Stock  being  sold,  or (y) a  specific  exemption  from the
registration requirements of the Securities Act, but in claiming such exemption,
the Optionee shall,  prior to any offer of sale or sale of such shares of Common
Stock,  provide  the Company  (unless  waived by the  Company)  with a favorable
written opinion of counsel,  in form and substance  satisfactory to the Company,
as to the  applicability of such exemption to the proposed sale or distribution.
Such  representations  and  warranties  shall  also be  deemed to be made by the
Optionee upon each exercise of this Option. Nothing herein shall be construed as
requiring  the Company to register  the shares  subject to this Option under the
Securities Act.                                                                 

               6.  Notwithstanding  anything  herein to the contrary,  if at any
time the  Committee  shall  determine,  in its  discretion,  that the listing or
qualification  of the  shares  of Common  Stock  subject  to this  Option on any
securities  exchange or under any applicable  law, or the consent or approval of
any  governmental  regulatory body, is necessary or desirable as a condition to,
or in  connection  with,  the  granting  of an  option or the issue of shares of
Common  Stock  hereunder,  this Option may not be exer cised in whole or in part
unless such listing, qualification, consent or approval shall have been effected
or  obtained  free  of any  conditions  not  acceptable  to the  Committee.  The
Committee  shall use reasonable  efforts to obtain such listing,  qualification,
consent or approval to the extent necessary in connection therewith.            

               7.  The  Company   may  affix   appropriate   legends   upon  the
certificates  for shares of Common Stock issued upon exercise of this Option and
may issue such "stop transfer"  instructions to its transfer agent in respect of
such shares as it determines,  in its discretion, to be necessary or appropriate
to (a) prevent a violation of, or to perfect an exemption from, the registration
requirements  of the Securities Act, or (b) implement the provisions of the Plan
or this Option or any other agreement  between the Company and the Optionee with
respect to such shares of Common Stock.                                         

               8.  Nothing in the Plan or herein  shall confer upon the Optionee
any right to continue as an employee or director, as applicable, of the Company,
its parent or any of its subsidiaries, or interfere in any way with any right to
terminate  such  directorship  at any time  for any  reason  whatsoever  without
liability  to  the  Company,  its  parent  or any  of  its  subsidiaries  or any
shareholder of the Company, its parent or any of its subsidiaries.              

               9. The  Company  and the  Optionee  agree  that they will both be
subject to and bound by all of the terms and  conditions  of the Plan, a copy of
which is  attached  hereto  and made a part  hereof.  Any  capitalized  term not
defined  herein shall have the meaning  ascribed to it in the Plan. In the event
of a conflict  between the terms of this  Option and the terms of the Plan,  the
terms of the Plan shall govern.                                                 

               10. The Optionee  represents  and agrees that he will comply with
all  applicable  laws  relating  to the Plan and the grant and  exercise of this
Option and the disposition of the shares of Common                              

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Stock  acquired  upon  exercise of the  Option,  including  without  limitation,
federal and state securities and "blue sky" laws.                               

               11. This Option is not  transferable  by the  Optionee  otherwise
than by will or the  laws of  descent  and  distribution  and may be  exercised,
during the  lifetime of the  Optionee,  only by the  Optionee or the  Optionee's
legal representatives.                                                          

               12. This Option shall be binding upon and inure to the benefit of
any successor or assign of the Company and to any heir,  distributee,  executor,
administrator or legal  representative  entitled by law to the Optionee's rights
hereunder.                                                                      

               13. This Option shall be governed by, and  construed and enforced
in accordance  with,  the laws of the State of Delaware,  without  regard to the
conflicts of law rules thereof.                                                 

               14.  The  invalidity,   illegality  or  unenforceability  of  any
provision herein shall not affect the validity,  legality or  enforceability  of
any other provision.                                                            

               15. The  Optionee  agrees that the Company may amend the Plan and
the options  granted to the Optionee under the Plan,  subject to the limitations
contained in the Plan.                                                          

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

                          MICROFRAME, INC.

             By:

                  Optionee

                                                     Address

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                                                                       EXHIBIT I

To be typed on MicroFrame Headed Paper

Dear Colleague/Option Holder                                                    

I am pleased to confirm  that  MicroFrame,  Inc has  purchased  the whole of the
share capital of SolCom Systems Ltd.                                            

You currently hold an option to purchase  shares in SolCom  Systems Ltd,  (SSL),
between [ ] August 2000 and [ ] August 2007 at [ ] per share.                   

Following  the  purchase  of SSL we  appreciate  that the  option to  purchase a
minority stake in a subsidiary company may not be attractive to you.            

[MicroFrame  Inc wishes to ensure  that  employees  benefit,  and feel that they
benefit from the future growth of the business].  We would therefore provide you
with the following three alternatives:-                                         

1.       An  option  granted  under the 1998  MicroFrame  stock  option  plan to
         purchase [ ] MicroFrame  shares for every [ ] SSL shares under  options
         previously  held  at a  price  of [ ] per  share.  This  option  may be
exercised between [ ] August 2000 and [ ] August 2007.        

       Unfortunately, due to the operation of the UK approved option schemes
         legislation these will be unapproved options.   This  is likely to mean
that:-                                                        

         o        you will be liable for national insurance contributions on the
                  difference  between the market value of  MicroFrame  shares on
                  the date of grant, and the option price payable, if you do not
already pay the maximum contributions;      

         o        you will pay income tax, via the PAYE  system,  on the benefit
                  you  receive at the time when you  exercise  the  options  and
                  acquire MicroFrame shares (i.e. market value of the shares you
acquire less exercise price); and           

         o        your  base  cost in the  shares  for  capital  gains  tax on a
                  subsequent  sale will be the market value of the shares at the
                  date when you exercise the options and acquire the shares.  We
                  would recommend that you take  independent  advice with regard
to your particular circumstances.           

         A summary  of the terms of the 1998  MicroFrame  stock  option  plan is
attached at Appendix A.                                                         

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2.       An option to  purchase [ ]  MicroFrame  shares for every [ ] SSL shares
         under  options  previously  held at a price of [market value at time of
         grant]  per share  under the 1998 UK  sub-plan  of the 1998  MicroFrame
         stock option  plan.  These  options may be exercised  between [ 3 years
after date of grant] and [ 10 years after date of grant ].    

         The UK sub-plan [is/will be] a plan approved by the Inland Revenue.  As
         a result,  provided you exercise the options in an approved manner,  no
         income tax nor national insurance  liabilities will arise on either the
         grant, or the exercise, of the option. Instead capital gains tax may be
         payable on the  difference  between the sale  proceeds and the exercise
price on a subsequent sale, (subject to taper relief).        

         A summary of the terms of the UK sub-plan of the 1998 MicroFrame  stock
option plan is attached at Appendix B.                        

3.       Do nothing and  continue to hold  options in SSL which you may exercise
         under  the  terms  of  that  company's'  scheme  acquiring  a  minority
shareholding in SSL.                                          

Please  complete and return the [ ],  attached at Appendix C together  with your
current option certificate in relation to the SSL Employee Share Option Scheme. 

If you wish more details regarding these schemes or an explanation of any aspect
thereof please  contact [ ]. However,  no member of the group may advise you how
you  should  proceed  except  in  purely  administrative  terms  as we  are  not
authorised  investment  advisors.  If you are in any doubt as to how to  proceed
please consult your financial advisor.                                          

[I look forward to working with each of you in the future].                     

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                                                                       EXHIBIT J

 AGREEMENT
 amongst
SOLCOM SYSTEMS LIMITED
 and
THE EXECUTIVES
 and
 THE INVESTORS

 August 1998

 MURRAY BEITH MURRAY W. S.
39 Castle Street
 Edinburgh

Tel: (0131) 225 1200
Fax: (0131) 225 9212

 Reference: AGSOL002

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 AGREEMENT

between 

                                    SOLCOM SYSTEMS  LIMITED,  a private  limited
                                    company,  incorporated  under the  Companies
                                    Acts,  in  Scotland,  registered  number  SC
                                    129008,  and having its registered office at
                                    SolCom House,  Meikle Road,  Kirkton Campus,
                  Livingston ("the Company")

and     

                                    THE EXECUTIVES and THE INVESTORS detailed in
                                    parts 1 and 2 of the schedule annexed hereto
                                    (respectively   "the  Executives"  and  "the
   Investors")

WHEREAS 

The  Company,  the  Executives  and the  Investors  entered  into an  Investment
Agreement dated 28 June 1996 ("the  Investment  Agreement") and have agreed that
all  outstanding  claims or rights of each party to the Investment  Agreement in
respect of any antecedent breaches should be waived and further that, subject to
Closing (as defined in the Share Purchase Agreement amongst the Company, certain
of the  shareholders of the Company and MicroFrame Inc, to be dated on or around
the date of this Agreement ("the SPA")) the Investment  Agreement  should be set
aside.                                                                          

Therefore the parties have agreed and do hereby agree as follows:               

1.       WAIVER OF RIGHTS                                                       

         Subject to Closing (as defined in the SPA),  the parties  hereto hereby
         waive all and any rights under the Investment  Agreement which they may
         now have or may have had in respect of any  antecedent  breaches of the
         Investment  Agreement by any party thereto and hereby relieve,  release
         and  discharge  all  other  parties  from all  claims,  rights,  debts,
         liabilities,  demands and  obligations of whatever nature in respect of
such breaches.                                                

2.       DISCONTINUANCE OF THE INVESTMENT AGREEMENT                             

         Subject to Closing (as defined in the SPA),  the parties  hereto hereby
         (a)  agree  that  the  Investment  Agreement  shall  be set  aside  and
         terminated with immediate effect from Closing and that with effect from
         that date it shall be of no further force or effect;  and (b) waive any
         and all of their  rights  under the  Investment  Agreement  in all time
         coming and hereby  relieve,  release and  discharge  the other  parties
hereto and their successors, claims and assignees from any and

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         all claims,  rights,  debts,  liabilities,  demands and  obligations of
         whatever   nature  arising  out  of  the  Investment   Agreement.   All
         liabilities,  claims,  rights, debts, demands,  obligations of whatever
         nature of the parties  arising out of the  Investment  Agreement  shall
terminate accordingly.                                        

3.       INVESTOR CONSENTS                                                      

         In terms of and for the purposes of the  Investment  Agreement  and the
         Articles of Association of the Company ("the Articles"),  the Investors
         hereby  consent to and waive all of their rights  under the  Investment
Agreement, the Articles or otherwise in respect of:           

7.       The Company and the Executives entering into, completing and performing
         their  obligations  under the SPA and any  agreements  or  transactions
  referred to therein, contemplated thereby, or ancillary thereto;

8.       The  allotment  and issue of shares in the share capital of the Company
         pursuant to the conversion of all or part of the outstanding loan stock
         of the  Company  and the issue of  warrants  to  subscribe  for  shares
         pursuant  thereto  or the  exercise  of  any  outstanding  warrants  to
         subscribe for shares in the Company (whether  conditional or otherwise)
         or of any warrants to be issued  pursuant to the  conversion  of any of
the outstanding loan stock of the Company referred to above;  

9.       The entry into an  investment  agreement or  agreements  by the Company
         setting out the terms and  conditions on which a third party or parties
         will  subscribe  for  shares  in the  Company  in  connection  with the
         provision of funding to the Company in terms of Section 7.18 of the SPA
         and the  allotment  and issue of shares in the Company to a third party
         or parties in connection  with the  provision of such  funding,  all on
         such  terms  and  conditions  as  the  Directors  of  the  Company  may
determine;                                                    

10.      The  amendment  of any of the  terms  of the  outstanding  warrants  to
         subscribe for shares in the Company and of the terms of any warrants to
         be issued in connection  with the  conversion of the  outstanding  loan
         stock of the  Company  referred to in (2) above,  provided  always that
         such amendment shall not result in any increase in the number of shares
       which may be subscribed for pursuant to the exercise of each warrant;

11.      The granting of options to subscribe for up to 800,000  ordinary shares
         of (pound)0.01  each in the Company on such terms and conditions as the
         Directors of the Company may determine to employees and shareholders of
         the  Company  and the  allotment  and issue of  shares  in the  Company
pursuant to the exercise of such options; and                 

12.      The increase in the authorised share capital of the company if required
in connection with any or all of paragraphs (1) to (5) above. 

 -2-

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4.       GOVERNING LAW                                                          

         This agreement shall be governed by Scottish law and the parties hereto
         hereby prorogate the non exclusive jurisdiction of the Scottish courts.

IN WITNESS  WHEREOF  these  presents  typewritten  on this and the preceding two
pages are executed as follows:                                                  

They are  subscribed  for and on behalf of SOLCOM  SYSTEMS  LIMITED  by  s/Peter
MacLaren  Director at Edinburgh on 13th August Nineteen hundred and Ninety Eight
before this witness:                                                            

____________________________                         Witness                    

/s/ Alexander Nathaniel Gerver                       Full Name                  

39 Castle Street                                     Address                    

Edinburgh                                                                       

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

They are subscribed by or for and on behalf of                                  

BRIAN SOUTER     /s/                  PETER JAMES MACLAREN   /s/                
                ------------------                         -------------------
                         B Souter                                 P J MacLaren
ANN HERON GLOAG  /s/                  HELEN SEALEY           /s/                
                ------------------                         -------------------
                     A H Gloag                                H Sealey
ALI TAHERI       /s/                  ANDREW EDWARD SEALEY   /s/                
                ------------------                         -------------------
              For and on behalf of                              A E Sealey
A Taheri                    
KEITH LAING      /s/                  LADY MARGARET ELLIOT   /s/                
                ------------------                         -------------------
                         K Laing                                  Attorney for
                                                                 Lady M Elliot

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            E F G READS TRUSTEES
WILLIAM HUGH                        LIMITED AS TRUSTEES OF  M                   
EVANS           /s/                 D RUTTERFORD'S TRUST     /s/                
                ------------------                         ---------------------
                         W H Evans                          Authorised Signatory
            E F G READS TRUSTEES
              LIMITED AS TRUSTEES OF
PETER ATHOLL                        MRS J G RUTTERFORD'S 1991                   
WILSON          /s/                 TRUST                    /s/                
                ------------------                         ---------------------
                        P A Wilson                          Authorised Signatory
LOTHIAN                                                                         
INVESTMENT FUND                                                                 
FOR ENTERPRISE                                                                  
LIMITED         /s/                                                             
---------------------                           
Authorised Signatory                          

at Edinburgh on 13th August                                                     
Nineteen hundred and Ninety Eight                                               
before this witness:                                                            

_____________________________       Witness                                     

_____________________________       Full Name                                   

_____________________________                                                   

_____________________________       Address                                     

 -4-

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SCHEDULE

PART 1

EXECUTIVES

Name                               Address                                      

William Hugh Evans                 Formerly of 33 Stoneyflats Crescent, South   
                               Queensferry and now of 19 Pentland Drive,
          Edinburgh, EH 10 6PU

Peter Atholl Wilson                6 Hermand Gardens, West Calder, EH55 8BT     

Peter James MacLaren               Formerly of 19 Wester Coates Terrace,        
                               Edinburgh and now of 2 Glencairn Crescent
         Edinburgh, EH12 5BS

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PART 2

 INVESTORS

                                                        [Enlarge/Download Table]


Name                                            Address                                       

                                                                                              
Brian Souter                                    Murrayfield House, St Magdalene's Road, Perth,
                                                PH2 0BT                                       

Ann Heron Gloag                                 Balcraig House, Scone, Perth, PH2 7PJ         

Peter James MacLaren                            2 Glencairn Crescent, Edinburgh, EH12 5BS     

William Hugh Evans                              19 Pentland Drive, Edinburgh, EH10 6PU        

Keith Laing                                     43 Wester Bankton, Livingston, EH54 9DY       

Ali Taheri                                      29 North Gyle Terrace, Edinburgh, EH12 8JT    

Peter Atholl Wilson                             6 Hermand Gardens, West Calder, EH55 8BT      

Lady Margaret Elliot                            8 Howe Street, Edinburgh, EH3 6TD             

EFG Reads Trustees Limited the successors       PO Box 641, No 1 Seaton Place, St Helier,     
of Royal Bank of Canada Trust Company           Jersey, JE4 8YJ                               
Limited as trustees of M D Rutterford's Trust                                                 

EFG Reads Trustees Limited the successors       PO Box 641, No 1 Seaton Place, St Helier,     
of Royal Bank of Canada Trust Company           Jersey, JE4 8YJ                               
Limited as trustees of Mrs J G Rutterford's                                                   
1991 Trust                                                                                    

Andrew Edward Sealey                            The Coach House, 99 Blackheath Park,          
                                                London, SE3 0EU                               

Helen Sealey                                    4 Castlelaw Road, Edinburgh, EH13 0DN         

Lothian Investment Fund for Enterprise Limited  21 Ainslie Place, Edinburgh, EH3 6AJ          


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 AGREEMENT
 amongst
SOLCOM SYSTEMS LIMITED
 and
THE EXECUTIVES
 and
 THE INVESTORS

 August 1998
 MURRAY BEITH MURRAY W. S.
39 Castle Street
 Edinburgh

Tel: (0131) 225 1200
Fax: (0131) 225 9212

 Reference: AGSOL001

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 AGREEMENT

between 

                                    SOLCOM SYSTEMS  LIMITED,  a private  limited
                                    company,  incorporated  under the  Companies
                                    Acts,  in  Scotland,  registered  number  SC
                                    129008,  and having its registered office at
                                    SolCom House,  Meikle Road,  Kirkton Campus,
                  Livingston ("the Company")

and     

                                    THE EXECUTIVES and THE INVESTORS detailed in
                                    parts 1 and 2 of the schedule annexed hereto
                                    (respectively   "the  Executives"  and  "the
   Investors")

WHEREAS                                                                         

The  Company,  the  Executives  and the  Investors  entered  into an  Investment
Agreement dated 17 March 1993 ("the Investment  Agreement") and have agreed that
all  outstanding  claims or rights of each party to the Investment  Agreement in
respect of any antecedent breaches should be waived and further that, subject to
Closing (as defined in the Share Purchase Agreement amongst the Company, certain
of the  shareholders of the Company and MicroFrame Inc, to be dated on or around
the date of this Agreement ("the SPA")) the Investment  Agreement  should be set
aside.                                                                          

Therefore the parties have agreed and do hereby agree as follows:               

1.       WAIVER OF RIGHTS                                                       

         Subject to Closing (as defined in the SPA),  the parties  hereto hereby
         waive all and any rights under the Investment  Agreement which they may
         now have or may have had in respect of any  antecedent  breaches of the
         Investment  Agreement by any party thereto and hereby relieve,  release
         and  discharge  all  other  parties  from all  claims,  rights,  debts,
         liabilities,  demands and  obligations of whatever nature in respect of
such breaches.                                                

2.       DISCONTINUANCE OF THE INVESTMENT AGREEMENT                             

         Subject to Closing (as defined in the SPA),  the parties  hereto hereby
         (a)  agree  that  the  Investment  Agreement  shall  be set  aside  and
         terminated with immediate effect from Closing and that with effect from
         that date it shall be of no further force or effect;  and (b) waive any
and                                                           

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         all of their rights under the  Investment  Agreement in all time coming
         and hereby relieve,  release and discharge the other parties hereto and
         their successors, claims and assignees from any and all claims, rights,
         debts, liabilities,  demands and obligations of whatever nature arising
         out of the  Investment  Agreement.  All  liabilities,  claims,  rights,
         debts,  demands,  obligations of whatever nature of the parties arising
out of the Investment Agreement shall terminate accordingly.  

3.       INVESTOR CONSENTS                                                      

         In terms of and for the purposes of the  Investment  Agreement  and the
         Articles of Association of the Company ("the Articles"),  the Investors
         hereby  consent to and waive all of their rights  under the  Investment
Agreement, the Articles or otherwise in respect of:           

1.       The Company and the Executives entering into, completing and performing
         their  obligations  under the SPA and any  agreements  or  transactions
  referred to therein, contemplated thereby, or ancillary thereto;

2.       The  allotment  and issue of shares in the share capital of the Company
         pursuant to the conversion of all or part of the outstanding loan stock
         of the  Company  and the issue of  warrants  to  subscribe  for  shares
         pursuant  thereto  or the  exercise  of  any  outstanding  warrants  to
         subscribe for shares in the Company (whether  conditional or otherwise)
         or of any warrants to be issued  pursuant to the  conversion  of any of
the outstanding loan stock of the Company referred to above;  

3.       The entry into an  investment  agreement or  agreements  by the Company
         setting out the terms and  conditions on which a third party or parties
         will  subscribe  for  shares  in the  Company  in  connection  with the
         provision of funding to the Company in terms of Section 7.18 of the SPA
         and the  allotment  and issue of shares in the Company to a third party
         or parties in connection  with the  provision of such  funding,  all on
         such  terms  and  conditions  as  the  Directors  of  the  Company  may
determine;                                                    

4.       The  amendment  of any of the  terms  of the  outstanding  warrants  to
         subscribe for shares in the Company and of the terms of any warrants to
         be issued in connection  with the  conversion of the  outstanding  loan
         stock of the  Company  referred to in (2) above,  provided  always that
         such amendment shall not result in any increase in the number of shares
       which may be subscribed for pursuant to the exercise of each warrant;

5.       The granting of options to subscribe for up to 800,000  ordinary shares
         of (pound)0.01  each in the Company on such terms and conditions as the
         Directors of the Company may determine to employees and shareholders of
         the  Company  and the  allotment  and issue of  shares  in the  Company
pursuant to the exercise of such options; and                 

6.       The increase in the authorised share capital of the company if required
in connection with any or all of paragraphs (1) to (5) above. 

 -2-

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4.       GOVERNING LAW                                                          

         This agreement shall be governed by Scottish law and the parties hereto
         hereby prorogate the non exclusive jurisdiction of the Scottish courts.

IN WITNESS  WHEREOF  these  presents  typewritten  on this and the preceding two
pages are executed as follows:                                                  

They are  subscribed  for and on behalf of SOLCOM  SYSTEMS  LIMITED  by  s/Peter
MacLaren  Director at Edinburgh on 13th August Nineteen hundred and Ninety Eight
before this witness:                                                            

-----------------------------     Witness                                       

Alexander Nathaniel Gerver        Full Name                                     
-----------------------------                                                   

39 Castle St.                     Address                                       
-----------------------------                                                   
Edinburgh                                                                       

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

They are subscribed by or for and on behalf of                                  

WILLIAM HUGH EVANS                                                              
      --------------------------------------------
                                         W H Evans
PETER ATHOLL WILSON                                                             
      --------------------------------------------
                                        P A Wilson
PETER JAMES MACLAREN                                                            
      --------------------------------------------
                                      P J MacLaren
HELEN SEALEY                                                                    
      --------------------------------------------
                                          H Sealey

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ANDREW EDWARD SEALEY                                                            
                                    --------------------------------------
                                                                A E Sealey
LADY MARGARET ELLIOT                                                            
                                    --------------------------------------
                                                             Lady M Elliot
E F G READS TRUSTEES LIMITED AS                                                 
TRUSTEES OF  M D RUTTERFORD'S TRUST                                             
                                    --------------------------------------
                                                      Authorised Signatory
E F G READS TRUSTEES LIMITED AS                                                 
TRUSTEES OF  MRS J G RUTTERFORD'S 1991                                          
TRUST                                                                           
                                    --------------------------------------
                                                      Authorised Signatory

at Edinburgh                                                                    
on 13th August                                                                  
Nineteen hundred and Ninety Eight before this witness:                          

-----------------------------         Witness                                   

Alexander Nathaniel Gerver            Full Name                                 

39 Castle St.                         Address                                   
-----------------------------                                                   
Edinburgh                                                                       
-----------------------------                                                   

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

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SCHEDULE

PART 1

EXECUTIVES

Name                            Address                                         

William Hugh Evans              Formerly of 33 Stoneyflats Crescent, South      
                         Queensferry and now of 19 Pentland Drive,
    Edinburgh, EH 10 6PU

Peter Atholl Wilson             6 Hermand Gardens, West Calder, EH55 8BT        

Peter James MacLaren            Formerly of 19 Wester Coates Terrace,           
                         Edinburgh and now of 2 Glencairn Crescent
   Edinburgh, EH12 5BS

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PART 2

 INVESTORS

                                                        [Enlarge/Download Table]


Name                                           Address                                  

                                                                                        
Helen Sealey                                   4 Castlelaw Road, Edinburgh, EH13 0DN    

Andrew Edward Sealey                           Formerly 2a Vanbrugh Terrace,            
                                               London and now                           
                                               The Coach House, 99 Blackheath Park,     
                                               London, SE3 0EU                          

EFG Reads Trustees Limited the successors      PO Box 641, No 1 Seaton Place, St Helier,
of Royal Bank of Canada Trust Company          Jersey, JE4 8YJ                          
Limited as trustees of M D Rutterford's Trust                                           

EFG Reads Trustees Limited the successors      PO Box 641, No 1 Seaton Place, St Helier,
of Royal Bank of Canada Trust Company          Jersey, JE4 8YJ                          
Limited as trustees of Mrs J G Rutterford's                                             
1991 Trust                                                                              

Lady Margaret Elliot                           8 Howe Street, Edinburgh, EH3 6TD        

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 AGREEMENT
 amongst
SOLCOM SYSTEMS LIMITED
 and
THE EXECUTIVES
 and
LIFE

 August 1998

 MURRAY BEITH MURRAY W. S.
39 Castle Street
 Edinburgh

Tel: (0131) 225 1200
Fax: (0131) 225 9212

 Reference: AGSOL003

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 AGREEMENT

between 

                                    SOLCOM SYSTEMS  LIMITED,  a private  limited
                                    company,  incorporated  under the  Companies
                                    Acts,  in  Scotland,  registered  number  SC
                                    129008,  and having its registered office at
                                    SolCom House,  Meikle Road,  Kirkton Campus,
                  Livingston ("the Company")

and     

                                    WILLIAM   HUGH   EVANS,   formerly   of   33
                                    Stoneyflats, South Queensferry and now of 19
                           Pentland Drive, Edinburgh, EH10 6PU

                                    PETER ATHOLL WILSON,  of 6 Hermand  Gardens,
             West Calder, EH55 8BT

                                    PETER JAMES MACLAREN,  formerly of 19 Wester
                                    Coates  Terrace,  Edinburgh  and  now  of  2
                                    Glencairn  Crescent,   Edinburgh,  EH12  5BS
                   (together "the Executives")

and     

                                    LOTHIAN   INVESTMENT   FUND  FOR  ENTERPRISE
                                    LIMITED,  a company limited by guarantee (SC
                                    137938) and having its registered  office at
                            21 Ainslie Place, Edinburgh ("LIFE")

WHEREAS                                                                         

The Company, The Executives and LIFE entered into a Minute of Agreement dated 21
December 1993 ("The Investment  Agreement") and have agreed that all outstanding
claims or rights of each  party to The  Investment  Agreement  in respect of any
antecedent  breaches  should be waived and further that,  subject to Closing (as
defined in The Share Purchase Agreement amongst The Company, certain of The     

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shareholders  of The  Company and  MicroFrame  Inc, to be dated on or around The
date of this  Agreement  ("The SPA")) The  Investment  Agreements  should be set
aside.                                                                          

Therefore The parties have agreed and do hereby agree as follows:               

1.       WAIVER OF RIGHTS                                                       

         The parties hereto hereby waive all and any rights under The Investment
         Agreement  which  they may now have or may have had in  respect  of any
         antecedent  breaches of The  Investment  Agreement by any party thereto
         and hereby  relieve,  release and  discharge all other parties from all
         claims, rights, debts, liabilities, demands and obligations of whatever
nature in respect of such breaches.                           

2.       DISCONTINUANCE OF THE INVESTMENT AGREEMENT                             

         Subject to Closing (as defined in The SPA),  the parties  hereto hereby
         (a)  agree  that  the  Investment  Agreement  shall  be set  aside  and
         terminated with immediate effect from Closing and that with effect from
         that date it shall be of no further force or effect;  and (b) waive any
         and all of their  rights  under the  Investment  Agreement  in all time
         coming and hereby  relieve,  release and  discharge  the other  parties
         hereto  and their  successors,  claims and  assignees  from any and all
         claims, rights, debts, liabilities, demands and obligations of whatever
         nature  arising  out  of the  Investment  Agreement.  All  liabilities,
         claims,  rights, debts, demands,  obligations of whatever nature of the
         parties  arising  out  of  the  Investment  Agreement  shall  terminate
accordingly.                                                  

3.       LIFE CONSENTS                                                          

         In terms of and for the purposes of the  Investment  Agreement  and the
         Articles of  Association of the Company ("The  Articles"),  LIFE hereby
         consents  to  and  waives  all  of  its  rights  under  the  Investment
Agreement, the Articles or otherwise in respect of            

         1.       The Company and the Executives  entering into,  completing and
                  performing their  obligations under the SPA and any agreements
                  or transactions referred to therein,  contemplated thereby, or
ancillary thereto;                          

         2.       The  allotment and issue of shares in the share capital of the
                  Company  pursuant  to the  conversion  of all or  part  of the
                  outstanding  loan  stock  of the  Company  and  the  issue  of
                  warrants  to  subscribe  for  shares  pursuant  thereto or the
                  exercise of any  outstanding  warrants to subscribe for shares
                  in the Company  (whether  conditional  or otherwise) or of any
                  warrants to be issued pursuant to the conversion of any of the
            outstanding loan stock of the Company referred to above;

         3.       The entry into an  investment  agreement or  agreements by the
                  Company  setting out the terms and conditions on which a third
     party or parties will subscribe for shares in the

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                  Company in  connection  with the  provision  of funding to the
                  Company in terms of Section 7.18 of the SPA and the  allotment
                  and issue of shares in the Company to a third party or parties
                  in connection with the provision of such funding,  all on such
                  terms and  conditions  as the  Directors  of the  Company  may
determine;                                  

         4.       The amendment of any of the terms of the outstanding  warrants
                  to subscribe for shares in the Company and of the terms of any
                  warrants to be issued in connection with the conversion of the
                  outstanding  loan  stock  of the  Company  referred  to in (2)
                  above, provided always that such amendment shall not result in
                  any increase in the number of shares  which may be  subscribed
 for pursuant to the exercise of each warrant;

         5.       The  granting  of  options  to  subscribe  for  up to  800,000
                  ordinary  shares of  (pound)0.01  each in the  Company on such
                  terms and  conditions  as the  Directors  of the  Company  may
                  determine to employees and shareholders of the Company and the
                  allotment  and issue of shares in the Company  pursuant to the
exercise of such options; and               

         6.       The increase in the authorised share capital of the company if
                  required in connection  with any or all of  paragraphs  (1) to
(5) above.                                  

4.       GOVERNING LAW                                                          

         This agreement shall be governed by Scottish law and the parties hereto
         hereby prorogate the non exclusive jurisdiction of the Scottish courts.

IN WITNESS  WHEREOF  these  presents  typewritten  on this and the preceding two
pages are executed as follows:                                                  

They are subscribed for and on behalf    They are subscribed for and on behalf  
of                                       of                                     
SOLCOM SYSTEMS LIMITED                   LOTHIAN INVESTMENT FUND FOR            
by s/Peter MacLaren     Director         ENTERPRISE LIMITED                     
at Edinburgh                             by s/Peter MacLaren   Attorney         
on 13th August                           at Edinburgh                           
Nineteen hundred and Ninety Eight        on 13th August                         
before this witness:                     Nineteen hundred and Ninety Eight      
                      before this witness:

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----------------------------   Witness       ----------------------    Witness  

Alexander Nathaniel Gerver     Full Name     John Macrae Caldwell      Full Name

39 Castle St                   Address       c/o Saltire Court         Address  
------------------------------               -----------------------            

Edinburgh                                    Edinburgh                          
-----------------------                      -----------------------            

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

They are subscribed by or for and on behalf of                                  

WILLIAM HUGH EVANS             /s/                                              
              --------------------------------
                                     W H Evans
PETER ATHOLL WILSON            /s/                                              
              --------------------------------
                                    P A Wilson
PETER JAMES MACLAREN           /s/                                              
              --------------------------------
                                  P J MacLaren
at Edinburgh                                                                    
on 13th August                                                                  
Nineteen hundred and Ninety Eight before this witness:                          

----------------------------  Witness                                           

Alexander Nathaniel Gerver    Full Name                                         
----------------------------                                                    

39 Castle St                  Address                                           
----------------------------                                                    

Edinburgh                                                                       
----------------------------                                                    

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

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                                                                     EXHIBIT K

 DEED OF ADHERENCE
 among
MICROFRAME, INC.
 and
ANDERSON STRATHERN
NOMINEES LIMITED
 and
JAMES WILSON RAMSAY, WILLIAM RAMSAY,
 ERIC PETER MEYERS, IRENE VASS, ROBERT FORBES,
 RENATE RITCHIE, KEVIN RITCHIE, IAN QUINNEY,
 ROBERT STRUTHERS, GAYNOR CHRISTINE STRUTHERS,
STEWART STRUTHERS, GEOFFREY MICHAEL GWYNN,
RICHARD ANDREW SMITH, JOAN SMITH, DAVID MICHAEL SMITH,
 GRAHAM WILLIAM SMITH, KAREN MARGARET SMITH,
 HENRY COX, ANKE-BEATE STAHL, WILLIAM LILLIS
and GERARD COX

 ANDERSON STRATHERN WS
SOLICITORS
 48 Castle Street,
 Edinburgh
FAS02080mm

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         DEED of ADHERENCE

among   

                                    MICROFRAME,  INC., a New Jersey  Corporation
      ("Microframe")

and     

                                    ANDERSON   STRATHERN   NOMINEES  LIMITED,  a
                                    company incorporated under the Companies Act
                                    1985 of the  United  Kingdom  and having its
                                    registered   office  at  48  Castle  Street,
              Edinburgh ("Nominees")

and     

                                    JAMES WILSON RAMSAY,  of 16 Easter Crescent,
                                    Wishaw, Lanarkshire ML2 8XB, WILLIAM RAMSAY,
                                    of 7 Huntly  Quadrant,  Wishaw,  Lanarkshire
                                    ML2 7LP,  ERIC PETER  MEYERS,  of 79 Mowbray
                                    Grove, South Queensferry,  West Lothian EH30
                                    9PD, IRENE VASS of 8 Seafield Court, Princes
                                    Park,  Falkirk,  ROBERT  FORBES  of 70 Saint
                                    Andrews Drive, Bridge of Weir, Renfrewshire,
                                    RENATE  RITCHIE of 3 Grange  Drive,  Falkirk
                                    FK2  9ES,  KEVIN  RITCHIE,  care of 3 Grange
                                    Drive,  Falkirk  FK2  9ES,  IAN  QUINNEY  of
                                    Victoria Cottage,  Lammerlaws,  Burntisland,
                                    Fife  KY3  9BS,  ROBERT  STRUTHERS,   of  34
                                    Primrose Place,  Livingston EH54 6RN, GAYNOR
                                    CHRISTINE  STRUTHERS,  of 34 Primrose Place,
                                    Livingston EH54 6RN, STEWART STRUTHERS, of 2
                                    Murrell  Road,  Aberdour,  GEOFFREY  MICHAEL
                                    GWYNN of Rose Cottage,  Roseford Lane, Acton
                                    Trussell, Stratford ST17 ORD, RICHARD ANDREW
                                    SMITH  of  65   Foxknowe   Place,   Eliburn,
                                    Livingston   EH54   6TX,   JOAN   SMITH   of
                                    Furzefield,  Abbey Road, Bourne,  Lincs PEl0
                                    9AP,   DAVID   MICHAEL  SMITH  of  18  Edwin
                                    Gardens,  Bourne,  Lincs  PE10  9QN,  GRAHAM
                                    WILLIAM  SMITH of The  Setter  Dog,  Walkers
                                    Barn, Reinow, Macclesfield,  Cheshire, KAREN
                                    MARGARET   SMITH,   of  65  Foxknowe  Place,
                                    Eliburn,  Livingston  EH54 6TX, HENRY COX of
                                    1/4 Caledonian Crescent, Edinburgh EHl1 2BD,
                                    ANKE-BEATE STAHL of 1/4 Caledonian Crescent,
                                    Edinburgh  EHl1  2BD,  WILLIAM  LILLIS of 18
                                    lnvergarry Drive,  Glasgow and GERARD COX of
                                    5    Rhindmuir    Grove,    Glasgow    ("the
       Beneficiaries")

WHEREAS:-                                                                       

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                  (G)      Microframe   has  entered   into  a  Share   Purchase
                           Agreement for the purchase of the entire issued share
                           capital of the  Company as  hereinafter  defined  and
                           Nominees is a party to the Share  Purchase  Agreement
as a Seller.              

                  (H)      Nominees held certain shares in the Company on behalf
                           of  the   Beneficiaries   which  were   acquired   by
                           Microframe  pursuant to the Share Purchase  Agreement
                           and in respect of which Nominees has had issued to it
                   certain shares of common stock in Microframe.

                  (I)      Nominees  wishes  to  transfer  its  shares of common
                           stock  in   Microframe   to  the   Beneficiaries   as
                           beneficial   owners   thereof  which   Microframe  is
                           prepared to agree to do subject to the entering  into
of these presents.        

NOW THEREFORE IT IS AGREED as follows:-     

1.       Definitions and Interpretation     

                  1.1      For the  purposes  of  this  Deed  of  Adherence  the
                           following  words  and  expressions   shall  have  the
following meanings:-      

                      "Company"               means SolCom  Systems  Limited,  a
                                              company   incorporated  under  the
                                              Companies  Act 1985 of the  United
                                  Kingdom and having its

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                                              registered office at SolCom House,
                                              Meikle   Road,   Kirkton   Campus,
                       Livingston;

                      "Escrow Agreement"      means the escrow agreement entered
                                              into   pursuant   to   the   Share
                                              Purchase Agreement a copy of which
                                     is annexed as Appendix 2;

                      "Registration  Rights   means  the   registration   rights
                       Agreement"             agreement entered into pursuant to
                                              the Share  Purchase  Agreement,  a
                                              copy  of  which  is   annexed   as
                       Appendix 3;

                      "Share Purchase         means the Share Purchase Agreement
                       Agreement"             entered into  between  Microframe,
                                              the Company and the parties  named
                                              therein as Sellers relative to the
                                              purchase  of  the  entire   issued
                                              share  capital of the  Company,  a
                                              copy  of  which  is   annexed   as
                        Appendix  1;

                      "Shares"                means the  shares of common  stock
                                              in  Microframe  specified  in  the
                                              Schedule  against the name of each
                                              of the  individual  Beneficiaries;

                      "Warranties"            means   the   warranties   of  the
                                              Sellers  set out in  Section  3 of
                                              the Share  Purchase  Agreement and
                                              of each  Seller set out in Section
                                              5 of the Share Purchase  Agreement
                              and of the Sellers

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set out in Section  10.5 of the Share  Purchase  Agreement  as  qualified by the
Disclosure  Letter and the  Supplemental  Disclosure  Letter in accordance  with
their terms.                                                                    

                  1.2      Words and  expressions  defined in the Share Purchase
                           Agreement shall have the same meaning in this Deed of
                           Adherence  except where provided  otherwise in Clause
         1.1 or elsewhere in these presents.
                  1.3      The  provisions of the  Interpretation  Act 1978 with
                           respect  to  interpretation  and  construction  shall
                       apply to this Deed of Adherence mutatis mutandis.
                  1.4      The  headings  herein  are for  convenience  only and
                           shall not be  construed  as forming part of this Deed
                           of   Adherence  or  be  taken  into  account  in  the
interpretation hereof.    
                  1.5      References  to a Clause,  Schedule or an Appendix are
                           to a Clause,  Schedule or an Appendix to this Deed of
Adherence.                

2.       Adherence by Beneficiaries                           

                  In  consideration  of  Microframe  entering into this deed and
                  issuing  the  Shares to  Nominees  and the  acknowledgment  by
                  Microframe   as   provided   for  in  Clause  3  each  of  the
                  Beneficiaries  undertakes and agrees to be bound as if he were
                  a Seller and executing party by the provisions and obligations
                  incumbent  upon   Nominees  in respect of the Shares by virtue
of: -                                       

                  2.1      the Share  Purchase  Agreement,  such  provisions and
                           obligations  including,   without  prejudice  to  the
                           generality,  the  warranties  subject  always  to the
                           limitations  on liability set out in Section 4 of the
                           Share  Purchase  Agreement  or as may be available to
                           the Sellers,  the  covenant of the Sellers  regarding
                           standstill  set  out in  Section  7.22  of the  Share
                           Purchase  Agreement,  the provisions  regarding title
                           survival of representations and warranties set out in
      Section 10 of the Share Purchase

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                           Agreement and the obligations of indemnification  set
                           out in  Section  12 of the Share  Purchase  Agreement
                           subject  always  to  the  limitations   provided  for
therein;                  

2.2      the Escrow Agreement;              

2.3      the Registration Rights Agreement; 

3.                Acknowledgment by Microframe                

                  3.1      in   consideration   of  the   undertakings   by  the
                           Beneficiaries  provided  for in  Clause 2  Microframe
                           undertakes  to agree to the  transfer  of the  Shares
                           into the names of each of the relevant  Beneficiaries
                           and acknowledges  that the provisions and obligations
                           incumbent  upon  Microframe to inter alia Nominees by
                           virtue of the documents listed in Clause 3.2 shall be
                           enforceable by each of the  Beneficiaries  as if each
                           of the Beneficiaries were a party to the documents in
                           respect of the number of Shares set out against  that
                           Beneficiaries  name in the  Schedule  in the place of
Nominees;                 

          3.2      The documents referred to in Clause 3.1 are:-

                           3.2.1    the   Share   Purchase    Agreement,    such
                                    provisions   and   obligations    including,
                                    without   prejudice   to   the   generality,
                                    warranties by the Buyer set out in Section 6
                                    of the  Share  Purchase  Agreement,  and the
                                    covenant of the Buyer to set up, by way of a
                                    sub plan an  Employee  Share  Option  Scheme
                                    pursuant  to  Section   7.20  of  the  Share
                                    Purchase   Agreement,   and  the  provisions
                                    regarding the survival of warranties set out
                                    in   Section   10  of  the  Share   Purchase
  Agreement;

   3.2.2    the Escrow Agreement

                 3.2.3    the Registration Rights Agreement.

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4.       Release of Nominees                                  

                                    (a)     In  consideration  for  each  of the
                                            Beneficiaries     fulfilling     the
                                            provisions and obligations incumbent
                                            upon  Nominees  as  provided  for in
                                            Clause   2,   Microframe    releases
                                            Nominees  from  any  obligations  in
                                            respect  of the  Shares by virtue of
                                            the Share  Purchase  Agreement,  the
                                            Escrow     Agreement     and     the
                                          Registration Rights Agreement; and

                                    (b)     each     of    the     Beneficiaries
                                            acknowledges   that   Nominees   has
                                            fulfilled its obligations to each of
                                            the  Beneficiaries in respect of the
                                            Beneficiaries  holdings of shares in
                                            the  Company  and that  they have no
                                            right of recourse  against  Nominees
                               in respect of the same.

5.       General                                              

                  5.1      Each  individual  executing this Deed of Adherence on
                           behalf of a party to it represents  and warrants that
                           he or she has been fully  empowered  to execute  this
                           Deed of Adherence  and that all  necessary  action to
                           authorize the execution of this Deed of Adherence has
taken place;              

                  5.2      This Deed of  Adherence  is  governed by and shall be
                           construed  in  accordance  with  Scots  Law  and  the
                           parties   hereto   submit   to   the    non-exclusive
                           jurisdiction  of  the  Scottish  Courts:  IN  WITNESS
WHEREOF                   

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This is the  SCHEDULE  referred  to in the  foregoing  DEED of  ADHERENCE  among
MICROFRAME,  INC.  and  ANDERSON  STRATHERN  NOMINEES  LIMITED and JAMES  WILSON
RAMSAY,  WILLIAM RAMSAY,  ERIC PETER MEYERS,  IRENE VASS, ROBERT FORBES,  RENATE
RITCHIE,  KEVIN  RITCHIE,  IAN  QUINNEY,  ROBERT  STRUTHERS,   GAYNOR  CHRISTINE
STRUTHERS, STEWART STRUTHERS, GEOFFREY MICHAEL GWYNN, RICHARD ANDREW SMITH, JOAN
SMITH,  DAVID MICHAEL SMITH,  GRAHAM WILLIAM SMITH,  KAREN MARGARET SMITH, HENRY
COX,  ANKE-BEATE  STAHL,  WILLIAM  LILLIS  and GERARD COX [ ] dated [ ] 1998 [ ]
shares of common stock in Microframe                                            

Name     Number of Shares of Common                                             
Stock in Microframe                                           

Henry Cox                                                                       
Anke-Beate Stahl                                                                
Gerard Cox                                                                      
William Lillis                                                                  
Geoffrey Michael Gwynn                                                          
Eric Peter Meyers                                                               
Ian Quinney                                                                     
James Wilson Ramsay                                                             
William Ramsay                                                                  
Renate  Ritchie                                                                 
Kevin  Ritchie                                                                  
Richard  Andrew  Smith                                                          
Joan Smith                                                                      
Karen Margaret Smith                                                            
Graham William Smith                                                            
David Michael Smith                                                             
Robert Gordon  Struthers                                                        
Gaynor Christine Struthers                                                      
Stewart Struthers                                                               
Irene Vass                                                                      
Robert Forbes                                                                   

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This is the  SCHEDULE  referred  to in the  foregoing  DEED of  ADHERENCE  among
MICROFRAME,  INC.  and  ANDERSON  STRATHERN  NOMINEES  LIMITED and JAMES  WILSON
RAMSAY,  WILLIAM RAMSAY,  ERIC PETER MEYERS,  IRENE VASS, ROBERT FORBES,  RENATE
RITCHIE,  KEVIN  RITCHIE,  IAN  QUINNEY,  ROBERT  STRUTHERS,   GAYNOR  CHRISTINE
STRUTHERS, STEWART STRUTHERS, GEOFFREY MICHAEL GWYNN, RICHARD ANDREW SMITH, JOAN
SMITH,  DAVID MICHAEL SMITH,  GRAHAM WILLIAM SMITH,  KAREN MARGARET SMITH, HENRY
COX, ANKE-BEATE STAHL, WILLIAM LILLIS and GERARD COX [ ] dated [ ] 1998         

Share Purchase Agreement

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This is the  SCHEDULE  referred  to in the  foregoing  DEED of  ADHERENCE  among
MICROFRAME,  INC.  and  ANDERSON  STRATHERN  NOMINEES  LIMITED and JAMES  WILSON
RAMSAY,  WILLIAM RAMSAY,  ERIC PETER MEYERS,  IRENE VASS, ROBERT FORBES,  RENATE
RITCHIE,  KEVIN  RITCHIE,  IAN  QUINNEY,  ROBERT  STRUTHERS,   GAYNOR  CHRISTINE
STRUTHERS, STEWART STRUTHERS, GEOFFREY MICHAEL GWYNN, RICHARD ANDREW SMITH, JOAN
SMITH,  DAVID MICHAEL SMITH,  GRAHAM WILLIAM SMITH,  KAREN MARGARET SMITH, HENRY
COX, ANKE-BEATE STAHL, WILLIAM LILLIS and GERARD COX [ ] dated [ ] 1998         

Escrow Agreement

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This is the  SCHEDULE  referred  to in the  foregoing  DEED of  ADHERENCE  among
MICROFRAME,  INC.  and  ANDERSON  STRATHERN  NOMINEES  LIMITED and JAMES  WILSON
RAMSAY,  WILLIAM RAMSAY,  ERIC PETER MEYERS,  IRENE VASS, ROBERT FORBES,  RENATE
RITCHIE,  KEVIN  RITCHIE,  IAN  QUINNEY,  ROBERT  STRUTHERS,   GAYNOR  CHRISTINE
STRUTHERS, STEWART STRUTHERS, GEOFFREY MICHAEL GWYNN, RICHARD ANDREW SMITH, JOAN
SMITH,  DAVID MICHAEL SMITH,  GRAHAM WILLIAM SMITH,  KAREN MARGARET SMITH, HENRY
COX, ANKE-BEATE STAHL, WILLIAM LILLIS and GERARD COX [ ] dated [ ] 1998         

 Registration Rights Agreement

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                                                                     EXHIBIT L

RETROCESSION

by

Lothian Investment Fund for Enterprise Limited

in favour of

Solcom Systems Limited

 August 1998

MURRAY BEITH MURRAY W.S.
39 Castle Street
 Edinburgh

Tel: (0131) 225-1200
Fax: (0131) 225-9112

Reference RESOL001

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We, LOTHIAN INVESTMENT FUND FOR ENTERPRISE LIMITED incorporated under the       
Companies  Acts in  Scotland  with  registered  number  SC137938  and having our
registered  office at 21 Ainslie Place,  Edinburgh  WHEREAS by assignation dated
21st December 1993 SOLCOM SYSTEMS LIMITED  incorporated under the Companies Acts
in Scotland with registered  number SC129008 and having its registered office at
Solcom  House,  Meikle  Road,  Kirkton  Campus,  Livingston  assigned  to us the
following  Policies  of  Assurance  with Allied  Dunbar  Assurance  PLC,  namely
008557-322, 008559-322 and 008572-322 on the lives of Hugh Evans, Peter MacLaren
and Peter  Wilson  respectively,  AND  WHEREAS  we have  agreed  to grant  these
presents  DO  HEREBY  RETROCESS  to the said  Solcom  Systems  Limited  the said
policies of  assurance  together  with bonus and other  additions  and  benefits
accrued or that may accrue  thereon;  and we warrant the foregoing  retrocession
from our own facts and deeds only:                                              

IN WITNESS  WHEREOF  these  presents  type  written on this page are executed as
follows:-                                                                       

They are subscribed for and on behalf of                                        
LOTHIAN INVESTMENT FUND FOR                                                     
ENTERPRISE LIMITED                                                              
at                                                                              
on                                                                              
Nineteen hundred and Ninety                                                     
by                                      Director/Attorney                       
before this witness:-                                                           

----------------------------            Director/Attorney                       

----------------------------            Witness                                 

----------------------------            Full Name                               

----------------------------            Address                                 

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

----------------------------                                                    
Director/Attorney                                                               

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                                                                       EXHIBIT M

 INVESTOR REPRESENTATION AGREEMENT

         In  connection   with  the   acquisition   by  the   undersigned   (the
"Undersigned")  of shares of Common Stock (the "Shares") of MicroFrame,  Inc., a
New Jersey  corporation (the "Company"),  the Undersigned  hereby  acknowledges,
represents, warrants and agrees as follows:                                     

10.      I am aware of the Company's  business affairs and financial  condition,
         and have acquired all such  publicly  available  information  about the
         Company as I deem  necessary and  appropriate  in  connection  with the
         acquisition  of the  Shares.  I am  acquiring  these  Shares for my own
         account  for  investment  and not with a view to, or for the  resale in
         connection  with,  any  "distribution"  thereof  for  purposes  of  the
Securities Act of 1933, as amended (the "Securities Act").    

11.      I  understand  that  the  Shares  have not been  registered  under  the
         Securities Act in reliance upon a specific exemption from registration,
         which exemption depends upon, among other things,  the bona fide nature
of my investment intent as expressed herein.                  

12.      I further  understand that the Shares may not be sold publicly and must
         be held indefinitely unless they are subsequently  registered under the
         Securities Act or unless an exemption from registration is available. I
         am able, without impairing my financial  condition,  to hold the Shares
         for an  indefinite  period of time and to suffer a complete  loss on my
         investment.  I understand  that the Company is under no  obligation  to
         register the Shares other than as provided in that certain registration
         rights  agreement  dated as of the date hereof by and among the Company
         and  certain  holders  of shares of Common  Stock of the  Company  (the
         "Registration  Rights Agreement").  In addition,  I understand that (i)
         any subsequent  resale or  distribution of the Shares will be made only
         pursuant to a  registration  statement  under the  Securities Act or an
         exemption  from  the  registration  requirements  thereof  and  that in
         claiming the applicability of any such exemption, I shall, prior to any
         offer or sale of the  Shares,  provide  the  Company  with a  favorable
         written   opinion  of  counsel,   in  form  and  substance   reasonably
         satisfactory to the Company,  as to the  applicability of the exemption
         and (ii) the  certificate(s)  evidencing  the Shares will be  imprinted
with a legend referring to such restriction on transfer.      

13.      I am familiar with the  provisions of Rule 144,  promulgated  under the
         Securities Act,  which, in substance,  permits limited public resale of
         "restricted  securities"  acquired,  directly or  indirectly,  from the
         issuer  thereof (or from an affiliate  of the issuer),  in a non-public
         offering subject to the satisfaction of certain conditions,  including,
         among other things:  (1) the availability of certain public information
         about the  Company;  (2) the  resale  occurring  not less than one year
         after the party has  purchased,  and made full payment for,  within the
         meaning  of Rule 144,  the  Shares to be sold;  and,  in the case of an
         affiliate, or of a non-affiliated who has held the Shares less than two
         years, the sale being made through a broker in an unsolicited "broker's
         transaction" or in  transactions  directly with a market maker (as said
         term is defined under the Securities  Exchange Act of 1934, as amended)
         and the amount of Shares being sold during any  three-month  period not
    exceeding the specified limitations stated therein, if applicable.

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14.      I further  understand  that at the time I wish to sell the Shares there
         may be no public market upon which to make such a sale, and that,  even
         if such a public market then exists,  the Company may not be satisfying
         the current public  information  requirements of Rule 144, and that, in
         such event, I would be precluded from selling the Shares under Rule 144
         even if the one-year minimum holding period had been satisfied.  Except
         as  otherwise  set  forth  in  the  Registration  Rights  Agreement,  I
         understand  that the  Company is under no  obligation  to make Rule 144
available.                                                    

15.      I  further   understand  that  in  the  event  all  of  the  applicable
         requirements  of Rule 144 are not  satisfied,  registration  under  the
         Securities Act, or some other registration exemption, will be required;
         and that,  notwithstanding the fact that Rule 144 is not exclusive, the
         Staff of the  Securities  and Exchange  Commission  has  expressed  its
         opinion that persons  proposing to sell private  placement Shares other
         than in a registered  offering and otherwise  than pursuant to Rule 144
         will  have a  substantial  burden  of  proof  in  establishing  that an
         exemption from  registration is available for such offers or sales, and
         that such persons and their respective  brokers who participate in such
transactions do so at their own risk.                         

16.      I represent that I have full power and authority to execute and deliver
         this Agreement and all other related agreements and certificates and to
         carry out the  provisions  hereof and thereof,  and to hold the Shares,
         and this Agreement is a legal,  valid and binding  obligation  upon me.
         The execution and delivery of this  Agreement will not violate or be in
         conflict with any order, judgment, injunction, agreement or controlling
document to which I am a party or by which I am bound.        

                  IN  WITNESS   WHEREOF,   the  Undersigned  has  executed  this
Agreement as of the [closing date of SolCom acquisition].                       

----------------------------                         ---------------------------
Name of Undersigned                                  Social Security Number     

Address:                                                                        

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

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

ACCEPTED AND AGREED:                                                            

MICROFRAME, INC.                                                                

By:  ----------------------------                                               
Name:  Stephen B. Gray                                                
Title:    President                                                   

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                                                                       EXHIBIT N

1998 STOCK OPTION PLAN
of
MICROFRAME, INC.

17.      PURPOSES OF THE PLAN.  This stock  option plan (the "Plan") is designed
         to provide an  incentive  to key  employees  (including  directors  and
         officers who are key employees)  and to  consultants  and directors who
         are not employees of MicroFrame,  Inc., a New Jersey  corporation  (the
         "Company"),  or any of its  Subsidiaries  (as such term is  defined  in
         Paragraph  19), and to offer an additional  inducement in obtaining the
         services  of such  individuals.  The  Plan  provides  for the  grant of
         "incentive stock options" ("ISOs") within the meaning of Section 422 of
         the  Internal  Revenue  Code of 1986,  as  amended  (the  "Code"),  and
         nonqualified stock options which do not qualify as ISOs ("NQSOs").  The
         Company makes no representation or warranty,  express or implied, as to
         the  qualification  of any option as an "incentive  stock option" under
the Code.                                                     

18.      STOCK SUBJECT TO THE PLAN.  Subject to the  provisions of Paragraph 12,
         the  aggregate  number of shares  of Common  Stock,  $.01 par value per
         share, of the Company ("Common Stock") for which options may be granted
         under the Plan shall not exceed 3,000,000.  Such shares of Common Stock
         may, in the  discretion  of the Board of  Directors of the Company (the
         "Board of Directors"), consist either in whole or in part of authorized
         but  unissued  shares of Common Stock or shares of Common Stock held in
         the treasury of the Company. Subject to the provisions of Paragraph 13,
         any shares of Common  Stock  subject to an option  which for any reason
         expires,  is canceled or is terminated  unexercised or which ceases for
         any reason to be  exercisable  shall  again  become  available  for the
         granting  of options  under the Plan.  The  Company  shall at all times
         during the term of the Plan reserve and keep  available  such number of
         shares  of  Common  Stock  as  will  be   sufficient   to  satisfy  the
requirements of the Plan.                                     

19.      ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Board
         of Directors or a committee of the Board of Directors (the "Committee")
         consisting of not less than two (2) directors,  each of whom shall be a
         "non-employee  director"  within the meaning of Rule 16b-3  promulgated
         under the Securities  Exchange Act of 1934, as amended (as the same may
         be in effect and interpreted from time to time,  "Rule 16b-3").  Unless
         otherwise  provided in the By-Laws of the Company or by  resolution  of
         the Board of  Directors,  a majority  of the  members of the  Committee
         shall  constitute  a quorum,  and the acts of a majority of the members
         present  at any  meeting  at which a quorum  is  present,  and any acts
         approved in writing by all members without a meeting, shall be the acts
of the Committee.                                             

                  Subject to the express  provisions of the Plan,  the Committee
shall have the authority,  in its sole discretion,  to determine the persons who
shall be granted options; the times when they shall receive options;  whether an
option granted to an employee shall be an ISO or a NQSO; the number of shares of
Common  Stock to be subject to each option;  the term of each  option;  the date
each option shall become exercisable;  whether an option shall be exercisable in
whole or in  installments,  and,  if in  installments,  the  number of shares of
Common Stock to be subject to each installment;  whether the installments  shall
be cumulative;  the date each installment shall become  exercisable and the term
of each installment; whether to accelerate the date of exercise of any option or
installment; whether shares of Common Stock may be issued                       

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upon the exercise of an option as partly paid, and, if so, the dates when future
installments  of the  exercise  price  shall  become due and the amounts of such
installments;  the  exercise  price of each  option;  the form of payment of the
exercise  price;  the fair market value of a share of Common Stock;  whether and
under what conditions to restrict the sale or other disposition of the shares of
Common Stock  acquired  upon the  exercise of an option and, if so,  whether and
under what  conditions  to waive any such  restriction;  whether  and under what
conditions  to subject  the  exercise  of all or any portion of an option to the
fulfillment  of  certain  restrictions  or  contingencies  as  specified  in the
contract  referred  to in  Paragraph  11  (the  "Contract"),  including  without
limitation,  restrictions or contingencies  relating to entering into a covenant
not to  compete  with the  Company,  its  Parent  (as such  term is  defined  in
Paragraph 19) and Subsidiaries,  to financial objectives for the Company, any of
its  Subsidiaries,  a division,  a product  line or other  category,  and/or the
period of continued  employment  of the optionee  with the Company or any of its
Subsidiaries,  and to determine whether such restrictions or contingencies  have
been met;  the  amount,  if any,  necessary  to satisfy  the  obligation  of the
Company, any of its Subsidiaries or a Parent to withhold taxes or other amounts;
whether an optionee is Disabled (as such term is defined in Paragraph  19); with
the consent of the  optionee,  to cancel or modify an option,  provided that the
modified  provision is permitted to be included in an option  granted  under the
Plan on the date of the modification,  and provided further, that in the case of
a  modification  (within the  meaning of Section  424(h) of the Code) of an ISO,
such option as  modified  would be  permitted  to be granted on the date of such
modification  under the terms of the Plan; to construe the respective  Contracts
and the Plan; to prescribe,  amend and rescind rules and regulations relating to
the Plan; to approve any  provision of the Plan or any option  granted under the
Plan or any amendment to either which,  under Rule 16b-3,  requires the approval
of the  Board  of  Directors,  a  committee  of  non-employee  directors  or the
shareholders to be exempt (unless otherwise  specifically  provided herein); and
to make all other  determinations  necessary or advisable for  administering the
Plan.  Any  controversy  or claim  arising out of or  relating to the Plan,  any
option granted under the Plan or any Contract  shall be determined  unilaterally
by the Committee in its sole discretion.  The determinations of the Committee on
the matters  referred to in this  Paragraph 3 shall be conclusive and binding on
the parties.                                                                    

                  No member or former  member of the  Committee  shall be liable
for any action or  determination  made in good faith with respect to the Plan or
any option granted hereunder.  In addition, each member and former member of the
Committee shall be indemnified and held harmless by the Company from and against
any liability,  claim for damages and expenses in connection therewith by reason
of any action or failure to act under or in connection with the Plan, any option
granted  hereunder or any Contract to the fullest extent  permitted with respect
to directors  under the  Company's  certificate  of  incorporation,  By-Laws and
applicable law.                                                                 

20.      ELIGIBILITY.  The Committee may from time to time,  consistent with the
         purposes of the Plan,  grant options to such key  employees  (including
         officers and directors who are key employees)  of, or  consultants  to,
         the Company or any of its  Subsidiaries,  and to such  directors of the
         Company who, at the time of grant,  are not common law employees of the
         Company or of any of its  Subsidiaries,  as the Committee may determine
         in its sole discretion. Such options granted shall cover such number of
         shares of  Common  Stock as the  Committee  may  determine  in its sole
         discretion;  provided,  however,  that the  maximum  number  of  shares
         subject to  options  that may be  granted  to any  employee  during any
         calendar  year  under the Plan shall be 400,000  shares;  and  provided
         further that the  aggregate  market value  (determined  at the time the
         option is granted) of the shares of Common Stock for which any eligible
         employee  may be  granted  ISOs under the Plan or any other plan of the
         Company,  or of a Parent  or a  Subsidiary  of the  Company,  which are
         exercisable  for the first time by such  optionee  during any  calendar
         year shall not exceed  $100,000.  The $100,000 ISO limitation  shall be
applied by taking ISOs into                                   

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     account in the order in which they were granted. Any option (or the portion
     thereof)  granted in excess of such ISO limitation  amount shall be treated
as a NQSO to the extent of such excess.                               

21.      EXERCISE PRICE.  The exercise price of the shares of Common Stock under
         each  option  shall  be   determined  by  the  Committee  in  its  sole
         discretion;  provided, however, that the exercise price of an ISO shall
         not be less than the fair market value of the Common  Stock  subject to
         such option on the date of grant;  and provided further that if, at the
         time an ISO is granted,  the  optionee  owns (or is deemed to own under
         Section 424(d) of the Code) stock possessing more than 10% of the total
         combined voting power of all classes of stock of the Company, of any of
         its  Subsidiaries or of a Parent,  the exercise price of such ISO shall
         not be less  than 110% of the fair  market  value of the  Common  Stock
subject to such ISO on the date of grant.                     

                  The fair  market  value of a share of Common  Stock on any day
shall  be (a) if the  principal  market  for  the  Common  Stock  is a  national
securities  exchange,  the average of the highest  and lowest  sales  prices per
share of the  Common  Stock on such day as  reported  by such  exchange  or on a
consolidated tape reflecting transactions on such exchange, (b) if the principal
market for the Common Stock is not a national securities exchange and the Common
Stock is quoted on the Nasdaq Stock Market  ("Nasdaq"),  and (i) if actual sales
price  information is available with respect to the Common Stock, the average of
the highest and lowest sales prices per share of the Common Stock on such day on
Nasdaq, or (ii) if such information is not available, the average of the highest
bid and the lowest  asked  prices per share for the Common  Stock on such day on
Nasdaq,  or (c) if the  principal  market for the Common Stock is not a national
securities exchange and the Common Stock is not quoted on Nasdaq, the average of
the highest bid and lowest  asked  prices per share for the Common Stock on such
day as  reported on the OTC  Bulletin  Board  Service or by  National  Quotation
Bureau,  Incorporated or a comparable service; provided that if clauses (a), (b)
and (c) of this Paragraph are all  inapplicable,  or if no trades have been made
or no quotes are  available  for such day,  the fair market  value of a share of
Common Stock shall be determined by the Committee by any method  consistent with
applicable  regulations  adopted by the  Treasury  Department  relating to stock
options.                                                                        

22.      TERM.  Each option granted  pursuant to the Plan shall be for such term
         as is  established  by the  Committee,  in its sole  discretion,  at or
         before the time such option is  granted;  provided,  however,  that the
         term of each ISO granted pursuant to the Plan shall be for a period not
         exceeding 10 years from the date of grant thereof, and provided further
         that if, at the time an ISO is granted, the optionee owns (or is deemed
         to own under Section 424(d) of the Code) stock possessing more than 10%
         of the  total  combined  voting  power of all  classes  of stock of the
         Company, of any of its Subsidiaries or of a Parent, the term of the ISO
         shall be for a period not exceeding  five years from the date of grant.
         Options  shall  be  subject  to  earlier   termination  as  hereinafter
provided.                                                     

23.      EXERCISE.  An option (or any installment  thereof),  to the extent then
         exercisable, shall be exercised by giving written notice to the Company
         at its  principal  office  stating  which  option  is being  exercised,
         specifying the number of shares of Common Stock as to which such option
         is being  exercised and accompanied by payment in full of the aggregate
         exercise  price  therefor  (or  the  amount  due  on  exercise  if  the
         applicable Contract permits installment payments) (a) in cash and/or by
         certified check or (b) with the  authorization  of the Committee,  with
         cash,  a certified  check  and/or with  previously  acquired  shares of
         Common  Stock,  having an aggregate  fair market value  (determined  in
         accordance  with  Paragraph  5), on the date of exercise,  equal to the
         aggregate  exercise  price of all options  being  exercised;  provided,
         however,  that in no case may shares be tendered  if such tender  would
         require  the  Company  to  incur a  charge  against  its  earnings  for
financial accounting purposes.                                

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                  The Committee may, in its sole  discretion,  permit payment of
the  exercise  price of an option by  delivery  by the  optionee  of a  properly
executed  notice,  together  with a copy of his  irrevocable  instructions  to a
broker acceptable to the Committee to deliver promptly to the Company the amount
of sale or loan proceeds  sufficient to pay such exercise  price.  In connection
therewith, the Company may enter into agreements for coordinated procedures with
one or more brokerage firms.                                                    

                  An optionee  shall not have the rights of a  shareholder  with
respect to such shares of Common  Stock to be received  upon the  exercise of an
option until the date of issuance of a stock  certificate to him for such shares
or, in the case of uncertificated shares, until the date an entry is made on the
books of the  Company's  transfer  agent  representing  such  shares;  provided,
however, that until such stock certificate is issued or until such book entry is
made, any optionee using  previously  acquired shares of Common Stock in payment
of an option  exercise  price shall continue to have the rights of a shareholder
with respect to such previously acquired shares.                                

                  In no case  may a  fraction  of a share  of  Common  Stock  be
purchased or issued under the Plan.                                             

24.      TERMINATION  OF  RELATIONSHIP.  Except as may  otherwise  be  expressly
         provided in the applicable  Contract,  any optionee whose employment or
         consulting   relationship   with  the  Company   (and  its  Parent  and
         Subsidiaries)  has  terminated  for any reason  other than the death or
         Disability of the optionee may exercise any option granted to him as an
         employee or consultant,  to the extent  exercisable on the date of such
         termination,  at any  time  within  three  months  after  the  date  of
         termination,  but not  thereafter  and in no event  after  the date the
         option would otherwise have expired;  provided,  however,  that if such
         relationship  is  terminated  either (a) for cause,  or (b) without the
         consent of the Company, such option shall terminate immediately. Except
         as may  otherwise be  expressly  provided in the  applicable  Contract,
         options  granted  under the Plan to an  employee or  consultant  of the
         Company or any of its Subsidiaries  shall not be affected by any change
         in the status of the holder so long as he  continues  to be an employee
         or a consultant of the Company,  its Parent or any of the  Subsidiaries
         (regardless  of a change in status from one to the other or having been
transferred from one corporation to another).                 

                  For the purposes of the Plan, an employment relationship shall
be deemed to exist  between an individual  and a corporation  if, at the time of
the  determination,  the  individual  was an  employee of such  corporation  for
purposes of Section 422(a) of the Code. As a result,  an individual on military,
sick leave or other bona fide leave of absence  shall  continue to be considered
an  employee  for  purposes  of the Plan  during such leave if the period of the
leave does not exceed 90 days, or, if longer, so long as the individual's  right
to reemployment  with the  corporation,  any of its  Subsidiaries or a Parent is
guaranteed  either by statute or by contract.  If the period of leave exceeds 90
days and the individual's  right to reemployment is not guaranteed by statute or
by contract,  the employment  relationship shall be deemed to have terminated on
the 91st day of such leave.                                                     

                  Except  as  may   otherwise  be  expressly   provided  in  the
applicable  Contract,  an  optionee  whose  directorship  with the  Company  has
terminated  for any reason other than his death or  Disability  may exercise the
options granted to him as a director who was not an employee of or consultant to
the Company or any of its Subsidiaries, to the extent exercisable on the date of
such termination, at any time within three months after the date of termination,
but not thereafter and in no event after the date the option would              

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otherwise  have  expired;  provided,   however,  that  if  his  directorship  is
terminated for cause, such option shall terminate immediately.                  

                  Nothing  in the Plan or in any option  granted  under the Plan
shall  confer  on any  person  any  right  to  continue  in the  employ  or as a
consultant  of the  Company,  its  Parent  or any of its  Subsidiaries,  or as a
director of the Company,  or interfere in any way with any right of the Company,
its Parent or any of its Subsidiaries to terminate such relationship at any time
for any reason whatsoever without liability to the Company, its Parent or any of
its Subsidiaries.                                                               

25.      DEATH  OR  DISABILITY  OF AN  OPTIONEE.  Except  as  may  otherwise  be
         expressly provided in the applicable Contract,  if an optionee dies (a)
         while he is employed by, or a consultant to, the Company, its Parent or
         any of its Subsidiaries,  (b) within three months after the termination
         of his  employment or  consulting  relationship  with the Company,  its
         Parent and its  Subsidiaries  (unless such termination was for cause or
         without  the consent of the  Company) or (c) within one year  following
         the termination of such employment or consulting relationship by reason
         of his  Disability,  the options  granted to him as an employee  of, or
         consultant  to,  the  Company  or  any  of  its  Subsidiaries,  may  be
         exercised,  to the extent  exercisable on the date of his death, by his
         Legal  Representative (as such term is defined in Paragraph 19), at any
         time within one year after death,  but not  thereafter  and in no event
         after the date the option would  otherwise have expired.  Except as may
         otherwise  be  expressly  provided  in  the  applicable  Contract,  any
         optionee whose employment or consulting  relationship with the Company,
         its  Parent  and its  Subsidiaries  has  terminated  by  reason  of his
         Disability may exercise such options,  to the extent  exercisable  upon
         the  effective  date of such  termination,  at any time within one year
         after such date,  but not thereafter and in no event after the date the
option would otherwise have expired.                          

                  Except  as  may   otherwise  be  expressly   provided  in  the
applicable  Contract,  if an  optionee  dies (a) while he is a  director  of the
Company,  (b) within three months after the termination of his directorship with
the Company (unless such termination was for cause) or (c) within one year after
the termination of his  directorship  by reason of his  Disability,  the options
granted to him as a director  who was not an  employee of or  consultant  to the
Company or any of its Subsidiaries,  may be exercised, to the extent exercisable
on the date of his death,  by his Legal  Representative  at any time  within one
year after death,  but not  thereafter and in no event after the date the option
would otherwise have expired.  Except as may otherwise be expressly  provided in
the applicable  Contract,  an optionee whose  directorship  with the Company has
terminated by reason of  Disability,  may exercise  such options,  to the extent
exercisable  on the effective date of such  termination,  at any time within one
year after  such date,  but not  thereafter  and in no event  after the date the
option would otherwise have expired.                                            

26.      COMPLIANCE WITH  SECURITIES  LAWS. It is a condition to the exercise of
         any  option  that  either  (a)  a  Registration   Statement  under  the
         Securities Act of 1933, as amended (the "Securities Act"), with respect
         to the shares of Common Stock to be issued upon such exercise  shall be
         effective  and  current  at the time of  exercise,  or (b)  there is an
         exemption from  registration  under the Securities Act for the issuance
         of the shares of Common Stock upon such exercise.  Nothing herein shall
         be construed as requiring the Company to register shares subject to any
         option under the Securities Act or to keep any  Registration  Statement
effective or current.                                         

                  The  Committee  may  require,  in its  sole  discretion,  as a
condition to the grant or exercise of an option,  that the optionee  execute and
deliver to the Company his  representations and warranties,  in form,  substance
and scope  satisfactory  to the  Committee,  which the  Committee  determines is
necessary or                                                                    

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convenient to facilitate the  perfection of an exemption  from the  registration
requirements of the Securities Act,  applicable  state  securities laws or other
legal requirement,  including without limitation,  that (a) the shares of Common
Stock to be  issued  upon  exercise  of the  option  are being  acquired  by the
optionee for his own  account,  for  investment  only and not with a view to the
resale or distribution thereof, and (b) any subsequent resale or distribution of
shares of Common  Stock by such  optionee  will be made only  pursuant  to (i) a
Registration  Statement  under the Securities Act which is effective and current
with  respect  to the  shares of Common  Stock  being  sold,  or (ii) a specific
exemption  from the  registration  requirements  of the  Securities  Act, but in
claiming such  exemption,  the  optionee,  prior to any offer of sale or sale of
such shares of Common Stock,  shall provide the Company with a favorable written
opinion of counsel  satisfactory  to the Company,  in form,  substance and scope
satisfactory to the Company,  as to the  applicability  of such exemption to the
proposed sale or distribution.                                                  

                  In addition, if at any time the Committee shall determine that
the  listing  or  qualification  of the shares of Common  Stock  subject to such
option on any securities  exchange,  Nasdaq or under any applicable law, or that
the  consent or approval  of any  governmental  agency or  regulatory  body,  is
necessary or desirable as a condition to, or in connection with, the granting of
an option or the issuance of shares of Common Stock thereunder,  such option may
not be granted or exercised in whole or in part, as the case may be, unless such
listing, qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Committee.                         

27.      STOCK  OPTION   CONTRACTS.   Each  option  shall  be  evidenced  by  an
         appropriate  Contract  which shall be duly  executed by the Company and
         the optionee.  Such Contract  shall contain such terms,  provisions and
         conditions  not  inconsistent  herewith  as  may be  determined  by the
         Committee in its sole discretion. The terms of each option and Contract
need not be identical.                                        

28.      ADJUSTMENTS  UPON CHANGES IN COMMON  STOCK.  Notwithstanding  any other
         provision  of the Plan,  in the event of any change in the  outstanding
         Common Stock by reason of a stock dividend, recapitalization, merger in
         which the  Company is the  surviving  corporation,  spinoff,  split-up,
         combination or exchange of shares or the like which results in a change
         in the number or kind of shares of Common  Stock  which is  outstanding
         immediately  prior to such  event,  the  aggregate  number  and kind of
         shares  subject to the Plan,  the  aggregate  number and kind of shares
         subject to each outstanding option and the exercise price thereof,  and
         the maximum  number of shares subject to options that may be granted to
         any employee in any calendar year, shall be  appropriately  adjusted by
         the Board of Directors,  whose  determination  shall be conclusive  and
         binding on all parties  thereto.  Such  adjustment  may provide for the
         elimination  of  fractional  shares that might  otherwise be subject to
options without payment therefor.                             

                  In the  event of (a) the  liquidation  or  dissolution  of the
Company, (b) a merger in which the Company is not the surviving corporation or a
consolidation,  or (c) any  transaction (or series of related  transactions)  in
which  (i) more  than 50% of the  outstanding  Common  Stock is  transferred  or
exchanged  for other  consideration  or (ii) shares of Common Stock in excess of
the  number of shares of Common  Stock  outstanding  immediately  preceding  the
transaction  are issued (other than to  shareholders of the Company with respect
to  their  shares  of stock  in the  Company),  any  outstanding  options  shall
terminate  upon the earliest of any such event,  unless other  provision is made
therefor in the transaction.                                                    

29.      AMENDMENTS  AND  TERMINATION  OF THE PLAN.  The Plan was adopted by the
         Board of Directors on June 12, 1998. No option may be granted under the
Plan after June 11, 2008. The Board                           

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         of Directors,  without further approval of the Company's  shareholders,
         may at any time suspend or terminate  the Plan, in whole or in part, or
         amend it from time to time in such  respects as it may deem  advisable,
         including without limitation, in order that ISOs granted hereunder meet
         the  requirements  for  "incentive  stock  options"  under the Code, to
         comply with the provisions of Rule 16b-3  promulgated  the Exchange Act
         or  Section  162(m)  of the Code or any  change  in  applicable  law or
         regulation,  ruling or  interpretation  of any  governmental  agency or
         regulatory  body;  provided,   however,  that  no  amendment  shall  be
         effective  without  the  requisite  prior  or  subsequent   shareholder
         approval  which  would (a)  except as  contemplated  in  Paragraph  12,
         increase the maximum number of shares of Common Stock for which options
         may be granted  under the Plan or change the  maximum  number of shares
         for which options may be granted to employees in any calendar year, (b)
         change the eligibility requirements for individuals entitled to receive
         options  hereunder or (c) make any change for which  applicable  law or
         any  governmental  agency  or  regulatory  body  requires   shareholder
         approval.  No  termination,  suspension  or amendment of the Plan shall
         adversely  affect the rights of an  optionee  under any option  granted
         under  the Plan  without  such  optionee's  consent.  The  power of the
         Committee to construe and  administer any option granted under the Plan
         prior to the termination or suspension of the Plan shall continue after
such termination or during such suspension.                   

30.      NON  TRANSFERABILITY OF OPTIONS. No option granted under the Plan shall
         be  transferable  other  than  by  will  or the  laws  of  descent  and
         distribution,  and options may be exercised, during the lifetime of the
         optionee, only by the optionee or his Legal Representatives.  Except to
         the extent  provided above,  options may not be assigned,  transferred,
         pledged,  hypothecated  or disposed of in any way (whether by operation
         of law or otherwise) and shall not be subject to execution,  attachment
         or  similar  process,  and any  such  attempted  assignment,  transfer,
         pledge,  hypothecation or disposition  shall be null and void ab initio
and of no force or effect.                                    

31.      WITHHOLDING  TAXES.  The  Company,  or its  Subsidiary  or  Parent,  as
         applicable,  may  withhold  (a)  cash or (b) with  the  consent  of the
         Committee,  shares of Common  Stock to be issued  upon  exercise  of an
         option or a combination  of cash and shares,  having an aggregate  fair
         market value  (determined in accordance  with Paragraph 5) equal to the
         amount  which the  Committee  determines  is  necessary  to satisfy the
         obligation of the Company,  a Subsidiary or Parent to withhold Federal,
         state and local income taxes or other amounts incurred by reason of the
         grant, vesting, exercise or disposition of an option or the disposition
         of the underlying  shares of Common Stock.  Alternatively,  the Company
         may require the optionee to pay to the Company  such  amount,  in cash,
         promptly  upon demand.  The Company  shall not be required to issue any
         shares of Common  Stock  pursuant to any such option until all required
payments have been made.                                      

32.      LEGENDS;  PAYMENT OF  EXPENSES.  The Company may endorse such legend or
         legends  upon the  certificates  for shares of Common Stock issued upon
         exercise of an option under the Plan and may issue such "stop transfer"
         instructions  to its  transfer  agent in respect  of such  shares as it
         determines,  in its sole discretion,  to be necessary or appropriate to
         (a)  prevent a  violation  of, or to perfect  an  exemption  from,  the
         registration  requirements  of the  Securities  Act,  applicable  state
         securities  laws  or  other  legal  requirements,   (b)  implement  the
         provisions  of the Plan or any  agreement  between  the Company and the
         optionee with respect to such shares of Common Stock, or (c) permit the
         Company to determine the occurrence of a  "disqualifying  disposition,"
         as  described  in Section  421(b) of the Code,  of the shares of Common
       Stock transferred upon the exercise of an ISO granted under the Plan.

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                  The Company  shall pay all issuance  taxes with respect to the
issuance of shares of Common Stock upon the exercise of an option  granted under
the Plan, as well as all fees and expenses incurred by the Company in connection
with such issuance.                                                             

33.      USE OF PROCEEDS.  The cash proceeds to be received upon the exercise of
         an option  under the Plan  shall be added to the  general  funds of the
         Company and used for such corporate  purposes as the Board of Directors
may determine, in its sole discretion.                        

34.      SUBSTITUTIONS  AND  ASSUMPTIONS  OF  OPTIONS  OF  CERTAIN   CONSTITUENT
         CORPORATIONS.  Anything in this Plan to the  contrary  notwithstanding,
         the  Board  of  Directors  may,   without   further   approval  by  the
         shareholders, substitute new options for prior options of a Constituent
         Corporation  (as such term is  defined in  Paragraph  19) or assume the
prior options of such Constituent Corporation.                

35.      DEFINITIONS.                                                           

     a.           "Constituent  Corporation"  shall mean any  corporation  which
                  engages with the Company,  its Parent or any  Subsidiary  in a
                  transaction  to which  Section  424(a) of the Code applies (or
                  would apply if the option assumed or substituted were an ISO),
        or any Parent or any Subsidiary of such corporation.

b.           "Disability" shall mean a permanent and total disability 
        within the meaning of Section  22(e)(3) of the Code.

     c.           "Legal Representative" shall mean the executor,  administrator
                  or other person who at the time is entitled by law to exercise
                  the  rights  of a  deceased  or  incapacitated  optionee  with
respect to an option granted under the Plan.

d.           "Parent" shall have the same definition as "parent       
corporation" in Section 424(e) of the  Code.

 e.           "Subsidiary" shall have the same definition as "subsidiary
corporation" in Section 424(f) of  the Code.

36.      GOVERNING LAW. The Plan, such options as may be granted hereunder,  the
         Contracts  and all related  matters shall be governed by, and construed
         in accordance  with, the laws of the State of New York,  without regard
to conflict or choice of law provisions.                      

                  Neither  the  Plan nor any  Contract  shall  be  construed  or
interpreted  with any  presumption  against the Company by reason of the Company
causing the Plan or Contract to be drafted. Whenever from the context it appears
appropriate,  any term stated in either the singular or plural shall include the
singular and plural,  and any term stated in the  masculine,  feminine or neuter
gender shall include the masculine, feminine and neuter.                        

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37.      PARTIAL INVALIDITY.  The invalidity,  illegality or unenforceability of
         any provision in the Plan,  any option or Contract shall not affect the
         validity,  legality or  enforceability  of any other provision,  all of
         which  shall be valid,  legal and  enforceable  to the  fullest  extent
permitted by applicable law.                                  

38.      SHAREHOLDER  APPROVAL.  The Plan  shall be  subject  to  approval  by a
         majority of the votes of all outstanding shares entitled to vote hereon
         at the next duly held meeting of the Company's  shareholders at which a
         quorum is  present or by  majority  written  consent  of the  Company's
         shareholders.  No options  granted  hereunder may be exercised prior to
         such approval,  provided that, the date of grant of any option shall be
         determined  as if the  Plan  had not  been  subject  to such  approval.
         Notwithstanding the foregoing, if the Plan is not approved by a vote of
         the  shareholders of the Company on or before October 1, 1998, the Plan
and any options granted hereunder shall terminate.            

 -9-

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                                                                     EXHIBIT 0

To:               The Directors                                                 
Solcom Systems Limited                      
Solcom House                                
Meikle Road                                 
Kirkton Campus                              
Livingston                                  

Date:                               1998                                        

Dear Sirs                                                                       

Solcom Systems Limited ("the Company")                                          

I hereby resign  office as Director and Secretary of the Company with  immediate
effect.  I confirm that in respect of such  resignation  I have no claim against
the Company in respect of breach of contract,  compensation  for loss of office,
wrongful or unfair  dismissal,  redundancy,  arrears of  remuneration  or on any
other account.                                                                  

Yours faithfully                                                                

--------------------------------                                                
Peter James MacLaren                                                            

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To:                        The Directors                                        
Solcom Systems Limited                      
Solcom House                                
Meikle Road                                 
Kirkton Campus                              
Livingston                                  

Date:                               1998                                        

Dear Sirs                                                                       

Solcom Systems Limited ("the Company")                                          

I hereby resign  office as a Director of the Company with  immediate  effect.  I
confirm that in respect of such  resignation I have no claim against the Company
in respect of breach of contract,  compensation for loss of office,  wrongful or
unfair dismissal, redundancy, arrears of remuneration or on any other account.  

The above is without  prejudice to my ongoing  employment by the Company and all
rights  accrued  or due to me by  the  Company  in my  capacity  as an  employee
thereof.                                                                        

Yours faithfully                                                                

-----------------------                                                         
William Hugh Evans                                                              

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To:                        The Directors                                        
Solcom Systems Limited                      
Solcom House                                
Meikle Road                                 
Kirkton Campus                              
Livingston                                  

Date:                               1998                                        

Dear Sirs                                                                       

Solcom Systems Limited ("the Company")                                          

I hereby resign  office as a Director of the Company with  immediate  effect.  I
confirm that in respect of such  resignation I have no claim against the Company
in respect of breach of contract,  compensation for loss of office,  wrongful or
unfair dismissal, redundancy, arrears of remuneration or on any other account.  

The above is without  prejudice to my ongoing  employment by the Company and all
rights  accrued  or due to me by  the  Company  in my  capacity  as an  employee
thereof.                                                                        

Yours faithfully                                                                

-----------------------                                                         
Peter Atholl Wilson                                                             

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To:                        The Directors                                        
Solcom Systems Limited                      
Solcom House                                
Meikle Road                                 
Kirkton Campus                              
Livingston                                  

Date:                               1998                                        

Dear Sirs                                                                       

Solcom Systems Limited ("the Company")                                          

I hereby resign  office as a Director of the Company with  immediate  effect.  I
confirm that in respect of such  resignation I have no claim against the Company
in respect of breach of contract,  compensation for loss of office,  wrongful or
unfair dismissal, redundancy, arrears of remuneration or on any other account.  

Yours faithfully                                                                

-----------------------                                                         
Michael David Rutterford                                                        

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                                                                       EXHIBIT P

WAIVER OF CLAIMS

 against

SOLCOM SYSTEMS LIMITED

 and

 SOLCOM SYSTEMS., INC.
by
 THE SELLERS (as herein defined)

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We, the undersigned ("the Sellers"),  being the registered holders of all of the
issued  ordinary shares of one penny each in the share capital of SolCom Systems
Limited ("the Company") as at the date of the Share Purchase  Agreement  amongst
us, the Company and  MicroFrame Inc ("the Buyer") in respect of the sale of such
ordinary  shares  in the  share  capital  of the  Company  to  the  Buyer  ("the
Agreement"),  subject  to  and  conditional  upon  Closing  (as  defined  in the
Agreement) hereby waive any claim we may now have or may have at Closing against
the Company or SolCom Systems,  Inc. (save in respect of or arising from (1) our
employment  by the Company or (2) any share or stock option  entitlement  we may
have in respect of the share capital of the Company  including for the avoidance
of doubt but without  prejudice  to the  foregoing  generality  in respect of or
arising  from any stock  option  contract  to which we are a party or any option
entitlement  we may have in terms of any share  option  scheme of the  Company).
This waiver  shall be governed by Scots Law and the  Scottish  courts shall have
exclusive  jurisdiction  in respect  thereof:  IN WITNESS WHEREOF these presents
consisting  of this page and the schedule  annexed  hereto are executed by us at
Edinburgh on August 1998 as follows:                                            

                                                        [Enlarge/Download Table]

                                                                                           
--------------------------------------      ---------------------------------------------- 
William Hugh Evans                          For and on behalf of EFG Read's Trustees       
                                            Limited as Trustee of MD Rutterford's 1991     
                                            Trust                                          

--------------------------------------      ---------------------------------------------- 
William Hugh Evans,                         For and on behalf of EFG Read's Trustees       
on behalf of the Hugh Evans Family Trust    Limited as Trustee of Mrs. JG Rutterford's 1991
                                            Trust                                          

--------------------------------------      ---------------------------------------------- 
Keith Laing                                 Michael David Rutterford                       

--------------------------------------      ---------------------------------------------- 
Colin Laing (per his attorney)              June Georgina Rutterford (per her attorney)    

--------------------------------------      ---------------------------------------------- 
Peter James MacLaren                        Andrew Edward Sealey (per his attorney)        

--------------------------------------      ---------------------------------------------- 
Elizabeth Marie McQuillan (per her attorney) Helen Sealey (per her attorney)               

                                       -2-                                                 

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--------------------------------------      ---------------------------------------------- 
Peter Atholl Wilson                         Brian Souter (per his attorney)                

--------------------------------------      ---------------------------------------------- 
Alison Wilson                               Ali Taheri (per his attorney)                  
(per her guardian Peter Atholl Wilson)                                                     

--------------------------------------      ---------------------------------------------- 
Lady Margaret Elliot (per her attorney)     Frances Loretta DeLaura (per her attorney)     

--------------------------------------      ---------------------------------------------- 
Ann Heron Gloag (per her attorney)          For and on behalf of Anderson Strathern        
                                            Nominees Limited                               

all before this witness:                                                        

------------------------------                                                  
Name                                                                            

-----------------------------    ---------------------------   (witness)      
Address                                                                         

 -3-

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                                                             Clydesdale Bank PLC

Our ref           SMCK/4432/JAC/L1                     Business Banking Centre  
Your ref                                               Clydesdale Bank Plaza    
Date              8 July, 1998                         Festival Square          
                                             50 Lothian Road
 Edinburgh
 EH3 9AN

FOR THE ATTENTION OF:  PETER MACLAREN                  DX 500500/Box 162        
-------------------------------------                                           
SolCom Systems Limited                                                          
Meikle Road                                            Telephone 0131 456 4432  
Kirkton Campus                                         Fax 0131 456 4460        
LIVINGSTON                                                                      
EH54 7DE                                                                        

Dear Sirs                                                                       

SOLCOM SYSTEMS LIMITED ("THE COMPANY")                                          
SALE OF THE ENTIRE ISSUED SHARE CAPITAL OF THE COMPANY TO                       
MICROFRAME INC. ("MICROFRAME")                                                  

We refer to:                                                                    

1.       Small Firms Loan Guarantee Scheme Facility Letter dated 7 November 1996
         setting out the terms and conditions of the facility of  (pound)200,000
         provided by Clydesdale Bank Plc ("The Bank") to the Company ("the First
Loan Agreement").                                             

2.       Small Firms Loan Guarantee Scheme Facility Letter dated 7 November 1996
         setting   out  the   terms   and   conditions   of  the   facility   of
         (pound)26,786.74  provided by the Bank to the Company ("the Second Loan
Agreement"); and                                              

3.       Small Firms Loan Guarantee Scheme Facility Letter dated 7 November 1996
         setting out the terms and conditions of the facility of (pound)9,632.70
   provided by the Bank to the Company ("the Third Loan Agreement").

In terms of clause 10.01(h) of each of the First Loan Agreement, the Second Loan
Agreement and the Third Loan  Agreement  (together "the Loan  Agreements"),  the
Bank shall be under no  obligation to advance  monies under the Loan  Agreements
and  may  by  notice  to the  Company  require  payment  forthwith  of all  sums
outstanding under the Loan Agreements together with all interest accrued        

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                                                                          Page 2

thereon  and/or  cancel any portion of the  facilities  then  undrawn  under the
respective  Loan Agreements if (save as may have been approved in writing by the
Bank) there is any alteration in the legal or beneficial ownership or control of
inter alia 25% or more of the issued share capital of the Company.              

We  understand  that the entire  issued  share  capital of the  Company  will be
purchased by  Microframe  pursuant to a share  purchase  agreement to be entered
into  between  inter  alia the then  current  shareholders  of the  Company  and
Microframe ("the Transfer").                                                    

We hereby approve,  consent to and waive our rights under the Loan Agreements in
relation  to the  Transfer  and  confirm  that we do not and will not regard the
Transfer as an event of default  under the Loan  Agreement.  In  particular,  we
confirm  that we will not as a result of the Transfer  require  repayment of the
facility  advanced under each of the Loan Agreements  (nor the interest  accrued
thereon) and will not cancel any undrawn portion of such facility.              

For the avoidance of doubt we confirm that the remaining Terms and Conditions of
the Loan Agreements remain in full force and effect.                            

Yours faithfully                                                                

Scott McKerracher                                                               
Business Banking Manager                                                        
For and on behalf of Clydesdale Bank Plc.                                       

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BCE                                 BCE Business Funding Limited                
Business               1 Commercial Gate, Mansfield, Notinghamshire, NG18 IEJ   
Funding Ltd.           Telephone:  (01623) 620100  Facsimile:  (01623) 421400   

8 June 1998                                                                     

Mr. P. MacLaren                                                                 
Finance Director                                                                
SolCom Systems Ltd.                                                             
Meikle Road                                                                     
Kirkton Campus                                                                  
LIVINGSTON                                                                      
EH54 7DE                                                                        

Dear Mr. MacLaren:                                                              

LOAN REFERENCE 11259                                                            

I refer to your fax dated 7 June 1998 and write to confirm our  agreement to the
change of ownership subject to the outstanding debt being repaid in full.       

I propose that you leave the direct debit in place until such time that you have
a  completion  date at which time you should  request a  redemption  figure from
ourselves.                                                                      

Yours sincerely,                                                                

GORDON MACHEJ                                                                   
DIRECTOR                                                                        

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SolCom Systems Ltd

Fax: *44 (0)1506 461717; Telephone: *44 (0)1506 461707
email: pm@solcom.co.uk
SolCom House, Meikle Road, Kirkton Campus. Livingston,
Scotland EH5 7DE

From Peter J. MacLaren, Financial Director
 04:00 PM 07 June 1 1998

To:  Gordon Mackie Esq.                                                         
BCE Business Funding Ltd                                                        
01623 420400                                                                    

Dear Mr. Mackie:                                                                

Loan ref 11259                                                                  

I understand that John Caldwell of Shepherd & Wedderburn has spoken to you about
our proposed merger with MicroFrame Inc. and the possible  handling of the above
loan. I understand that you have suggested  either  repayment of principle or an
interest rate increase of 2% pa. I think it would be simpler for us to repay the
principal  outstanding  and we would  propose to do this  immediately  following
completion  of the  merger.  I would  appreciate  it if you could  signify  your
agreement to this.                                                              

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                                                                       EXHIBIT Q

10th July 1998                                                                  

                                                           Lothian and
                                                         Edinburgh
                                                          Enterprise
                                                       Limited
The Directors                                                                   
SolCom Systems Limited                                                          
Kirkton Campus                                                                  
Meikle Road                                                                     
Livingston                                                                      

Dear Sirs                                                                       

Acquisition of SolCom Systems Limited ("the Company")                           

We have been advised by the Company that the entire  issued share capital of the
Company will be purchased by MicroFrame,  Inc. ("the Buyer") pursuant to a share
purchase  agreement ("the Agreement") to be entered into between inter alia, the
Company and the Buyer ("the Transfer").  We understand that there is to be a gap
between signing of the Agreement and completion of the Transfer.                

From time to time we have offered,  awarded and/or  provided and anticipate that
in the future we may offer,  award and/or provide to the Company grants or other
forms of financial assistance under certain terms and conditions ("Grants"). The
Grants  awarded or  offered by us to the  Company  include  those  listed in the
schedule to this letter ("Completed Grants").                                   

We hereby  consent for all purposes to the entry into the  Agreement  and to the
Transfer  and the  consequent  change in the control and  ownership of the share
capital of the Company  and waive any and all of our rights  under the terms and
conditions  of any and all of the  Completed  Grants  awarded  or offered to (i)
terminate any or all of the Completed  Grants and (ii) require  repayment of the
sums paid by us to the Company under any or all of the Completed  Grants awarded
or offered.  We further hereby confirm that we do not and will not  subsequently
regard the Transfer as an event of default under the terms and conditions of any
Completed  Grants  awarded or offered or other existing Grant awarded or offered
or of any Grant awarded or offered prior to completion of the Transfer.         

Yours faithfully                                                                

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For and on behalf of                                                            
Lothian & Edinburgh Enterprise Limited                                          

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 Acquisition of SolCom Systems Limited ("the Company")

Completed Grants Schedule 10 July 1998

Purchase Order Number      Budget                                               

-------------------------- -----------------------------------------            
5038                       P1252 - ODP                                          
5406                       P1252 - ODP                                          
6906                       P1641 - Business Services                            
7618                       P1252 - ODP                                          
8871                       P1860 - LEEL company support                         
9093                       P1252 - ODP                                          
10272                      P1252 - ODP                                          
10274                      P1252 - ODP                                          
10963                      P10271 - Graduates Into Software                     
11327                      P10320 - Skills For Small Business                   
13086                      P10271 - Graduates into Software                     
13087                      P10271 - Graduates into Software                     
-------------------------- -----------------------------------------            

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                                                                     EXHIBIT R

                                                                Grant Thornton

The Company Secretary                                                           
SolCom Systems Limited                                                          
SolCom House                                                                    
Meikle Road                                                                     
Kirkton Campus                                                                  
LIVINGSTON                                                                      
EH54 7DE                                                                        

                                                            [Date as at Closing]

Dear Sir                                                                        

In  accordance  with the  Companies  Act 1985,  sections 392 to 394, we write to
inform  you of our  resignation  as  auditors  of SolCom  Systems  Limited  with
immediate effect.                                                               

There are no  circumstances  connected  with our ceasing to hold office which we
consider  should be brought to the  attention of the members or creditors of the
company.                                                                        

We also  confirm  that there are no sums due to us by the  company in respect of
outstanding invoices or in respect of work carried out but not invoiced.        

You are  required to send a copy of this notice to the  Registrar  of  Companies
within fourteen days.                                                           

Yours faithfully                                                                

Grant Thornton                                                                  
Registered Auditors                                                             

1/4 Atholl  Crescent                                                            
Edinburgh EH3 8LQ                                                               
Tel 0131 229 9181                                                               
Fax 0131 229 4560                                                               
DX ED428                                                                        

Authorised  by The  Institute                                                   
of Chartered  Accountants  in England                                           
and Wales to carry on investment                                                
business.  A list of partners may be                                            
inspected at the above address and                                              
at Grant Thornton House                                                         
Euston Square London NW1 2EP                                                    

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                                                                  Grant Thornton

The Company Secretary                                                           
SolCom Systems Ltd                                                              
SolCom House                                                                    
Meikle Road                                                                     
Kirkton Campus                                                                  
LIVINGSTON                                                                      
EH54 7DE                                                                        

                                                          [Date as at Closing]

Dear Sir                                                                        

We refer to our resignation  letter in respect of our appointment as auditors of
SolCom  Systems  Limited.  As requested,  we confirm that neither we nor our USA
firm hold or have held the position of auditors to your USA subsidiary  company,
SolCom Systems Inc.                                                             

For US GAAP  purposes  and for  the  purposes  of  certifying  the  consolidated
financial statements of the group for the periods to June 30, 1997 and March 31,
1998, we performed such limited audit work on the subsidiary  company's  records
as  we  deemed  necessary  in  order  to  certify  the  consolidated   financial
statements.                                                                     

We confirm that our  resignation as auditor of the parent company also is deemed
to include  our  ceasing to hold any  position  or having any  involvement  with
SolCom Systems Inc.                                                             

Yours faithfully                                                                

Leslie Duncan                                                                   
Partner                                                                         

1/4 Atholl  Crescent                                                            
Edinburgh EH3 8LQ                                                               
Tel 0131 229 9181                                                               
Fax 0131 229 4560                                                               
DX ED428                                                                        

Authorised  by The  Institute                                                   
of Chartered  Accountants  in                                                   
England and Wales to                                                            
carry on investment  business.                                                  
A list of partners may be inspected                                             
at the above address and at                                                     
Grant Thornton House                                                            
Euston Square London NW1 2EP                                                    

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APPENDIX B

FAIRNESS OPINION

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[Letterhead of Van Kasper & Company]

                                                         June 10, 1998

Board of Directors                                                              
MicroFrame, Inc.                                                                
21 Meridian Road                                                                
Edison, NJ 08820                                                                

Gentlemen:                                                                      

         You have requested our opinion,  as investment  bankers,  as to whether
the consideration to be issued by MicroFrame,  Inc. ("MicroFrame") in connection
with the proposed  acquisition  of SolCom Systems  Limited and its  subsidiaries
("SolCom")  through the purchase of all outstanding shares of SolCom in exchange
for an  aggregate  of 4.2  million  shares of  MicroFrame  common  stock and 1.3
million   options  to  purchase   shares  of   MicroFrame   common   stock  (the
"Transaction")  is fair to the shareholders of MicroFrame from a financial point
of view.                                                                        

         In  connection  with  our  opinion,  among  other  things,  we have (i)
discussed the proposed  Transaction  and related matters with certain members of
management of  MicroFrame  and SolCom;  (ii)  reviewed the draft Share  Purchase
Agreement dated May 19, 1998, that we have been advised is representative of the
final agreement to be executed by the parties shortly hereafter;  (iii) reviewed
audited financial  statements of MicroFrame at and for the two years ended March
31, 1996 and 1997 and the accompanying Reports of Independent  Accountants,  and
unaudited financial statements of MicroFrame at and for the year ended March 31,
1998; (iv) reviewed  audited  financial  statements of SolCom Systems Limited at
and for the two  years  ended  June 30,  1997 and the  accompanying  reports  of
Independent Accountants, and draft audited financial statements of SolCom at and
for the year ended June 30, 1997 and the nine months ended March 31,  1998;  (v)
reviewed  documents  filed  by  MicroFrame  with  the  Securities  and  Exchange
Commission; (vi) reviewed projections for MicroFrame, SolCom, and MicroFrame and
SolCom  combined  after the  Transaction,  as  prepared  and  provided  to us by
MicroFrame and SolCom; (vii) reviewed certain marketing materials provided to us
by MicroFrame and SolCom; (viii) performed a discounted cash flow analysis using
various discount rates based upon financial  projections  provided by MicroFrame
and SolCom,  (ix) compared publicly  available recent  information for companies
that we determined to be comparable, (x) reviewed recent historical stock prices
for MicroFrame and other  companies we have determined to be comparable and (xi)
reviewed the financial terms of certain other recent business  combinations that
we determined to be comparable.                                                 

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Board of Directors                                                              
MicroFrame, Inc.                                                                
June 10, 1998                                                                   
Page 2                                                                          

         With your permission and without any independent  verification,  (i) we
have  assumed  that  the  documents  to be  prepared  and  used  to  effect  the
Transaction  will do so on the  terms  set  forth in the  draft  Share  Purchase
Agreement dated May 19, 1998,  without material  modification,  and (ii) we have
relied on the accuracy and  completeness of all the financial and other publicly
available  information  reviewed  by us  or  that  was  furnished  or  otherwise
communicated  to us by MicroFrame and SolCom.  Independent of the foregoing,  we
have assumed (i) that the projections for MicroFrame, SolCom, and MicroFrame and
SolCom  combined after  completion of the Transaction  were reasonably  prepared
based on assumptions reflecting good faith judgments of the management preparing
them as to the  most  likely  future  performance  of  MicroFrame,  SolCom,  and
MicroFrame  and SolCom  combined  after the  Transaction  and (ii)  neither  the
management  of  MicroFrame  (with  respect to  projections  for  MicroFrame  and
MicroFrame and SolCom  combined  after  completion of the  Transaction)  nor the
management  of SolCom  (with  respect  to the  projections  of  SolCom)  has any
information  or belief that would make any such  projections  misleading  in any
material respect.  In this regard,  however, we have made certain adjustments to
the financial projections provided to us for MicroFrame,  SolCom, and MicroFrame
and  SolCom  combined  after  completion  of  the  Transaction,  where  we  have
determined  that it may have been  appropriate to do so for purposes of our work
for this opinion.                                                               

         We have not independently  verified the accuracy or completeness of any
of the  information  provided to us or obtained  by us from  publicly  available
sources and do not take any responsibility with respect to any such information.
Also,  we have not made an  independent  valuation or appraisal of the assets or
liabilities  of MicroFrame or SolCom and have not been  furnished  with any such
evaluation or appraisal.                                                        

         Our opinion is based upon an analysis of the  foregoing in light of our
assessment of general economic and financial market conditions as they exist and
can be evaluated by us as of the date  hereof.  In this regard,  we have assumed
there has been no  material  change in the  business,  condition  (financial  or
other) or prospects of  MicroFrame or SolCom since the  respective  dates of the
information  provided to us. We have not  participated in the negotiation of the
Transaction,  provided any legal or other advice with respect to the Transaction
or proposed any possible alternatives to the Transaction.                       

         Our engagement and the opinion  expressed herein are for the benefit of
MicroFrame's  Board of  Directors.  Our opinion does not address the  underlying
decision by  MicroFrame  to  undertake  the  Transaction  or the prices at which
MicroFrame's  common  stock  will  actually  trade at any time and we express no
recommendation  or  opinion  to any  shareholder  of  MicroFrame  as to how such
shareholder  should  vote.  It  is  understood  that  this  letter  is  for  the
information  of the Board of Directors of MicroFrame and may not be used for any
other  purpose or be  disclosed  or  otherwise  referred  to  without  our prior
consent,  except in any filing with the  Securities  and Exchange  Commission in
connection  with the  Transaction or as may otherwise be required by law or by a
court of competent jurisdiction.                                                

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Board of Directors                                                              
MicroFrame, Inc.                                                                
June 10, 1998                                                                   
Page 3                                                                          

         Based upon and subject to the foregoing, we are of the opinion that, as
of the date hereof,  the Transaction is fair to the Company and the shareholders
of the Company from a financial point of view.                                  

                                     Very truly yours,

                                        VAN KASPER & COMPANY

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APPENDIX C

1998 STOCK OPTION PLAN

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1998 STOCK OPTION PLAN
of
MICROFRAME, INC.

                  1.  PURPOSES OF THE PLAN.  This stock option plan (the "Plan")
is designed to provide an incentive to key  employees  (including  directors and
officers who are key  employees)  and to  consultants  and directors who are not
employees of MicroFrame,  Inc., a New Jersey corporation (the "Company"), or any
of its  Subsidiaries  (as such term is defined in Paragraph 19), and to offer an
additional  inducement in obtaining the services of such  individuals.  The Plan
provides for the grant of "incentive stock options"  ("ISOs") within the meaning
of Section 422 of the Internal  Revenue Code of 1986,  as amended (the  "Code"),
and  nonqualified  stock  options  which do not qualify as ISOs  ("NQSOs").  The
Company  makes no  representation  or  warranty,  express or implied,  as to the
qualification of any option as an "incentive stock option" under the Code.      

                  2. STOCK  SUBJECT TO THE PLAN.  Subject to the  provisions  of
Paragraph 12, the aggregate number of shares of Common Stock, $.01 par value per
share,  of the Company  ("Common  Stock") for which options may be granted under
the Plan shall not exceed  3,000,000.  Such  shares of Common  Stock may, in the
discretion of the Board of Directors of the Company (the "Board of  Directors"),
consist either in whole or in part of authorized  but unissued  shares of Common
Stock or shares of Common Stock held in the treasury of the Company.  Subject to
the  provisions of Paragraph 13, any shares of Common Stock subject to an option
which for any reason expires, is canceled or is terminated  unexercised or which
ceases for any reason to be  exercisable  shall again become  available  for the
granting of options  under the Plan.  The Company  shall at all times during the
term of the Plan  reserve  and keep  available  such  number of shares of Common
Stock as will be sufficient to satisfy the requirements of the Plan.            

                  3.  ADMINISTRATION OF THE PLAN. The Plan shall be administered
by the  Board  of  Directors  or a  committee  of the  Board of  Directors  (the
"Committee")  consisting of not less than two (2) directors,  each of whom shall
be a "non-employee  director" within the meaning of Rule 16b-3 promulgated under
the  Securities  Exchange Act of 1934,  as amended (as the same may be in effect
and interpreted from time to time, "Rule 16b-3").  Unless otherwise  provided in
the  By-Laws  of the  Company  or by  resolution  of the Board of  Directors,  a
majority of the members of the Committee shall constitute a quorum, and the acts
of a  majority  of the  members  present  at any  meeting  at which a quorum  is
present,  and any acts  approved  in writing by all  members  without a meeting,
shall be the acts of the Committee.                                             

                  Subject to the express  provisions of the Plan,  the Committee
shall have the authority,  in its sole discretion,  to determine the persons who
shall be granted options; the times                                             

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when they shall receive options;  whether an option granted to an employee shall
be an ISO or a NQSO;  the number of shares of Common Stock to be subject to each
option; the term of each option; the date each option shall become  exercisable;
whether an option shall be exercisable in whole or in  installments,  and, if in
installments,  the  number  of  shares of  Common  Stock to be  subject  to each
installment;  whether  the  installments  shall be  cumulative;  the  date  each
installment shall become  exercisable and the term of each installment;  whether
to accelerate the date of exercise of any option or installment;  whether shares
of Common  Stock may be issued upon the  exercise  of an option as partly  paid,
and,  if so, the dates when  future  installments  of the  exercise  price shall
become due and the  amounts of such  installments;  the  exercise  price of each
option;  the form of payment of the exercise  price;  the fair market value of a
share of Common Stock; whether and under what conditions to restrict the sale or
other disposition of the shares of Common Stock acquired upon the exercise of an
option  and,  if so,  whether  and  under  what  conditions  to  waive  any such
restriction; whether and under what conditions to subject the exercise of all or
any  portion  of an  option  to  the  fulfillment  of  certain  restrictions  or
contingencies  as  specified  in the  contract  referred to in Paragraph 11 (the
"Contract"),   including  without  limitation,   restrictions  or  contingencies
relating to entering into a covenant not to compete with the Company, its Parent
(as such  term is  defined  in  Paragraph  19) and  Subsidiaries,  to  financial
objectives for the Company, any of its Subsidiaries,  a division, a product line
or other  category,  and/or the period of continued  employment  of the optionee
with the  Company or any of its  Subsidiaries,  and to  determine  whether  such
restrictions or contingencies  have been met; the amount,  if any,  necessary to
satisfy the obligation of the Company,  any of its  Subsidiaries  or a Parent to
withhold taxes or other  amounts;  whether an optionee is Disabled (as such term
is defined in  Paragraph  19);  with the consent of the  optionee,  to cancel or
modify an option,  provided  that the  modified  provision  is  permitted  to be
included in an option  granted  under the Plan on the date of the  modification,
and provided further,  that in the case of a modification (within the meaning of
Section  424(h)  of the  Code)  of an ISO,  such  option  as  modified  would be
permitted to be granted on the date of such modification  under the terms of the
Plan; to construe the respective Contracts and the Plan; to prescribe, amend and
rescind rules and regulations  relating to the Plan; to approve any provision of
the Plan or any option  granted under the Plan or any amendment to either which,
under Rule 16b-3,  requires the approval of the Board of Directors,  a committee
of non-employee  directors or the  shareholders  to be exempt (unless  otherwise
specifically provided herein); and to make all other determinations necessary or
advisable for administering the Plan. Any controversy or claim arising out of or
relating to the Plan, any option granted under the Plan or any Contract shall be
determined   unilaterally  by  the  Committee  in  its  sole   discretion.   The
determinations  of the Committee on the matters  referred to in this Paragraph 3
shall be conclusive and binding on the parties.                                 

                  No member or former  member of the  Committee  shall be liable
for any action or  determination  made in good faith with respect to the Plan or
any option granted hereunder.  In addition, each member and former member of the
Committee shall be indemnified and held harmless by the Company from and against
any liability,  claim for damages and expenses in connection therewith by reason
of any action or failure to act under or in connection with the Plan, any option
granted  hereunder or any Contract to the fullest extent  permitted with respect
to directors  under the  Company's  certificate  of  incorporation,  By-Laws and
applicable law.                                                                 

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                  4.   ELIGIBILITY.   The  Committee  may  from  time  to  time,
consistent  with the purposes of the Plan,  grant  options to such key employees
(including  officers and directors who are key employees) of, or consultants to,
the Company or any of its  Subsidiaries,  and to such  directors  of the Company
who, at the time of grant, are not common law employees of the Company or of any
of its Subsidiaries, as the Committee may determine in its sole discretion. Such
options  granted  shall  cover  such  number of  shares  of Common  Stock as the
Committee  may determine in its sole  discretion;  provided,  however,  that the
maximum  number of shares subject to options that may be granted to any employee
during any calendar  year under the Plan shall be 400,000  shares;  and provided
further that the aggregate  market value  (determined  at the time the option is
granted) of the shares of Common  Stock for which any  eligible  employee may be
granted ISOs under the Plan or any other plan of the Company,  or of a Parent or
a Subsidiary of the Company,  which are  exercisable  for the first time by such
optionee  during any calendar year shall not exceed  $100,000.  The $100,000 ISO
limitation  shall be applied by taking  ISOs into  account in the order in which
they were granted. Any option (or the portion thereof) granted in excess of such
ISO limitation amount shall be treated as a NQSO to the extent of such excess.  

                  5. EXERCISE PRICE.  The exercise price of the shares of Common
Stock  under  each  option  shall be  determined  by the  Committee  in its sole
discretion;  provided,  however,  that the exercise price of an ISO shall not be
less than the fair market  value of the Common  Stock  subject to such option on
the date of grant;  and provided further that if, at the time an ISO is granted,
the optionee owns (or is deemed to own under  Section  424(d) of the Code) stock
possessing  more than 10% of the total  combined  voting power of all classes of
stock of the Company,  of any of its  Subsidiaries or of a Parent,  the exercise
price of such ISO shall not be less  than 110% of the fair  market  value of the
Common Stock subject to such ISO on the date of grant.                          

                  The fair  market  value of a share of Common  Stock on any day
shall  be (a) if the  principal  market  for  the  Common  Stock  is a  national
securities  exchange,  the average of the highest  and lowest  sales  prices per
share of the  Common  Stock on such day as  reported  by such  exchange  or on a
consolidated tape reflecting transactions on such exchange, (b) if the principal
market for the Common Stock is not a national securities exchange and the Common
Stock is quoted on the Nasdaq Stock Market  ("Nasdaq"),  and (i) if actual sales
price  information is available with respect to the Common Stock, the average of
the highest and lowest sales prices per share of the Common Stock on such day on
Nasdaq, or (ii) if such information is not available, the average of the highest
bid and the lowest  asked  prices per share for the Common  Stock on such day on
Nasdaq,  or (c) if the  principal  market for the Common Stock is not a national
securities exchange and the Common Stock is not quoted on Nasdaq, the average of
the highest bid and lowest  asked  prices per share for the Common Stock on such
day as  reported on the OTC  Bulletin  Board  Service or by  National  Quotation
Bureau,  Incorporated or a comparable service; provided that if clauses (a), (b)
and (c) of this Paragraph are all inapplicable, or if no                        

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trades have been made or no quotes are  available  for such day, the fair market
value of a share of Common  Stock shall be  determined  by the  Committee by any
method consistent with applicable regulations adopted by the Treasury Department
relating to stock options.                                                      

                  6. TERM. Each option granted pursuant to the Plan shall be for
such term as is  established  by the Committee,  in its sole  discretion,  at or
before the time such option is granted; provided, however, that the term of each
ISO granted  pursuant to the Plan shall be for a period not  exceeding  10 years
from the date of grant thereof, and provided further that if, at the time an ISO
is granted,  the optionee owns (or is deemed to own under Section  424(d) of the
Code) stock  possessing  more than 10% of the total combined voting power of all
classes of stock of the Company,  of any of its Subsidiaries or of a Parent, the
term of the ISO shall be for a period not exceeding  five years from the date of
grant. Options shall be subject to earlier termination as hereinafter provided. 

                  7. EXERCISE.  An option (or any installment  thereof),  to the
extent then  exercisable,  shall be  exercised by giving  written  notice to the
Company  at its  principal  office  stating  which  option  is being  exercised,
specifying the number of shares of Common Stock as to which such option is being
exercised and  accompanied  by payment in full of the aggregate  exercise  price
therefor  (or the amount due on  exercise  if the  applicable  Contract  permits
installment  payments)  (a) in cash  and/or by  certified  check or (b) with the
authorization  of the  Committee,  with cash,  a  certified  check  and/or  with
previously  acquired  shares of Common  Stock,  having an aggregate  fair market
value  (determined  in  accordance  with  Paragraph 5), on the date of exercise,
equal to the aggregate exercise price of all options being exercised;  provided,
however, that in no case may shares be tendered if such tender would require the
Company  to  incur a  charge  against  its  earnings  for  financial  accounting
purposes.                                                                       

                  The Committee may, in its sole  discretion,  permit payment of
the  exercise  price of an option by  delivery  by the  optionee  of a  properly
executed  notice,  together  with a copy of his  irrevocable  instructions  to a
broker acceptable to the Committee to deliver promptly to the Company the amount
of sale or loan proceeds  sufficient to pay such exercise  price.  In connection
therewith, the Company may enter into agreements for coordinated procedures with
one or more brokerage firms.                                                    

                  An optionee  shall not have the rights of a  shareholder  with
respect to such shares of Common  Stock to be received  upon the  exercise of an
option until the date of issuance of a stock  certificate to him for such shares
or, in the case of uncertificated shares, until the date an entry is made on the
books of the  Company's  transfer  agent  representing  such  shares;  provided,
however, that until such stock certificate is issued or until such book entry is
made, any optionee using  previously  acquired shares of Common Stock in payment
of an option  exercise  price shall continue to have the rights of a shareholder
with respect to such previously acquired shares.                                

                  In no case  may a  fraction  of a share  of  Common  Stock  be
purchased or issued under the Plan.                                             

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                  8.  TERMINATION  OF  RELATIONSHIP.  Except as may otherwise be
expressly provided in the applicable Contract,  any optionee whose employment or
consulting  relationship  with the Company (and its Parent and Subsidiaries) has
terminated for any reason other than the death or Disability of the optionee may
exercise any option granted to him as an employee or  consultant,  to the extent
exercisable  on the date of such  termination,  at any time within  three months
after the date of termination, but not thereafter and in no event after the date
the  option  would  otherwise  have  expired;  provided,  however,  that if such
relationship  is terminated  either (a) for cause, or (b) without the consent of
the Company, such option shall terminate immediately. Except as may otherwise be
expressly provided in the applicable Contract, options granted under the Plan to
an employee or consultant of the Company or any of its Subsidiaries shall not be
affected by any change in the status of the holder so long as he continues to be
an  employee  or a  consultant  of  the  Company,  its  Parent  or  any  of  the
Subsidiaries  (regardless  of a change in status from one to the other or having
been transferred from one corporation to another).                              

                  For the purposes of the Plan, an employment relationship shall
be deemed to exist  between an individual  and a corporation  if, at the time of
the  determination,  the  individual  was an  employee of such  corporation  for
purposes of Section 422(a) of the Code. As a result,  an individual on military,
sick leave or other bona fide leave of absence  shall  continue to be considered
an  employee  for  purposes  of the Plan  during such leave if the period of the
leave does not exceed 90 days, or, if longer, so long as the individual's  right
to reemployment  with the  corporation,  any of its  Subsidiaries or a Parent is
guaranteed  either by statute or by contract.  If the period of leave exceeds 90
days and the individual's  right to reemployment is not guaranteed by statute or
by contract,  the employment  relationship shall be deemed to have terminated on
the 91st day of such leave.                                                     

                  Except  as  may   otherwise  be  expressly   provided  in  the
applicable  Contract,  an  optionee  whose  directorship  with the  Company  has
terminated  for any reason other than his death or  Disability  may exercise the
options granted to him as a director who was not an employee of or consultant to
the Company or any of its Subsidiaries, to the extent exercisable on the date of
such termination, at any time within three months after the date of termination,
but not  thereafter  and in no event after the date the option  would  otherwise
have expired;  provided,  however,  that if his  directorship  is terminated for
cause, such option shall terminate immediately.                                 

                  Nothing  in the Plan or in any option  granted  under the Plan
shall  confer  on any  person  any  right  to  continue  in the  employ  or as a
consultant  of the  Company,  its  Parent  or any of its  Subsidiaries,  or as a
director of the Company,  or interfere in any way with any right of the Company,
its Parent or any of its Subsidiaries to terminate such relationship at any time
for any reason whatsoever without liability to the Company, its Parent or any of
its Subsidiaries.                                                               

                  9. DEATH OR DISABILITY OF AN OPTIONEE. Except as may otherwise
be expressly provided in the applicable Contract,  if an optionee dies (a) while
he is employed  by, or a consultant  to, the  Company,  its Parent or any of its
Subsidiaries, (b) within three months after                                     

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the termination of his employment or consulting  relationship  with the Company,
its  Parent  and its  Subsidiaries  (unless  such  termination  was for cause or
without  the  consent  of the  Company)  or (c) within  one year  following  the
termination  of such  employment  or  consulting  relationship  by reason of his
Disability,  the options granted to him as an employee of, or consultant to, the
Company or any of its Subsidiaries,  may be exercised, to the extent exercisable
on the date of his death, by his Legal  Representative  (as such term is defined
in Paragraph  19), at any time within one year after death,  but not  thereafter
and in no event after the date the option would  otherwise have expired.  Except
as may otherwise be expressly provided in the applicable Contract,  any optionee
whose employment or consulting relationship with the Company, its Parent and its
Subsidiaries  has  terminated  by reason of his  Disability  may  exercise  such
options,  to the extent exercisable upon the effective date of such termination,
at any time within one year after such date,  but not thereafter and in no event
after the date the option would otherwise have expired.                         

                  Except  as  may   otherwise  be  expressly   provided  in  the
applicable  Contract,  if an  optionee  dies (a) while he is a  director  of the
Company,  (b) within three months after the termination of his directorship with
the Company (unless such termination was for cause) or (c) within one year after
the termination of his  directorship  by reason of his  Disability,  the options
granted to him as a director  who was not an  employee of or  consultant  to the
Company or any of its Subsidiaries,  may be exercised, to the extent exercisable
on the date of his death,  by his Legal  Representative  at any time  within one
year after death,  but not  thereafter and in no event after the date the option
would otherwise have expired.  Except as may otherwise be expressly  provided in
the applicable  Contract,  an optionee whose  directorship  with the Company has
terminated by reason of  Disability,  may exercise  such options,  to the extent
exercisable  on the effective date of such  termination,  at any time within one
year after  such date,  but not  thereafter  and in no event  after the date the
option would otherwise have expired.                                            

                  10.  COMPLIANCE WITH SECURITIES LAWS. It is a condition to the
exercise  of any option  that  either  (a) a  Registration  Statement  under the
Securities Act of 1933, as amended (the "Securities  Act"),  with respect to the
shares of Common Stock to be issued upon such  exercise  shall be effective  and
current at the time of exercise,  or (b) there is an exemption from registration
under the  Securities  Act for the  issuance of the shares of Common  Stock upon
such  exercise.  Nothing  herein shall be construed as requiring  the Company to
register  shares  subject to any option under the  Securities Act or to keep any
Registration Statement effective or current.                                    

                  The  Committee  may  require,  in its  sole  discretion,  as a
condition to the grant or exercise of an option,  that the optionee  execute and
deliver to the Company his  representations and warranties,  in form,  substance
and scope  satisfactory  to the  Committee,  which the  Committee  determines is
necessary or convenient to facilitate  the  perfection of an exemption  from the
registration  requirements of the Securities Act,  applicable  state  securities
laws or other legal  requirement,  including  without  limitation,  that (a) the
shares of Common  Stock to be  issued  upon  exercise  of the  option  are being
acquired by the optionee for his own account, for investment only and not with a
view to the resale or distribution thereof, and (b) any subsequent resale or    

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distribution  of  shares  of  Common  Stock by such  optionee  will be made only
pursuant  to (i) a  Registration  Statement  under the  Securities  Act which is
effective  and current with respect to the shares of Common Stock being sold, or
(ii) a specific  exemption from the registration  requirements of the Securities
Act, but in claiming such exemption, the optionee, prior to any offer of sale or
sale of such shares of Common Stock,  shall provide the Company with a favorable
written opinion of counsel  satisfactory to the Company, in form,  substance and
scope satisfactory to the Company,  as to the applicability of such exemption to
the proposed sale or distribution.                                              

                  In addition, if at any time the Committee shall determine that
the  listing  or  qualification  of the shares of Common  Stock  subject to such
option on any securities  exchange,  Nasdaq or under any applicable law, or that
the  consent or approval  of any  governmental  agency or  regulatory  body,  is
necessary or desirable as a condition to, or in connection with, the granting of
an option or the issuance of shares of Common Stock thereunder,  such option may
not be granted or exercised in whole or in part, as the case may be, unless such
listing, qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Committee.                         

                  11. STOCK OPTION CONTRACTS.  Each option shall be evidenced by
an  appropriate  Contract  which  shall be duly  executed by the Company and the
optionee.  Such Contract shall contain such terms, provisions and conditions not
inconsistent  herewith  as  may  be  determined  by the  Committee  in its  sole
discretion. The terms of each option and Contract need not be identical.        

      12.      ADJUSTMENTS UPON CHANGES IN COMMON STOCK.
Notwithstanding  any other  provision of the Plan, in the event of any change in
the outstanding  Common Stock by reason of a stock  dividend,  recapitalization,
merger in which the Company is the  surviving  corporation,  spinoff,  split-up,
combination  or exchange of shares or the like which  results in a change in the
number or kind of shares of Common Stock which is outstanding  immediately prior
to such event,  the aggregate number and kind of shares subject to the Plan, the
aggregate number and kind of shares subject to each  outstanding  option and the
exercise price thereof, and the maximum number of shares subject to options that
may be granted to any  employee in any  calendar  year,  shall be  appropriately
adjusted by the Board of Directors,  whose determination shall be conclusive and
binding on all parties thereto.  Such adjustment may provide for the elimination
of fractional  shares that might otherwise be subject to options without payment
therefor.                                                                       

                  In the  event of (a) the  liquidation  or  dissolution  of the
Company, (b) a merger in which the Company is not the surviving corporation or a
consolidation,  or (c) any  transaction (or series of related  transactions)  in
which  (i) more  than 50% of the  outstanding  Common  Stock is  transferred  or
exchanged  for other  consideration  or (ii) shares of Common Stock in excess of
the  number of shares of Common  Stock  outstanding  immediately  preceding  the
transaction  are issued (other than to  shareholders of the Company with respect
to their shares of stock in the Company),                                       

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any  outstanding  options shall  terminate  upon the earliest of any such event,
unless other provision is made therefor in the transaction.                     

                  13.  AMENDMENTS  AND  TERMINATION  OF THE  PLAN.  The Plan was
adopted by the Board of  Directors  on June 12,  1998.  No option may be granted
under the Plan after June 11,  2008.  The Board of  Directors,  without  further
approval of the Company's shareholders, may at any time suspend or terminate the
Plan,  in whole or in part, or amend it from time to time in such respects as it
may deem advisable,  including  without  limitation,  in order that ISOs granted
hereunder meet the requirements for "incentive stock options" under the Code, to
comply with the provisions of Rule 16b-3 promulgated the Exchange Act or Section
162(m) of the Code or any  change in  applicable  law or  regulation,  ruling or
interpretation of any governmental agency or regulatory body; provided, however,
that no amendment  shall be effective  without the requisite prior or subsequent
shareholder  approval  which would (a) except as  contemplated  in Paragraph 12,
increase the maximum  number of shares of Common Stock for which  options may be
granted under the Plan or change the maximum  number of shares for which options
may be granted to  employees in any calendar  year,  (b) change the  eligibility
requirements for individuals  entitled to receive options  hereunder or (c) make
any change for which  applicable  law or any  governmental  agency or regulatory
body requires shareholder approval.  No termination,  suspension or amendment of
the Plan  shall  adversely  affect the  rights of an  optionee  under any option
granted  under  the Plan  without  such  optionee's  consent.  The  power of the
Committee to construe and  administer any option granted under the Plan prior to
the termination or suspension of the Plan shall continue after such  termination
or during such suspension.                                                      

                  14. NON  TRANSFERABILITY  OF OPTIONS.  No option granted under
the Plan shall be  transferable  other  than by will or the laws of descent  and
distribution, and options may be exercised, during the lifetime of the optionee,
only by the optionee or his Legal Representatives. Except to the extent provided
above,  options  may not be  assigned,  transferred,  pledged,  hypothecated  or
disposed of in any way (whether by operation of law or otherwise)  and shall not
be subject to execution,  attachment or similar process,  and any such attempted
assignment,  transfer,  pledge,  hypothecation or disposition  shall be null and
void ab initio and of no force or effect.                                       

                  15.  WITHHOLDING  TAXES.  The Company,  or its  Subsidiary  or
Parent,  as  applicable,  may  withhold  (a) cash or (b) with the consent of the
Committee,  shares of Common Stock to be issued upon  exercise of an option or a
combination  of  cash  and  shares,   having  an  aggregate  fair  market  value
(determined  in  accordance  with  Paragraph  5) equal to the  amount  which the
Committee  determines is necessary to satisfy the  obligation of the Company,  a
Subsidiary or Parent to withhold Federal,  state and local income taxes or other
amounts incurred by reason of the grant, vesting,  exercise or disposition of an
option  or  the   disposition  of  the   underlying   shares  of  Common  Stock.
Alternatively,  the Company may require the  optionee to pay to the Company such
amount,  in cash,  promptly  upon demand.  The Company  shall not be required to
issue any shares of Common Stock  pursuant to any such option until all required
payments have been made.                                                        

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                  16. LEGENDS; PAYMENT OF EXPENSES. The Company may endorse such
legend or legends upon the  certificates  for shares of Common Stock issued upon
exercise  of an  option  under  the  Plan and may  issue  such  "stop  transfer"
instructions  to its transfer  agent in respect of such shares as it determines,
in its  sole  discretion,  to be  necessary  or  appropriate  to (a)  prevent  a
violation of, or to perfect an exemption from, the registration  requirements of
the  Securities   Act,   applicable   state   securities  laws  or  other  legal
requirements,  (b) implement the provisions of the Plan or any agreement between
the Company and the optionee with respect to such shares of Common Stock, or (c)
permit the Company to determine the occurrence of a "disqualifying disposition,"
as  described  in  Section  421(b) of the Code,  of the  shares of Common  Stock
transferred upon the exercise of an ISO granted under the Plan.                 

                  The Company  shall pay all issuance  taxes with respect to the
issuance of shares of Common Stock upon the exercise of an option  granted under
the Plan, as well as all fees and expenses incurred by the Company in connection
with such issuance.                                                             

                  17. USE OF PROCEEDS. The cash proceeds to be received upon the
exercise of an option under the Plan shall be added to the general  funds of the
Company  and used for such  corporate  purposes  as the Board of  Directors  may
determine, in its sole discretion.                                              

                  18.  SUBSTITUTIONS  AND  ASSUMPTIONS  OF  OPTIONS  OF  CERTAIN
CONSTITUENT CORPORATIONS. Anything in this Plan to the contrary notwithstanding,
the Board of  Directors  may,  without  further  approval  by the  shareholders,
substitute new options for prior options of a Constituent  Corporation  (as such
term is defined in Paragraph 19) or assume the prior options of such Constituent
Corporation.                                                                    

19.      DEFINITIONS.                       

                           (a)   "Constituent   Corporation"   shall   mean  any
corporation  which engages with the Company,  its Parent or any  Subsidiary in a
transaction  to which Section  424(a) of the Code applies (or would apply if the
option assumed or  substituted  were an ISO), or any Parent or any Subsidiary of
such corporation.                                                               

                           (b)  "Disability"  shall mean a  permanent  and total
disability within the meaning of Section 22(e)(3) of the Code.                  

                           (c) "Legal  Representative"  shall mean the executor,
administrator or other person who at the time is entitled by law to exercise the
rights of a deceased or incapacitated optionee with respect to an option granted
under the Plan.                                                                 

                           (d)  "Parent"  shall  have  the  same  definition  as
"parent corporation" in Section 424(e) of the Code.                             

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                           (e)  "Subsidiary"  shall have the same  definition as
"subsidiary corporation" in Section 424(f) of the Code.                         

                  20.  GOVERNING  LAW. The Plan,  such options as may be granted
hereunder,  the  Contracts  and all related  matters  shall be governed  by, and
construed in accordance with, the laws of the State of New York,  without regard
to conflict or choice of law provisions.                                        

                  Neither  the  Plan nor any  Contract  shall  be  construed  or
interpreted  with any  presumption  against the Company by reason of the Company
causing the Plan or Contract to be drafted. Whenever from the context it appears
appropriate,  any term stated in either the singular or plural shall include the
singular and plural,  and any term stated in the  masculine,  feminine or neuter
gender shall include the masculine, feminine and neuter.                        

                  21.  PARTIAL   INVALIDITY.   The  invalidity,   illegality  or
unenforceability  of any provision in the Plan, any option or Contract shall not
affect the validity,  legality or enforceability of any other provision,  all of
which shall be valid,  legal and enforceable to the fullest extent  permitted by
applicable law.                                                                 

                  22.  SHAREHOLDER  APPROVAL.  The  Plan  shall  be  subject  to
approval by a majority of the votes of all  outstanding  shares entitled to vote
hereon at the next duly held meeting of the  Company's  shareholders  at which a
quorum is present or by majority written consent of the Company's  shareholders.
No options granted  hereunder may be exercised prior to such approval,  provided
that, the date of grant of any option shall be determined as if the Plan had not
been subject to such approval. Notwithstanding the foregoing, if the Plan is not
approved by a vote of the  shareholders  of the Company on or before  October 1,
1998, the Plan and any options granted hereunder shall terminate.               

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APPENDIX D

1998 U.K. SUB-PLAN

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MICROFRAME, INC.

1998 STOCK OPTION PLAN

1998 U.K. Sub-Plan/U.K. Approved Rules

In  pursuance of its powers under the  MicroFrame,  Inc.  1998 Stock Option Plan
(the "Plan"), the Board of Directors, or a duly appointed committee of the Board
of Directors (the  "Committee") of MicroFrame,  Inc. (the "Company") has adopted
these rules (the "UK Rules") for the purposes of operating  the Plan with regard
to such options  ("Options")  which the UK Rules are  expressed to extend at the
time when the Option is granted.  Unless the  context  requires  otherwise,  all
expressions used in the UK Rules have the same meaning as the Plan. The Plan, as
supplemented by the UK Rules, is referred to hereinafter as the "Sub-Plan".  For
the  avoidance  of doubt,  the terms of the Plan  (insofar as they have not been
disapplied by Rule p of the UK Rules) shall form part of the Sub-Plan.          

         (a)      The  shares  over  which  Options  may be  granted  under  the
                  Sub-Plan  form part of the ordinary  share capital (as defined
                  in  Section  832(1)  Income  and  Corporation  Taxes Act 1988)
                  ("ICTA 1988") of the Company and must at all times,  including
                  the time of grant and the time of  exercise,  comply  with the
                  terms  of  the  Plan  and  comply  with  the  requirements  of
paragraphs 10 to 14 Schedule 9 ICTA 1988.   

         (b)      The companies  participating  in this Sub-Plan are the Company
                  and all companies controlled by the Company within the meaning
of Section 840 ICTA 1988 ("Subsidiaries").  

         (c)      The shares of Common  Stock to be  acquired on exercise of the
                Option in accordance with the terms of the Sub-Plan will be:

(i)      fully paid up;                     

(ii)     not redeemable;                    

                  (iii)    not   subject   to  any   restrictions   other   than
                           restrictions  which  attach to all shares of the same
                           class.  For the  purpose  of this  clause,  the  term
                           "restrictions" includes restrictions which are deemed
                           to  attach  to  the   shares   under  any   contract,
                           agreement, arrangement or condition as referred to in
        paragraph 13 Schedule 9 ICTA 1988.

         (d)      An Option granted under this Sub-Plan shall not be exercisable
    for more than ten years after the date of grant.

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         (e)      To the  extent any  restrictions  or  contingencies  have been
                  imposed by the  Committee  under the  provisions  contained in
                  Paragraph 3 of the Plan,  these  restrictions or contingencies
shall:                                      

     (i)      referred to at Paragraph 11 of the Plan;

                  (ii)     be such that rights to exercise such Option after the
                           fulfillment  or  attainment  of any  restrictions  or
                           contingencies  so specified shall not be dependent on
               the further discretion of any person; and

                  (iii)    not be  capable  of  amendment,  variation  or waiver
                           unless an event  occurs  which  causes the  Committee
                           reasonably to consider that waived, varied or amended
                           restrictions  or  contingencies  would  be  a  fairer
                           measure of performance and would be no more difficult
to satisfy.               

         (f)      No Option will be granted to an  employee  or  director  under
                  this Sub-Plan, or where an Option has previously been granted,
                  no Option  shall be exercised  by an  optionholder  if at that
                  time he has,  or any time within the  preceding  12 months has
                  had, a material  interest  for the purposes of Schedule 9 ICTA
                  1988 in either the Company being a close  company  (within the
                  meaning  of Chapter I of Part XI of ICTA 1988) or in a company
                  being a close company which has control (within the meaning of
                  Section 840 ICTA 1988) of the Company or in a company  being a
                  close  company  and a member of a  consortium  (as  defined in
                  Section   187(7)  ICTA  1988)  which  owns  the  Company.   In
                  determining  whether a  company  is a close  company  for this
                  purpose,  Section  414(1)(a) ICTA 1988 (exclusion of companies
                  not  resident in the United  Kingdom)  and Section 415 of ICTA
                  1988 (exclusion of certain companies with listed shares) shall
be disregarded.                             

         (g)      Notwithstanding  any  provision of the Plan, no Option will be
                  granted to an  employee  or  director  under this  Sub-Plan in
                  relation to which the exercise  price is manifestly  less than
                  the fair market value (as defined in Section 187(2) ICTA 1988)
                  of the  Company's  Common  Stock  on the  date of grant of the
                  Option.  The  exercise  price  shall be  stated at the date of
                  grant  of  the  Option  and  determined  in  accordance   with
                  Paragraph 5 of the Plan,  save that the  exercise  price of an
                  Option  granted under the Sub-Plan  shall be not less than one
                  hundred  percent  (100%) of the fair market value of the stock
                  on the date of grant,  and shall be agreed in advance with the
                  Shares  Valuation  Division of the Inland Revenue or otherwise
                  determined   with  the  agreement  of  the  Shares   Valuation
Division.                                   

         (h)      Notwithstanding  Paragraph  7 of the Plan,  settlement  of the
                  exercise  price may not be in the form of previously  acquired
                  shares  of Common  Stock  and  payment  of the  amount  due on
exercise may not be made in installments.   

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         (i)      Any  alteration or amendment to this  Sub-Plan  shall not have
                  effect  unless  approved by the Board of Inland  Revenue.  The
                  Company  undertakes to provide details thereof to the Board of
  Inland Revenue without delay for this purpose.

         (j)      Notwithstanding   Paragraph  11  of  the  Plan,  any  material
                  alteration  of the  standard  form of stock  option  agreement
                  shall not have effect  unless  approved by the Board of Inland
Revenue.                                    

         (k)      No  adjustment  pursuant to  Paragraph 12 of the Plan shall be
                  made to any Option which has been  granted  under the Sub-Plan
                  unless such  adjustment  would be permitted under the Plan and
                  is a variation in the share capital of which the scheme shares
                  form part under  paragraph  29 Schedule 9 ICTA 1988.  Where so
                  permitted,  no such  adjustment  shall take  effect  until the
                  approval  of the  Board of  Inland  Revenue  shall  have  been
obtained thereto.                           

         (l)      For the  avoidance  of doubt it is stated  that the Company is
                  the grantor as defined in paragraph 1(1) Schedule 9 ICTA 1988.

         (m)      Any  Option  granted to an  employee  or  director  under this
                  Sub-Plan  shall be limited to take effect so that  immediately
                  following such grant, the aggregate  market value  (determined
                  at the time  prescribed  by  paragraph 28 Schedule 9 ICTA 1988
                  and  calculated in accordance  with the provisions of the said
                  Schedule 9) of shares of Common  Stock which the  optionholder
                  can  acquire  under  this  Sub-Plan  and any  other  scheme or
                  schemes,  not being a  savings-related  share  option  scheme,
                  approved  under the said  Schedule  9 and  established  by the
                  grantor or by any  associated  company  (as defined in Section
                  416 ICTA 1988) of the grantor (and not  exercised),  shall not
                  exceed(pound)30,000  or such  other  sum as may be  prescribed
                  from  time to time  by  paragraph  28  Schedule  9 ICTA  1988,
                  provided   always   that  this  limit  shall  not  exceed  the
limitations set out in the Plan.            

         (n)      An Option  will only be  granted  under  this  Sub-Plan  to an
                  employee  (other  than one who is a  director)  or a full-time
                  director of the Company or a subsidiary  participating in this
                  Sub-Plan. For this purpose, a full-time director is one who is
                  employed by the  Company  required to work at least 25 hours a
                  week  excluding  meal-times  in the business of the Company or
                  its  Subsidiaries.  For the  avoidance of doubt an Option will
                  not be granted under this Sub-Plan to a consultant or director
                  who  is  not  an  employee  of  the  Company  or  any  of  its
                  Subsidiaries,  and  all  references  in the  Plan  to  Options
granted to consultants shall be disregarded.

         (o)      The  Company  shall,  not later  than 30 days after the actual
                  receipt of the written  notice of exercise of an Option  given
                  in accordance  with the provisions of the Plan,  together with
                  the payment of the aggregate  exercise price in respect of the
shares of Common                            

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                  Stock to be issued or transferred  pursuant to the exercise of
                  an Option,  allot and issue credited as fully paid or transfer
                  to the  Optionee  and cause to be  registered  in his name the
                  number  of shares of Common  Stock  specified  in the  written
notice.                                     

         (p)      The  following  shall not form part of and shall  therefore be
 disregarded for the purposes of the Sub-Plan:

                  (i)      in  Paragraph  3 of the  Plan,  the  words  "the fair
                           market value of a share of Common Stock;  whether and
                           under what  conditions  to restrict the sale or other
                           disposition  of the shares of Common  Stock  acquired
                           upon the  exercise of an Option and if so whether and
                           under what  circumstances to waive such  restriction;
                           whether to  accelerate  the date of  exercise  of any
                           option or installment; whether shares of Common Stock
                           may be  issued  upon the  exercise  of an  option  as
                           partly  paid,  and,  if so,  the  dates  when  future
                           installments  of the exercise  price shall become due
                           and the  amounts  of such  installment;  and with the
                           consent  of the  optionee,  to  cancel  or  modify an
                           option,  provided  that  the  modified  provision  is
                           permitted to be included in an Option  granted  under
the terms of the Plan";   

                  (ii)     in  the  first   paragraph   of   Paragraph   7,  the
                           parenthetical  that  reads,  "or  the  amount  due on
                           exercise   if   the   applicable   Contract   permits
                           installment  payments" and the language from "(b)" to
    the end of that paragraph; and

                  (iii)    all  references  in  the  Plan  to  "Incentive  Stock
                Options" or "Non-Qualified Stock Options."

         (q)      This Sub-Plan  shall not become  effective in any manner until
                  and unless a closing  occurs in  connection  with that certain
                  Share  Purchase  Agreement  dated as of August  17,  1998,  as
                  amended,  by and among the  Company,  SolCom  Systems  Limited
                  ("SolCom")   and  certain   shareholders   and   shareholders'
representatives of SolCom.                  

                     Adopted on behalf of the Company:

           By: /s/ Stephen B. Gray
                                      ------------------------------------------
                     Stephen B. Gray
                                           President and Chief Executive Officer

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APPENDIX E

FINANCIAL STATEMENTS OF SOLCOM

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SOLCOM SYSTEMS LIMITED

 CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 1998
AND THE YEAR ENDED JUNE 30, 1997

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REPORT OF THE INDEPENDENT AUDITORS

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

The Board of Directors                                                          
SolCom Systems Limited                                                          

We have audited the accompanying  consolidated balance sheets of SolCom System's
Limited  and its  subsidiary  as of March  31,  1998  and June 30,  1997 and the
related consolidated  statements of operations,  shareholders' deficit, and cash
flows for the nine months ended March 31, 1998 and the year ended June 30, 1997.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.                                                                  

We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the overall  financial  statements
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.                                                                        

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial  position of SolCom Systems
Limited  and its  subsidiary  as of March  31,  1998  and June 30,  1997 and the
consolidated  results of their operations and their  consolidated cash flows for
the nine  months  ended  March  31,  1998 and the year  ended  June 30,  1997 in
conformity with generally accepted accounting principles in the United States.  

GRANT THORNTON                                                                  
Edinburgh                                                                       
United Kingdom                                                                  

August 1998                                                                     

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[Letterhead of Grant Thornton]

The Members                                                                     
SolCom Systems Limited                                                          
SolCom House                                                                    
Meikle Road                                                                     
Kirkton Campus                                                                  
Livingston EH54 7DE                                                             

                                                        January 1999

Dear Sirs                                                                       

SOLCOM SYSTEMS LIMITED                                                          
UK STATUTORY FINANCIAL STATEMENTS FOR THE PERIOD                                
ENDED 31 MARCH 1998                                                             

Reference  is made to our audit  report  dated 14 August  1998 in respect of the
accompanying financial statements.                                              

The financial  statements  are prepared in accordance  with  Generally  Accepted
Accounting Principles in the United Kingdom ("UK GAAP").                        

Our audit was  conducted in  accordance  with  Auditing  Standards in the United
Kingdom ("UK GAAS") that are similar in all material respects to US GAAS.       

Yours faithfully,                                                               

Grant Thornton                                                                  

January 1999                                                                    

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                                                        [Enlarge/Download Table]

SOLCOM SYSTEMS LIMITED                                                                                             
CONSOLIDATED BALANCE SHEETS                                                                                        
-------------------------------------------------------------------------------------------------------------------

                                                                                           (In Thousands)          
                                                                                        except per share data      
                                                                                   March 31, 1998   June 30, 1997  
                                                                                    (pound)         (pound)        

                                                                                                                   
ASSETS                                                                                                             
Current assets:                                                                                                    
Cash and cash equivalents                                                             12               7           
Accounts receivable                                                                  147             204           
Other receivables                                                                     23              24           
Prepayments                                                                           44              24           
Inventories                                                                          251             217           
                                                                                     ---             ---           
Total current assets                                                                 477             476           

Property and equipment, net                                                          147             169           
                                                                                     ---             ---           
Total assets                                                                         624             645           
                                                                                     ===             ===           

LIABILITIES AND SHAREHOLDERS' EQUITY                                                                               
Current liabilities:                                                                                               
Bank overdraft                                                                        11             133           
Current portion of bank loans                                                        112             123           
Current portion of capital leases                                                     11              10           
Accounts payable                                                                     605             311           
Accrued expenses                                                                     257             171           
                                                                                     ---             ---           
Total current liabilities                                                            996             748           

Capital leases, less current position                                                  -               9           
Bank loans, less current position                                                     18              97           

Cumulative redeemable preference (pound)1 stated value, 30,000 shares authorized                                   
and outstanding                                                                       30              30           

Commitments and contingencies                                                          -               -           

Shareholders' deficit                                                                                              
Ordinary(pound)0.01 stated value, 48,960,000 (June 30, 1997 - 40,460,000) shares                                   
authorized, issued and outstanding, 36,140,000 (June 30, 1997 - 30,740,000)                                        
shares                                                                               361             307           
Additional paid in capital                                                           433             222           
Accumulated deficit                                                               (1,217)           (768)          
Cumulative translation adjustment                                                      3               -           
                                                                                  ------        --------           
Total shareholders' deficit                                                         (420)           (239)          
                                                                                    -----           -----          
Total liabilities and shareholders' deficit                                          624             645           
                                                                                    ====             ===           


The accompanying notes are an integral part of these consolidated financial 
statements

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SOLCOM SYSTEMS LIMITED                                                                                             
CONSOLIDATED STATEMENTS OF OPERATIONS                                                                              

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

                                                                                  (In Thousands)                   
                                                                               except per share data               

                                                                     nine months                      year         
                                                                        ended                        ended         
                                                                    March 31, 1998               June 30, 1997     
                                                                    (pound)                      (pound)           

                                                                                                                   
Sales                                                                 1,031                        1,003           
Cost of sales                                                          (221)                        (193)          
                                                                       -----                        -----          
Gross profit                                                            810                          810           
Operating expenses                                                     (965)                      (1,073)          
Research and development expense                                       (264)                        (279)          
Interest income                                                           1                            3           
Interest expense                                                        (21)                         (18)          
                                                                      --------                     ------          
Net loss                                                               (439)                        (557)          
                                                                       -----                                       
Loss per share - basic and diluted                                ((pound)0.01)              ((pound)0.02)         
                                                                        =======                     =======        


 The accompanying notes are an integral part of these consolidated
financial statements. 

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SOLCOM SYSTEMS LIMITED                                                                                              
CONSOLIDATED STATEMENTS OF SHAREHOLDERS DEFICIT                                                                     

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

                                       (In thousands, except per share data)                                        

                                                              Additional                  Cumulative                
                                        Ordinary    Shares     paid in     Accumulated    translation               
                                         Shares     Amount     capital      deficits      adjustments     Total     

                                                                                                                    
Balance at July 1, 1996                          3   (pound)3  (pound)498    (pound)(201)      (pound)-  (pound)300 
Net Loss                                         -          -           -           (557)             -        (557)
Capitalization of share premium             30,737        304        (304)             -              -           - 
Employee stock compensation                      -          -          28              -              -          28 
Preference dividend declared                     -          -           -            (10)             -         (10)
                                      ----------------------------------------------------------------------------- 
Balance at June 30, 1997                    30,740        307         222           (768)             -        (239)
Net income                                       -          -           -           (439)             -        (439)
Share capital issued                         5,400         54         211              -              -         265 
Translation adjustment                           -          -           -              -              3           3 
Preference dividend declared                     -          -           -            (10)             -         (10)
                                      ----------------------------------------------------------------------------- 
Balance at March 31, 1998                   36,140 (pound)361  (pound)433  (pound)(1,127)      (pound)3 (pound)(420)
                                      ============================================================================= 

The accompanying notes form an integral part of these consolidated
financial statements. 

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SOLCOM SYSTEMS LIMITED                                                                                             
CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                              

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

                                                                                           (In Thousands)          
                                                                                        except per share data      

                                                                                     nine months         year      
                                                                                        ended           ended      
                                                                                   March 31, 1998   June 30, 1997  
                                                                                    (pound)         (pound)        

                                                                                                                   
Cash flows from operating activities                                                                               
Net loss                                                                               (439)           (557)       
Adjustments to reconcile net loss to net cash used in operating activities                                         
Depreciation                                                                                                       
Employee stock compensation                                                              57              56        
(Increase) in Inventories                                                                 -              28        
Decrease/(Increase) in receivables and prepayments                                      (34)           (114)       
Increase in accounts payable and accrued expenses                                       370             237        
                                                                                     ------          ------        
Total adjustments                                                                       431              68        
                                                                                     ------         -------        
Net cash used in operating activities                                                    (8)           (489)       

Cash flows from investing activities                                                                               
Capital expenditures                                                                    (35)           (157)       
                                                                                     -------        --------       
Net cash used in investing activities                                                   (35)           (157)       

Cash flows from financing activities                                                                               
Bank overdraft                                                                         (122)            132        
Proceeds from issuance of long term debt                                                  -             247        
Principal payments under long-term debt and capital losses                              (98)            (76)       
Proceeds from issuance of shares                                                        265               -        
                                                                                     ------          ------        
Net cash provided by financing activities                                                45             303        

Effect of exchange rate changes on cash and cash equivalents                              3               -        
                                                                                     ------          ------        

Net increase/(decrease) in cash and cash equivalents                                      5            (343)       

Cash and cash equivalent at beginning of the period                                       7             350        
                                                                                     ------           -----        

Cash and cash equivalents at the end of the period                                       12               7        
                                                                                      =====         =======        

Supplemental  disclosure of cash flow  information:  Cash paid during the period                                   
for:                                                                                                               
Interest                                                                                 18              13        
                                                                                      =====          ======        

 The accompanying notes are an integral part of these consolidated
financial statements. 

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SOLCOM SYSTEMS LIMITED                                                          
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS)                                     

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

NOTE A - DESCRIPTION OF THE BUSINESS                                            

The Company                                                                     

SolCom  Systems  Limited and its  subsidiary  (the  "Company")  are  principally
engaged  in  the  provision  of  outsourced   services  to  the  technology  and
information industries.                                                         

Incorporation and history                                                       

The Company was  incorporated in Scotland on December 13, 1990 as SolCom Systems
Limited.  The  subsidiary  was  incorporated  in the state of Virginia in USA on
September 16, 1996 as SolCom System Inc.                                        

Companies Act 1985                                                              

These  financial  statements  do not  comprise  accounts  within the  meaning of
Section 240 of the UK Companies Act 1985 (the  "Companies  Act").  The Company's
statutory accounts,  which are its primary financial  statements are prepared in
accordance with generally accepted  accounting  principles in the United Kingdom
("UK GAAP") in  compliance  with the  Companies  Act and are  presented in Great
Britain pounds sterling ("pounds sterling").                                    

Change of fiscal year end                                                       

The Company has changed its fiscal year end to March 31, 1998 in anticipation of
its  acquisition  by  MicroFrame,  Inc. The  Consolidated  Financial  Statements
present results for the 9 months ended March 31, 1998 with  comparatives for the
year ended June 30, 1997.                                                       

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNT POLICIES                                

A summary of the significant  accounting  policies  consistently  applied in the
preparation of the accompanying financial statements follows:                   

Principles of Consolidation                                                     

The  consolidated  financial  statements  include the accounts of SolCom Systems
Limited and its subsidiary,  SolCom Systems,  Inc. All significant  intercompany
balances and transactions have been eliminated.                                 

Accounting Estimates                                                            

The preparation of financial  statements in conformity  with generally  accepted
accounting principles in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,  the
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements, and the reported amount of revenues and expenses during the reported
period. Actual results may differ from those estimates.                         

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SOLCOM SYSTEMS LIMITED                                                          
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)                          

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

Revenue Recognition                                                             

The Company  records  revenue in  accordance  with  Statement of Position  91-I.
"Software  Revenue  Recognition")  (the "SOP").  In accordance with the SOP, the
Company  records  revenue  from product  sales upon  shipment to the customer if
there exists no significant vendor obligations and collectibility is probable.  

Earnings Per Share                                                              

During 1997, the Company adopted  Statements of Financial  Accounting  Standards
(SFAS) No. 128,  Earnings Per Share.  SFAS No. 128 requires the  presentation of
basic  earnings  per share (EPS) and,  for  companies  with  potential  dilutive
securities, such as options, diluted EPS.                                       

Basic earnings per share is computed using the weighted average number of shares
of common stock and convertible  preferred stock  outstanding.  Diluted earnings
per share is  computed  using the  weighted  average  number of shares of common
stock  outstanding and when dilutive,  common  equivalent shares from options to
purchase common stock using the treasury stock method.                          

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                 

Research and Development Costs                                                  

The  Company   charges  all  costs  incurred  to  establish  the   technological
feasibility of a product or enhancement to research and development expense.    

Cash and Cash Equivalents                                                       

The Company considers all highly liquid debt instruments purchased with original
maturities  of three months or less to be cash  equivalents  for purposes of the
statement of cash flows.                                                        

Fair value of Financial Instruments                                             

The fair values of the Company's cash and cash equivalents, accounts receivable,
accounts payable,  and accrued expenses approximate their carrying values due to
the relatively short maturities of these instruments.                           

Inventories                                                                     

Inventories are priced at the lower of cost (determined by first-in,  first-out)
or market value (defined as not realizable value).                              

Property, Plant and Equipment                                                   

Property,  plant and equipment are stated at cost.  Depreciation is provided for
in amounts  sufficient to relate the cost of  depreciable  assets less estimated
residual value to operations over their estimated  useful lives,  principally on
the  straight-line  basis. The estimated lives used in determining  depreciation
are:                                                                            

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SOLCOM SYSTEMS LIMITED                                                          
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)                          

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

Plant and machinery                 3 years                                     
Motor vehicles (new)                5 years                                     
Motor vehicles (second band)        3 years                                     
Fixtures and fittings               3 - 5 years                                 

Leased  plant  are  amortized  over the  lives of the  respective  leases or the
service life of the asset, whichever is shorter. Repair and maintenance cost are
charged to expenses as incurred. Income Taxes                                   

The Company  accounts for income taxes using  Statement of Financial  Accounting
Standards No. 109 (SFAS No 109).  "Accounting  for Income Taxes." Under SFAS No.
109,  income  taxes are  accounted  for under  the asset and  liability  method.
Deferred  tax  assets  and   liabilities  are  recognized  for  the  future  tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases and operating loss and tax credit carry forwards.  Deferred tax assets and
liabilities  are measured  using accrued tax rates  expected to apply to taxable
income in the years in which  those  temporary  differences  are  expected to be
recovered  or settled.  The effect on deferred tax assets and  liabilities  of a
change in tax rates is  recognized  in income in the period that  includes  that
enactment dates.                                                                

Foreign Currency Translation                                                    

The  reporting  currency of the Company is the pound  sterling.  The  functional
currency of the US subsidiary is the US dollar.                                 

The  assets  and  liabilities  of  the  Company's  foreign   subsidiaries  whose
functional  currency  is other than the pound  sterling  are  translated  at the
exchange  rates in effect on the  reporting  date,  and income and  expenses are
translated  at the weighted  average  exchange  rate during the period.  The net
effect  of  translation  gains and loses are not  included  in  determining  net
income,  but are accumulated as a separate  component of  shareholders'  equity.
Foreign  currency  transaction  gains and losses are included in determining net
income.                                                                         
Such gains and losses are not material for any period presented.                

NOTE C - INVENTORIES                                                            

Inventories at March 31, and June 30,                                           
consist of the following:                      (In Thousands)   
                                         1998             1997
                                         (pound)               (pound)
Raw materials                                       115             102         
Finished Goods                                      136             115         
                                       -------         -------
                                           251             217
                                       =======         =======

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SOLCOM SYSTEMS LIMITED                                                                                        
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)                                                        

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

NOTE D - PROPERTY AND EQUIPMENT                                                                               

Property and equipment at March 31 and June 30, consists of the following:                (In Thousands)      
                                                                                      1998             1997   
                                                                                    (pound)            (pound)
                                                                                                              
Plant and machinery                                                                     206             170   
Fixtures and fittings                                                                    86              89   
                                                                                    -------         -------   
                                                                                        292             259   
Less accumulated depreciation                                                          (145)            (90)  
                                                                                       -----            ----  
                                                                                        147             169   
                                                                                     ======          ======   
NOTE E - ACCRUED EXPENSES                                                                                     

Accrued expenses at March 31 and June 30, consist of the following:                                           
                                                                                         (In Thousands)       
                                                                                     1998             1997    
                                                                                   (pound)           (pound)  
Social security and other taxes                                                          85              36   
Other                                                                                    29              21   
Sundry creditors                                                                         97              78   
Provision for preference dividend and provision on redemption of preference                                   
shares                                                                                   46              36   
                                                                                      -----           -----   
                                                                                        257             171   
                                                                                      =====           =====   

NOTE F - LONG-TERM OBLIGATIONS                                                                                

                                                                                         (In Thousands)       
                                                                                     1998             1997    
                                                                                    (pound)          (pound)  
Long-term obligations at March 31 and June 30, consists of the following:                                     

Secured loan repayable in yearly installments of(pound)3,000 (excluding interest)                             
until November 1999, carrying interest of 10% per annum                                   8              10   

Secured loans - the loans are secured by a floating charge over the assets of                                 
the company. The interest rate is 2.5% over bank base rate (7.25%)                      122             210   
                                                                                      -----           -----   
                                                                                        130             220   
less current portion                                                                    112             123   
                                                                                      -----           -----   

                                                                                         18              97   
                                                                                      =====          ======   

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SOLCOM SYSTEMS LIMITED                                                          
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)                          
--------------------------------------------------------------------------------

Aggregate maturities of long-term obligations at March 31, 1998 are as follows: 
                                                            (In Thousands)
                                                             (pound)
                                1998                         112
                                1999                           8
                                2000                           8
                                2001                           2
                                                          ------
                                                             130
                                                          ======

NOTE G - INCOME TAXES                                                           

As of March 31, 1998 the Company has available UK and foreign net operation loss
carry forwards of approximately  (pound)600,000 and (pound)250,000 respectively,
to offset future  taxable  income.  In the UK net operating  loss carry forwards
expire  indefinitely,  the US  operating  loss carry  forwards at March 31, 1998
expire 2013.                                                                    

Deferred  tax assets  represent  the tax  effects,  based on current  tax law or
future  deductible  or taxable  amounts  attributable  to events  that have been
recognized  in the  financial  statements.  Deferred tax assets  consists of the
following at March 31, 1998 and June 30, 1997:                                  

                                            (In Thousands)
                                              1998              1997
                                             (pound)           (pound)
Net operating loss carry forward                          280         160       
Valuation allowance                                                             
Net deferred tax asset                                   (280)       (160)      
                                                 ------------    -----------
                                                     0           0
                                                 ============    ===========

The deferred  tax  valuation  allowance  increased  (pound)120,000  for the nice
months ended March 31, 1998, since this benefit may not be realized.            

NOTE H - BENEFIT PLANS                                                          

Personal Pension Plans                                                          

The  Company  has a  defined  contribution  agreement  for  the  benefit  of its
employees.  The assets of the agreement are  administered  by trustees in a fund
independent from those of the Company.  Costs charged against profits represents
the  amount  of the  contributions  payable  to the  scheme  in  respect  of the
accounting period. The company contributed to the scheme Li.8,745,  and Li.9,037
for the nine  months  ended  March 31,  1997 and the year  ended  June 30,  1997
respectively.                                                                   

NOTE I - PREFERRED STOCK                                                        

The holders of preference stock,  which are non-equity shares, are entitled to a
cumulative  dividend at the rate of 8% per year and to redemption of one half of
the  shares by end of 1998 and the  remainder  by end 1999 (or  earlier,  at the
company's option) at the following prices:                                      

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SOLCOM SYSTEMS LIMITED                                                          
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)                          
--------------------------------------------------------------------------------

                                                      Redemption
                                                 Price
Date of redemption                                            per Share         
                                               Li.

January 1, 1997 to December 31, 1997                          1.80              
January 1, 1998 to December 31, 1998                          2.20              
December 31, 1998 to December 30, 1999                        2.80              
On or after December 31, 1999                                 3.00              

On a winding up or  reduction of capital the holders of  preference  shares will
rank ahead of holders of ordinary  shares in respect of a final dividend of Li.3
per share.                                                                      

If any part of a  preference  dividend  is in  arrears  at the time of a General
Meeting of the company,  then the holders of the Preference  Shares are entitled
to one vote per 30 shares, such votes ranking equally with those of the ordinary
shareholders  (one  vote  per  ordinary  share).  Due to the  unavailability  of
distributable  profits,  at the end of the period preference  dividends totaling
Li.9,600 were in arrears (1997 - Li.8,400).                                     

NOTE J - GEOGRAPHIC INFORMATION                                                 

The Company's  operations involve a single industry segment providing  services.
Information  about the  Company's  operations  by  geographic  area for the nine
months ended March 31, 1998 and the year ended June 30, 1997 is as follows:     

                                            (In Thousands)
                                          1998              1997
                                           Li.               Li.
Sales                                                                           
United States                                    772               762    
United Kingdom                                   196               168    
Other                                             63                73    
                                         -------           -------
                                            1031              1003
                                            ====              ====
Expenditure from operations                                                     
United States                                   (302)             (412)   
United Kingdom                                   (86)              (91)   
Other                                            (31)              (39)   
                                            ------            ------
                                             (419)             (542)
                                             =====             =====
Identifiable assets                                                             
United States                                    178               231    
United Kingdom                                   446               414    
                                             ---               ---
                                             624               645
                                             ===               ===

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SOLCOM SYSTEMS LIMITED                                                          
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)                          

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

NOTE K - COMMITMENTS AND CONTINGENCIES                                          

Operating Losses                                                                

The  Company   leases   certain   facilities   and  items  of  equipment   under
noncancellable  operating  leases.  The  following is a schedule,  by years,  of
minimum  rental  payments  under such  operating  leases which expire on various
dates through 2011 (in thousands):                                              

                          (In Thousands)
                       Li.
1998                                               43                           
1999                                               43                           
2000                                               43                           
2001                                               43                           
Thereafter                                        451                           
                       ---
                       623

Total rent  expenses for the nine months ended March 31, 1998 and the year ended
June 30, 1997 were approximately Li.46,000 and Li.60,000, respectively.         

NOTE K - COMMITMENTS AND CONTINGENCIES (CONTINUED)                              

Capital Leases                                                                  

The Company also leases certain assets under capital leases.  The related assets
and  obligations  have been recorded using the Company's  incremental  borrowing
rate at the inception of the lease. The leases, which are noncancellable, expire
at various dates through  1999.  The following is a schedule of leased  property
under capital leases as of March 31 and June 30:                                

                                                    (In Thousands)
                                                   1998           1997
                                                    Li.            Li.
Plant and machinery                                       26             26     
Less accumulated depreciation                            (15)            (8)    
                                                   ------        -------
                                                     11             18
                                                    =====          =====

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SOLCOM SYSTEMS LIMITED                                                          
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)                          

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

The  following  is a schedule of the present  value of the net minimum  payments
under capital leases as of March 31, 1998:                                      

                                                                (In Thousands)
                                                                     Li.
Present Value of net minimum lease payments, all current                 11     

Government Grants                                                               

The Company has received  government grants  principally of a revenue nature and
these  grants  have been  credited  to Income in the period in which the related
expenditures has been incurred.  The grants of a capital nature are deferred and
released  to the  Income  Statement  over the lives of the  assets to which they
relate. No portion of capital grants were deferred at March 31, 1998 or June 30,
1997. The following is an analysis of government  grants  credited to the Income
Statement:                                                                      

                                                            (In Thousands)
                                                         1998           1997
                                                              Li.            Li.

Amortization of capital grant                                 --              1 

Revenue grants receivable:                                                      
Small Company Innovation Support Scheme grant                 12             -- 
Training grants                                                3             15 
Marketing grants                                              --              5 
                                                         ------         ------
                                                             15             21
                                                          =====          =====

The Small Company  Innovation Support Scheme grant was awarded to offset revenue
costs incurred in the period on the development of an Ethernet RMON switch.     

The training grants were awarded to support  training of specific  employees and
the marketing grants were specifically for strategic consultancy.               

NOTE L - CONCENTRATION OF CREDIT                                                

Approximately 56% (1997 33%) of the Company's revenue is from one customer.     

During the nine months ended March 31, 1998, approximately 74% (1997 76%) of the
Company's net revenues were from 5 (1997 - 5) major customers. At March 31, 1998
accounts  receivable   included  balances  of  approximately   Li.131,000  (1997
Li.166,000) from 5 major  customers,  of which Li.83,000 (1997 Li.26,000) is due
from the one most significant customer.                                         

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SOLCOM SYSTEMS LIMITED                                                          
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)                          

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

NOTE M - STOCK OPTIONS                                                          

The Group  accounts  for  employee  stock  options  under APB  Opinion  No.  25,
"Accounting   for  Stock  Issued  to  Employees",   under  which   Li.28,000  of
compensation  cost was recognized in 1997. Had compensation cost been determined
consistent  with SFAS NO 123,  "Accounting for  Stock-Based  Compensation",  the
company's net loss and respective  loss per share would have been reduced to the
following pro forma amounts:                                                    

                                                           1998         1997
                                                            Li.          Li.
Net loss                              As reported            (432)        (557) 
                                     Pro forma              (432)        (529)

Basic and diluted loss per share      As reported        Li.(0.01)    Li.(0.02) 
                                     Pro forma          Li.(0.01)    Li.(0.02)

The fair value of each option  granted is  estimated  on the date of grant using
the minimum  value method of which the  following  weighted-average  assumptions
were used for grants,  risk-free  interest  rates 6.5%;  and expected  life of 5
years.                                                                          

A summary of the status of the company's stock option plans as of March 31, 1998
and June 30,  1997,  and  changes  during  the years  ending  on those  dates is
presented below.                                                                

                                                        [Enlarge/Download Table]


                                                  1998                           1997             
                                                            Weighted                      Weighted
                                                            average                       average 
                                        Shares              exercise  Shares              exercise
                                         000                 price      000                price  
                                                                                                  
Outstanding at beginning of year            8,160               0.04      5,900               0.04
Granted                                     3,934               0.13      2,260               0.04
Outstanding at end of year                 12,094               0.10      8,160               0.04
                                                        ------------                  ------------

Options exercisable at year end            12,094               0.10      8,160                  -
                                                        ------------                  ------------
Weighted average fair value of options                          Li.-                     Li.45,000
granted during the year                                                                           
                                                        ============                  ============

The exercise  price of share options  granted during the nine months ended March
31, 1998 exceeded the market price.                                             

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SOLCOM SYSTEMS LIMITED                                                          
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)                          

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

The following table summarizes  information  concerning  options  outstanding at
March 31, 1998:                                                                 

                                Weighted
                                 Average
                                   Number        remaining        Weighted
                                Outstanding   contractual life     Average
Range of Exercise Price                000           (Years)      Exercise Price
Li..0.04                              8,160             5            Li.0.04    

NOTE N - ACCOUNTING PRONOUNCEMENTS                                              

In June 1997 the  Financial  Accounting  Standards  Board  issued  SFAS No.  130
"Reporting  Comprehensive  Income",  and this SFAS is effective for fiscal years
beginning  after  December 15, 1997.  The Company has  considered the effects of
this  statement and believes the  cumulative  transition  adjustment is the only
component of comprehensive income as defined by this statement.                 

In May 1997  the  Financial  Accounting  Standards  Board  issued  SFAS No.  131
"Disclosure about Segments of an Enterprise and Related Information" and this is
effective for fiscal years  beginning  after  December 15, 1997.  The Company is
evaluating the disclosure impact of SFAS No. 131 on its financial statements and
believes that the effect of adoption of SFAS No. 131 will not be material.      

In October  1997,  the AICPA issued SOP 97-2,  "Software  Revenue  Recognition",
which  supersedes  SOP 91-1,  "Software  Revenue  Recognition",  SOP  97-2,  and
amendments  thereto,  provide guidance on applying generally accepted principles
in  recognizing   revenue  on  software   transactions   and  is  effective  for
transactions entered into in fiscal years beginning after December 15, 1997. The
Company  is  currently  evaluating  the  impact  of SOP  97-2  on its  financial
statements.                                                                     

NOTE O - SUBSEQUENT EVENTS                                                      

On June 5,  and July 23,  1998,  the  company  issued a total of  4,174,390  new
ordinary shares (2,674,390 and 1,500,000 respectively) for a total consideration
of Li.417,439. Each new share has attached to it a warrant permitting the holder
to subscribe  between  January 1, and June 30, 1999 for one further  share to be
issued at par. In the event that control of the company is obtained by a certain
third party prior to December  31, 1998 then all  unexercised  warrants  will be
cancelled.                                                                      

On July 23, 1998 the company  issued  Li.150,000 of  convertible  unsecured loan
stock,  entitled to interest at 10% per and  convertible at Li.0.10 per share to
ordinary shares with warrants attached (with rights as above).                  

On July  23,  1998  options  over  980,000  shares  were  exercised  for a total
subscription of Li.36,750.                                                      

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SOLCOM SYSTEMS LIMITED                                                          
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)                          

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

NOTE O - SUBSEQUENT EVENTS (CONTINUED)                                          

On August 17, 1998  agreement was reached under which the entire  ordinary share
capital of the company will be acquired by  MicroFrame  Inc., a company based in
New Jersey  whose  shares are quoted on NASDAQ.  This  agreement is subject to a
number of  conditions  precedent  which will  require to be  satisfied  prior to
execution of the transfers of shares.  These conditions include (i) the issue of
new ordinary shares (to be included in the  acquisition)  for cash sufficient to
offset  certain  indebtedness  of the company (ii)  conversion of the preference
shares  to  ordinary  shares  (also to be  included  in the  acquisition)  (iii)
approval  by the Stock  Exchanged  Commission  in the USA (iv)  approval  by the
shareholders of MicroFrame Inc.                                                 

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                                                       SolCom Systems Ltd 1997
                                             Registered in Scotland No. 129008

SolCom Systems Ltd.                                                             

Directors' Report and Financial Statements                                      
For the year ended 30 June 1997                                                 

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DIRECTORS' REPORT AND FINANCIAL STATEMENTS                                      
Year ended 30 June 1997                                                         

CONTENTS                                               Page                     

Directory                                              1                        
Directors' report                                      2-4                      
Auditors' report                                       5                        
Profit and loss account                                6                        
Balance sheet                                          7                        
Notes to the financial statements                      8-21                     

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                                                         SolCom Systems Ltd 1997
                                               Registered in Scotland No. 129008

DIRECTORS' REPORT AND FINANCIAL STATEMENTS                                      
Year ended 30 June 1997                                                         

DIRECTORS                                                                       

W. Hugh Evans                                                                   
Peter J. MacLaren                                                               
Michael D. Rutterford (Chairman)                                                
Peter A. Wilson                                                                 

SECRETARY                                                                       

Peter J. MacLaren                                                               

REGISTERED OFFICE AND PRINCIPAL TRADING ADDRESS                                 

SolCom House                                                                    
Meikle Road, Kirkton Campus                                                     
Livingston                                                                      
EH54 7DE                                                                        

USA SUBSIDIARY                                                                  

SolCom Systems Inc                                                              
1801 Robert Fulton Drive                                                        
Suite 400                                                                       
Reston                                                                          
VA  22091                                                                       

BANKERS                                                                         

Clydesdale Bank                             Riggs National Bank of Virginia     
Business Banking Centre                     Burke Centre Office                 
Clydesdale Plaza                            6035 Burke Centre Parkway           
Festival Square                             Burke                               
50 Lothian Road                             VA 22015                            
Edinburgh                                   USA                                 
EH3 9AN                                                                         

SOLICITORS                                                                      

MacLay Murray & Spens                      Murray Beith Murray                  
151 St. Vincent Street                     39 Castle Street                     
Glasgow                                    Edinburgh                            
G2 SNJ                                     EH2 3BH                              

AUDITORS                                                                        

Grant Thornton                                                                  
1/4 Atholl Crescent                                                             
Edinburg                                                                        
EH3 8LQ                                                                         

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                                                         SolCom Systems Ltd 1997

DIRECTORS' REPORT                                                               

The Directors  present their report  together with the financial  statements for
the year ended 30 June 1997.                                                    

PRINCIPAL ACTIVITIES                                                            

The company is engaged in the  development  and manufacture of both hardware and
software  products and the supply of  consultancy,  training and other services,
all aimed at supporting the management of computer networks.                    

REVIEW OF THE BUSINESS AND FUTURE DEVELOPMENTS                                  

A  principal  feature  of the  year has been  the  formation  of a wholly  owned
subsidiary  in the USA and the  opening  of a full  office in  Reston.,  VA. The
company is continuing its programme of new product  releases and the development
of sales operations in both Europe and the USA.                                 

RESULTS                                                                         

The loss for the period after taxation and  provisions for preference  dividends
and premium on  redemption of preference  shares,  amounts to Li.497,420  and is
dealt  with as shown in the  profit  and loss  account on page 6. In view of the
accumulated deficit, the directors cannot propose the payment of a dividend, and
the loss has been deducted from reserves.                                       

DIRECTORS AND THEIR INTERESTS                                                   

The  directors  who  served  during  the year and their  interests  in the share
capital of the company are set out below.  All directors  served  throughout the
year.                                                                           

                                                        [Enlarge/Download Table]


                            After Post Balance                                                    
                               Sheet Events                                                       
                                (See Below)              30 June 1997           30 June 1996      
                                        Options                  Options                   Options
                         Ordinary        Over      Ordinary        Over     Ordinary        Over  
                         Shares of     Ordinary    Shares of     Ordinary  Shares of      Ordinary
                       Li.0.01 each     Shares   Li.0.01 each     Shares   Li.1 each       Shares 

                                                                                                  
W. Hugh Evans            5,710,000    3,858,607   5,610,000    2,920,000     561           292    
Peter J. MacLaren        3,070,000    1,714,255   3,070,000    1,240,000     307           124    
Michael D. Rutterford    5,400,000          Nil   4,600,000          Nil     460           Nil    
Peter A. Wilson          5,710,000    3,858,607   5,610,000    2,920,000     561           292    

PRODUCT DEVELOPMENT                                                             

During  the  year  the  company  has  capitalized  expenditure  related  to  the
development of its product range amounting to Li.120,785.                       

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                                                         SolCom Systems Ltd 1997

DIRECTORS' REPORT (CONTINUED)                                                   

SHARE CAPITAL                                                                   

In December 1996 the company resolved to (i) subdivide each of its Li.1 ordinary
shares  into  100  ordinary  shares  of  Li.0.01;  and (ii)  convert  the sum of
Li.304,326  from the share premium  account into  30,432,600  ordinary shares of
Li.0.01 allotted proportionately to the existing ordinary shareholders.         

EMPLOYEE SHARE OPTION SCHEME                                                    

The company has  instituted  an Employee  Share Option  Scheme,  approved by the
Inland  Revenue in terms of Paragraph 1,  Schedule 9 ICTA 1988. No options under
this  scheme were  granted  prior to the year end but  options  were  granted in
August 1997 as noted below.                                                     

POST BALANCE SHEET EVENTS                                                       

In August 1997 the company  granted (i) options under its Employee  Share Option
Scheme in respect of a total of 846,944  shares at a price of Li.0.11 per share;
(ii) other  options in respect  of 560,000  shares at a price of  Li.0.1084  per
share and 27,273 shares at a price of Li.0.11 per share.                        

In November  and  December  1997 the  company  issued a total of  5,400,000  new
ordinary shares for a total  consideration  of Li.270,000 and granted options to
subscribe for 2,500,000 ordinary shares at prices ranging from Li.0.14 per share
depending on date of exercise.                                                  

DIRECTORS' RESPONSIBILITIES AND THE FINANCIAL STATEMENTS                        

Company law requires  the  directors to prepare  financial  statements  for each
financial  year  which  give a true and fair view of the state of affairs of the
company and of the profit or loss of the company for that  period.  In preparing
those financial statements, the directors are required to:                      

      select suitable accounting policies and then apply them consistently

make judgments and estimates that are reasonable and prudent  

         prepare the  financial  statements on the going concern basis unless it
         is inappropriate to presume that the company will continue in business.

The  directors  are  responsible  for keeping  proper  accounting  records,  for
safeguarding  the assets of the company and for taking  reasonable steps for the
prevention and detection of fraud and other irregularities.                     

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DIRECTORS' REPORT (CONTINUED)                                                   

AUDITORS                                                                        

Grant Thornton offer  themselves  for  re-appointment  as auditors in accordance
with section 385 of the Companies Act of 1985.                                  

BY ORDER OF THE BOARD                                                           

P J MacLaren                                                                    
Secretary                                                                       
30 April 1998                                                                   

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REPORT OF THE AUDITORS TO THE MEMBERS OF SOLCOM SYSTEMS LIMITED                 

We have  audited  the  financial  statements  on pages 6 to 17 which  have  been
prepared under the accounting policies set out on pages 8 and 9.                

Respective Responsibilities of Directors and Auditors                           

As  described  on  page 4,  the  company's  directors  are  responsible  for the
preparation  of  financial  statements.  It is our  responsibility  to  form  an
independent  opinion,  based on our audit, on those statements and to report our
opinion to you.                                                                 

Basis of Opinion                                                                

We conducted  our audit in  accordance  with  Auditing  Standards  issued by the
Auditing  Practices  Board. An audit includes  examination,  on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements. It
also includes an assessment of the  significant  estimates and judgments made by
the directors in the preparation of the financial statements, and of whether the
accounting policies are appropriate to the company's circumstances, consistently
applied and adequately disclosed.                                               

We  planned  and  performed  our audit so as to obtain all the  information  and
explanations  which  we  considered  necessary  in  order  to  provide  us  with
sufficient evidence to give reasonable  assurance that the financial  statements
are  free  from  material  misstatement,   whether  caused  by  fraud  or  other
irregularity  or error.  In forming  our opinion we also  evaluated  the overall
adequacy of the presentation of information in the financial statements.        

Going Concern                                                                   

In forming our opinion,  we have considered the adequacy of the disclosures made
in Note 2 of the financial statements relating to the uncertainty concerning the
company's  ability  to  raise  funds  adequate  to its  needs.  In  view  of the
significance  of this  uncertainty,  we  consider  it  should  be  drawn to your
attention, but our opinion is not qualified in this respect.                    

Opinion                                                                         

In our opinion the financial  statements  give a true and fair view of the state
of the company's affairs at 30 June 1997 and of its loss for the year then ended
and have been properly prepared in accordance with the Companies Act 1985.      

GRANT THORNTON                                                                  
REGISTERED AUDITORS                                                             
CHARTERED ACCOUNTANTS                                                           

Edinburgh                                                                       
30 April 1998                                                                   

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                                                        [Enlarge/Download Table]


PROFIT AND LOSS ACCOUNT                                                                    
12 Months ended 30 June 1997                                                               

                                                  Note         1997             1996       
                                                                Li.              Li.       

                                                                                           
TURNOVER                                           3              776,822          788,450 
Cost of Sales                                                     286,750          205,758 
                                                        ---------------------------------- 

Gross Profit                                                      490,072          582,692 

Distribution Costs                                                 85,405          180,657 

Administrative Expenses                                           877,161          379,936 
                                                        ---------------------------------- 

OPERATING PROFIT/(LOSS) BEFORE PRP                               (472,494)          22,099 

Profit Related Pay                                                      -            1,670 
Employer's NI on PRP                                                    -              159 
                                                        ---------------------------------- 

OPERATING PROFIT/(LOSS)                                          (472,494)          20,270 

Interest Received                                                   3,248                - 
Interest Paid                                      6              (17,974)          (5,402)
                                                        ---------------------------------- 

PROFIT/(LOSS) ON ORDINARY ACTIVITIES               3             (487,220)          14,868 
     BEFORE TAXATION                                                                       
Taxation                                           7                    -                - 
                                                        ---------------------------------- 

PROFIT FOR THE FINANCIAL YEAR                                     487,220           14,868 

Provision for Preference Dividend and Premium on                   10,200           10,200 
     Redemption of non-Equity Shares                                                       
                                                        ---------------------------------- 

RETAINED PROFIT/(LOSS) FOR YEAR                                  (497,420)           4,668 
                                                        ================================== 


There were no recognized  gains or losses other than the  profit/(loss)  for the
financial year                                                                  

The accompanying notes form an integral part of these Financial Statements      

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BALANCE SHEET AT JUNE 1997                                                                

                                                 Note          1997             1996      
                                                                Li.              Li.      

                                                                                          
FIXED ASSETS                                                                              
Intangible Assets                                 8              176,865          133,169 
Tangible Assets                                   8              154,901           68,116 
Investments                                       9              226,975                - 
                                                       ---------------------------------- 

                                                                 558,741          201,285 
CURRENT ASSETS                                                                            
Stock                                             10             124,203          103,215 
Debtors                                           11             134,304          112,969 
Cash at Bank and in Hand                                             803          349,783 
                                                       ---------------------------------- 

                                                                 259,310          565,967 

CREDITORS:  amounts falling due within one year   12             684,520          204,028 
                                                       ---------------------------------- 

NET CURRENT (LIABILITIES)/ASSETS                                (425,210)         361,939 
                                                       ---------------------------------- 

TOTAL ASSETS LESS CURRENT LIABILITIES                            133,531          563,224 

CREDITORS:  amounts falling due after more than   13             106,947           47,867 
    one year                                                                              

DEFERRED INCOME                                   15                   -            1,553 
                                                       ---------------------------------- 

                                                                  26,584          513,804 
                                                       ================================== 

SHARE CAPITAL AND RESERVES                                                                
Called up Share Capital                           16             337,400           33,074 
Share Premium Account                             17             193,540          497,866 
Reserve for Preference Dividend and Premium on                    35,700           25,500 
    Redemption                                                                            
Profit & Loss Account                             17            (540,056)         (42,636)
                                                       ---------------------------------- 

Shareholders' Funds                               18              26,584          513,804 
                                                       ================================== 


The  financial  statements  were  approved by the Board of Directors on 30 April
1998.                                                                           

P J MacLaren                                                                    
Financial Director                                                              

The accompanying notes form an integral part of these Financial Statements

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NOTES TO THE FINANCIAL STATEMENTS                                               
Year ended 30 June 1997                                                         

1        ACCOUNTING POLICIES                                                    

The principal accounting policies adopted are described below. The policies have
remain unchanged from the previous year.                                        

Basis of Preparation                                                            

The  financial   statements   have  been  prepared  under  the  historical  cost
convention.                                                                     

The Company is exempt from preparing  consolidated  financial  statements on the
grounds  that,  taken  together with its  subsidiaries,  it qualifies as a small
group under S248 of the Companies Act 1985.                                     

These financial statements therefore present information about the Company as an
individual undertaking and not about its group.                                 

Depreciation                                                                    

Depreciation  is calculated to write down the cost of all tangible  fixed assets
by equal  instalments  over their  expected  useful lives.  The rates  generally
applicable are:                                                                 

         Plant and Machinery                           3 Years
         Motor Vehicles (New)                          5 Years
         Motor Vehicles (Second Hand)                  3 Years
           Fixtures, Fittings, Tools and Equipment       3-5 Years

Stocks                                                                          

Stock are valued at the lower of cost and net realisable value.                 

Product Development                                                             

Expenditure  (including  staff  salaries,  NI, and certain  overheads)  which is
incurred  directly  for  the  purpose  of  developing   marketable  products  is
capitalised when  recoverability  can be assessed with reasonable  certainty and
amortised  over the expected  product life from the date of the product  launch.
Grants  receivable in respect of such  expenditure  are  similarly  deferred and
released to profit over the same period. For the present range of products,  the
product life is estimated to be 3 years.                                        

All other product development costs are written off in the year of expenditure. 

Product Warranties                                                              

Provision is made for all known and  expected  claims under the terms of product
warranties.                                                                     

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)                                   
Year ended 30 June 1997                                                         

Turnover                                                                        

Turnover is the total amount  receivable  by the company for goods  supplied and
services provided, excluding VAT and trade discounts.                           

Foreign Currencies                                                              

Transactions in foreign currencies are translated at the exchange rate ruling at
the  date  of the  transaction.  Monetary  assets  and  liabilities  in  foreign
currencies are  translated at the rates of exchange  ruling at the balance sheet
date.  All  exchange  differences  are dealt  with  through  the profit and loss
account.                                                                        

Contributions to Pension Funds                                                  
Defined Contribution Scheme                                                     

The  pension  costs  charged  against  profits   represent  the  amount  of  the
contributions payable to the scheme in respect of the accounting period.        

Leased Assets                                                                   

Assets held under finance leases and hire purchase  contracts are capitalised in
the balance sheet and depreciated over their expected useful lives. The interest
element of leasing  payments  represents  a constant  proportion  of the capital
balance  outstanding  and is charged to the  profit  and loss  account  over the
period of the lease.                                                            

All other leases are regarded as  operating  leases and the payments  made under
them are  charged to the profit and loss  account on a straight  line basis over
the lease term.                                                                 

Government Grants                                                               

Government  grants in respect of capital  expenditure are credited to a deferred
income  account and are  released to the profit and loss account by equal annual
installments  over the expected useful life of the relevant  assets.  Government
grants of a revenue  nature are  credited to the profit and loss  account in the
same period as the related expenditure.                                         

Investments                                                                     

Investments are included at cost, less amounts written off.                     

2        BASIS OF ACCOUNTING                                                    

The financial  statements  have been prepared on the going  concern  basis.  The
arrangements with the company's  bankers are such that overdraft  facilities are
only  available  from time to time and on a short  term,  temporary  basis.  The
nature  of the  company's  business  is  such  that  there  can be  considerable
unpredictable                                                                   

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)                                   
Year ended 30 June 1997                                                         

variations  in the  quantum  and timing of sales and hence cash  inflows and the
directors  recognise  the need to ensure that the company has access to adequate
levels of funds so as to  ensure  that  commitments  can be met as and when they
fall due for the  foreseeable  future.  The directors are therefore  exploring a
variety of options  for  securing  additional  new  financing  for the  company,
including the raising of equity finance from both new and existing shareholders.
Based on informal  discussions to date, the directors are confident  that, if it
became necessary,  it would be possible to raise the finance required from these
sources although it is appreciated that there is no certainty in this regard. On
this basis,  the  directors  consider it  appropriate  to prepare the  financial
statements on the going concern basis.  The financial  statements do not reflect
any  adjustment  that  would  result  from a  failure  to  secure  adequate  new
financing.                                                                      

3        TURNOVER AND PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION             

The  turnover  and  profit/(loss)  on ordinary  activities  before  taxation are
attributable  to the  continuing  activities of development  and  manufacture of
hardware and  software  products and the supply of  consultancy,  training,  and
other  services aimed at supporting  the  management of computer  networks.  The
percentage of the company's  turnover that, in the opinion of the directors,  is
attributable to export markets is 75% (1996:                                    
48%). The profit/(loss) on ordinary activities is after:                        

                                                        [Enlarge/Download Table]


                                                                                  1997             1996    
                                                                                   Li.              Li.    
Staff Costs:                                                                                               
                                                                                                           
Wages & Salaries (excl. PRP)                                                        529,141         251,112
Payroll Taxes and Social Security Costs (excl. NI related to PRP)                    52,899          24,397
Pension Costs                                                                        11,332           6,612
Charges to Subsidiary for Seconded Staff                                            (58,833)              -
                                                                               ------------ ---------------

                                                                                    534,539         282,121
                                                                               ============ ===============

Research and Development - Current Year Expenditure (including allocated             80,834          34,495
  overheads and excluding capitalised expenditure on product development)                                  
Depreciation and Amortisation:                                                                             
  Intangible fixed assets                                                            77,089          43,332
  Tangible fixed assets owned                                                        44,465          17,226
  Tangible fixed assets held under finance leases and hire purchase contracts         6,839           1,324
Hire of Equipment                                                                         -           2,894
Auditors' Remuneration                                                                5,000           2,815
                                                                               ============ ===============

Credits in Respect of Government Grants:                                                                   
Amortisation of Capital Grants                                                        1,553           8,946
Revenue Grants Receivable                                                            19,529          39,868
                                                                               ------------ ---------------


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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)                                   
Year ended 30 June 1997                                                         

4        DIRECTORS' REMUNERATION (INCLUDING PENSION CONTRIBUTIONS,              
EXCLUDING PRP)                                                

Management Remuneration                               103,824           66,455  
                                                  ==============   =============

During the year 2 directors  (1996: 2 directors)  participated in money purchase
pension schemes.                                                                

In addition,  a company  controlled by Mr. MacLaren,  received  Li.24,550 (1996:
Li.15,628) for financial management services.                                   

5        STAFF NUMBERS                                                          

The average number of persons employed by the company during the year, including
directors, was 25 (1996: 13).                                                   

6        INTEREST PAID                                                          

                                                 1997             1996
                                                Li.              Li.
On bank loans and overdrafts                           15,901         4,802     
Finance charges in respect of finance leases            2,073           600     
                                           ------------- -------------

                                                  17,974         5,402
                                           ============= =============

7        TAXATION                                                               

No liability to UK corporation  tax arises for the year due to the  availability
of tax losses.                                                                  

8        FIXED ASSETS                                                           

                                                                [Download Table]


                 Intangible                           Tangible                      
                 -------------- ----------------------------------------------------
                                                             Fixtures,              
                 Expenditure                                 fittings,              
                 on Product     Plant and        Motor       tools and       Total  
                 Development    machinery       vehicles     equipment     Tangible 
                     Li.           Li.            Li.           Li.           Li.   

                                                                                    
Cost:                                                                               
At 30 June 1996         233,612       94,193         3,500      7,809      105,502  
Additions               120,785       57,121             -     80,968      138,089  
Disposals                     -            -        (3,500)         -       (3,500) 
                 -------------- ------------  ------------ -----------------------  

At 30 June 1997         354,397      151,314             -     88,777      240,091  
                 -------------- ------------  ------------ -----------------------  

Depreciation and amortisation:                                                  

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)                                   
Year ended 30 June 1997                                                         

                                                        [Enlarge/Download Table]


                                       Intangible                           Tangible                      
                                       -------------------------------------------------------------------
                                                                                   Fixtures,              
                                       Expenditure                                 fittings,              
                                       on Product     Plant and       Motor       tools and       Total   
                                       Development    machinery      vehicles     equipment     Tangible  
                                           Li.           Li.           Li.           Li.           Li.    

                                                                                                          
At 30 June 1996                            100,443         30,461        3,500       3,425       37,386   
Charge for the year                         77,089         38,016            -      13,288       51,304   
Accumulated in relation to disposals             -              -       (3,500)          -       (3,500)  
                                      ------------     ------------------------------------------------   

At 30 June 1997                            177,532         68,477            -      16,713       85,190   
                                      ------------     ------------------------------------------------   

Net book value                                                                                            
At 30 June 1997                            176,865         82,837            -      72,064      154,901   
                                      ============     ================================================   

At 30 June 1996                            133,169         63,732            -       4,384       68,116   
                                      ============     ================================================   

The net book value of plant and machinery includes Li.18,839 9(1996:  Li.14,566)
in respect of assets held under finance leases and hire purchase contracts.     

9        FIXED ASSET INVESTMENT                                                 

                      Share in        Loans to
                      Subsidiary      Subsidiary
                                Undertaking    Undertaking     Total

Additions in year                              60        226,915      226,975   
                                   ----------- -------------- ------------
At 30 June 1997                                60        226,915      226,975   
                                   ----------- -------------- ------------
Net Book Value at 30 June 1997                 60        226,915      226,975   
                                   =========== ============== ============
Net Book Value at 30 June 1996                  -              -            -   
                                   =========== ============== ============

At 30 June 1997 the company  held more than 20 % of the equity of the  following
undertaking.                                                                    

                                                        [Enlarge/Download Table]


                                                                             Capital &                  
                     Country of   Class of share  Proportion    Nature of  Reserves at 30  Loss for the 
                    Incorporation  capital held      Held        Business    June 1997    Financial Year
                                                                                Li.            Li.      

                                                                                                        
SolCom Systems Inc.      USA         Ordinary        100%     Marketing of    (16,082)       (16,142)   
                                                              Network                                   
                                                              Management                                
                                                              Products                                  

The entire  share  capital of SolCom  Systems  Inc.  was acquired on 1 September
1996.                                                                           

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)                                   
Year ended 30 June 1997                                                         

                                                        [Enlarge/Download Table]


10       STOCKS                                                                                                 

                                                                                     1997             1996      
                                                                                      Li.              Li.      

                                                                                                                
Components                                                                               101,773          55,808
Finished goods                                                                            22,430          47,407
                                                                               ----------------- ---------------

                                                                                         124,203         103,215
                                                                               ================= ===============

11       DEBTORS                                                                                                

Trade Debtors                                                                             89,866          90,334
Prepayments & Accrued Income                                                              20,000          16,952
Other Debtors                                                                             24,438           5,683
                                                                               ----------------- ---------------

                                                                                         134,304         112,969
                                                                               ================= ===============

12       CREDITORS - amounts falling due within one year                                                        

                                                                                     1997             1996      
                                                                                      Li.              Li.      

Loans from Bank of Scotland                                                                    -           9,500
Loans from Clydesdale Bank (see Note 13)                                                 119,385               -
Bank Overdraft (Note 13)                                                                 132,422               -
Loan from British Coal Enterprise Ltd (Note 13)                                            3,889           4,444
Amounts due under finance leases (Note 13)                                                 9,742           5,297
Trade creditors                                                                          305,814         118,286
Social security and other taxes                                                           36,574          11,123
Warranty Provision                                                                        20,505          27,210
Accrued PRP and Associated Employer's NI                                                       -           1,829
Accruals                                                                                  56,189          26,339
                                                                               ----------------- ---------------

                                                                                         684,520         204,028
                                                                               ================= ===============

13       CREDITORS - amounts falling due after more than one year                                               

                                                         Interest     Last                                      
                                                           Rate    Repayment                                    

Loans from Bank of Scotland                                                                   -         30,893  
Loan from Clydesdale Bank                                            Feb-1999            72,804              -  
Loan from Clydesdale Bank                                            Oct-1998             1,475              -  
Loan from Clydesdale Bank                                            Aug-2001            17,895              -  


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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)                                   
Year ended 30 June 1997                                                         

Loan from British Coal Enterprise Ltd       10% pa    Jan-2001    5,397    8,886
Amounts due under finance leases (Note 14)                        9,376    8,088
                                                               -------- --------

                                                                106,947   47,867
                                                               ======== ========

The  above  loans  are  repayable  in  monthly  instalments  ending on the dates
indicated. The current portions are shown under Note 12.                        

The loans from the Clydesdale  Bank and the bank overdraft are secured by a bond
and  floating  charge  over all the  assets of the  company.  Amounts  due under
finance leases are secured on the assets concerned.                             

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                                                                [Download Table]


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)                                  
Year ended 30 June 1997                                                        

14       BORROWINGS                                                            

                                                        1997             1996  
                                                         Li.              Li.  

                                                                               
Borrowings are repayable as follows:                                           

Repayable within one year:                                                     
Bank and other borrowings                               255,696          13,944
Finance Lease                                             9,742           5,297

Repayable after one and within two years:                                      
Bank and other borrowings                                83,813          12,336
Finance Lease                                             8,342           5,297

Repayable after two and within five years:                                     
Bank and other borrowings                                13,758          21,086
Finance Lease                                             1,034           2,791

                                                  ------------- ---------------
Repayable after 5 years:                                                       
Bank and other borrowings                                     -           6,357
                                                  ------------- ---------------

                                                        372,385          67,108
                                                  ============= ===============

15       DEFERRED INCOME                                                       

Capitalised Grants:                                                            
Gross amount brought forward and carried forward         31,332          31,332
                                                  ============= ===============

Amortisation of Capitalised Grants:                                            

Accumulated amortisation brought forward                 29,779          20,833
Amortisation during the year                              1,553           8,946
                                                  ------------- ---------------

Accumulated amortisation carried forward                 31,332          29,779
                                                  ============= ===============

Net Capitalised Grants at 30 June                             -           1,553
                                                  ============= ===============


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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)                                   
Year ended 30 June 1997                                                         

16       SHARE CAPITAL                                                          

                                                        [Enlarge/Download Table]


                                          1997            1997       1996            1996 
                                           No              Li.        No             Li.  

                                                                                          
Authorised:                                                                               
Ordinary shares of Li.1 each                       -              -   3,889          3,889
Ordinary shares of Li.0.01 each           40,460,000        404,600       -              -
Preference Shares of Li.1 each                30,000         30,000  30,000         30,000
                                                      -------------         --------------

                                                            434,600                 33,889
                                                      =============         ==============

Allotted, called up and fully paid:                                                       
Ordinary shares of Li.1 each                       -              -   3,074          3,074
Ordinary shares of Li.0.01 each           30,740,000        307,400       -              -
Preference Shares of Li.1 each                30,000         30,000  30,000         30,000
                                                      -------------         --------------

                                             337,400                                33,074
                                     ===============                        ==============

During the year the company  divided each ordinary share of Li.1 into 100 shares
of Li.0.01  and  issued,  by way of a scrip issue  funded by  capitalisation  of
Li.304,326 of the Share  Premium  Account,  a total of  30,432,600  new ordinary
shares.  The effect of these two  transactions was to replace each Li.1 ordinary
share with 10,000 ordinary shares of Li.0.01.                                   

Holders of the preference shares, which are non-equity shares, are entitled to a
cumulative  dividend at the rate of 8% per year and to redemption of one half of
the  shares  by end 1998 and the  remainder  by end  1999  (or  earlier,  at the
company's option) at the following prices:                                      

                                                          Redemption
                                                           Price
                                                           per Share
Date of Redemption                                                  Li.         

1 January 1997 to 31 December 1997                                1.80          
1 January 1998 to 30 December 1998                                2.20          
31 December 1998 to 30 December 1999                              2.80          
On or after 31 December 1999                                      3.00          

On a winding up or  reduction of capital the holders of  preference  shares will
rank ahead of holders of ordinary  shares in respect of a final dividend of Li.3
per share.                                                                      

If any part of a  preference  dividend  is in  arrears  at the time of a General
Meeting of the company,  then the holders of the Preference  Shares are entitled
to one vote per 30 shares, such votes ranking equally with those of the ordinary
shareholders  (one  vote  per  ordinary  share).  Due to the  unavailability  of
distributable  profits,  at the end of the year preference  dividends  totalling
Li.8,400 were in arrears (1996 - Li.6,000).                                     

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                                                         SolCom Systems Ltd 1997

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)                                   
Year ended 30 June 1997                                                         

At 30 June  1997 the  company  had  granted  options  over a total of  8,160,000
ordinary  shares.  All  options are  exercisable  up to  December  2003,  at the
following prices:                                                               

                                                                   Price per
Date of Exercise                                                     Share (Li.)

1 January 1997 to 31 December 1997                                   0.021875   
1 January 1998 to 31 December 2003                                   0.037500   

17       SHARE PREMIUM ACCOUNT AND RESERVES                                     

                                                                [Download Table]


                                                            Share          Profit &
                                                           Premium           Loss  
                                                           Account          Account
                                                           Li.              Li.    

                                                                                   
At 30 June 1996                                               497,866      (42,636)
Loss for the year                                           -             (497,420)
Capitalized in respect of shares issued during the year      (304,326)    -        
                                                         ------------ ------------ 

At June 30, 1997                                              193,540     (540,056)
                                                         ============ ============ 

In  accordance  with S263 of the  Companies  Act 1985 the  balance  on the share
premium account may not be distributed.                                         

18       RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS                     

                                                        [Enlarge/Download Table]


                                                                          1997             1996      
                                                                           Li.              Li.      

                                                                                                     
Retained Loss for the year                                                   (497,420)          4,668
Issue of shares                                                                     -         425,063
Preference Dividend and Premium on Redemption of Preference Shares                                   
     (not paid)                                                                10,200          10,200
                                                                    ----------------- ---------------

Net increase/(decrease) in shareholders' funds                               (487,220)        439,931

Shareholders' funds at 1 July 1996                                            513,804          73,873
                                                                    ----------------- ---------------

Shareholders' funds at 30 June 1997                                            26,584         513,804
                                                                    ================= ===============

Attributable to:                                                                                     
Equity shareholders                                                           (39,116)        458,304
Non-equity shareholders                                                        65,700          55,500
                                                                    ----------------- ---------------

                                                                    ================= ===============
                                                                               26,584         513,804
                                                                    ================= ===============

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                                                         SolCom Systems Ltd 1997

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)                                   
Year ended 30 June 1997                                                         

19       LEASING COMMITMENTS                                                    

Operating lease payments amounting to Li.32,250 (1996: Li.12,550) are due within
one year.  The  property  lease to which these  payments  relate  expires  after
between 10 and 20 years.                                                        

20       CAPITAL COMMITMENTS                                                    

The Company had no capital commitments at 30 June 1997 or at 30 June 1996.      

21       CONTINGENT LIABILITIES                                                 

The company  raised a claim against a customer in the USA amounting to Li.91,518
for  non-payment  of invoices,  Li.598,075 for actual damages and Li.512,048 for
punitive  damages.  This  led  to a  counter  claim  from  the  customer  for an
unspecified amount for alleged non-performance of goods supplied.               

The directors  believe that the  counter-claim is spurious,  and has been raised
solely as a consequence  of the claim  initiated by the company.  This belief is
supported by the fact that,  since  raising the  counter-claim  the customer has
tabled an offer to settle the  original  claim,  which has been  rejected by the
company.  The  directors  are  confident,   therefore  that  no  liability  will
ultimately crystallise.                                                         

With this exception,  the company had no contingent  liabilities at 30 June 1997
or at 30 June 1996.                                                             

22       POST BALANCE SHEET EVENTS                                              

Post balance sheet events are detailed in the Directors' Report on page 3.      

23       PENSIONS                                                               

Defined Contribution Scheme                                                     

The company  operates a defined  contribution  pension scheme for the benefit of
certain  directors and employees.  The assets of the scheme are  administered by
trustees in a fund independent from those of the company.                       

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                                                         SolCom Systems Ltd 1997

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)                                   
Year ended 30 June 1997                                                         

24       TRANSACTIONS WITH RELATED PARTIES                                      

During the year the  company  traded  with SolCom  Systems  Inc, a wholly  owned
subsidiary. Details of transactions are as follows:                             

                                            1997
                                             Li.

Sales                                                     191,085               

Purchases and other charges net of recharges               31,946               

During the year the  company  paid Malloy & Ball Ltd a fee of  Li.24,550  (1996:
Li.15,628).  Peter J.  MacLaren is a director and  shareholder  in both Malloy &
Ball Ltd and SolCom Systems Ltd.                                                

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                                                         SolCom Systems Ltd 1997

 SOLCOM SYSTEMS LTD AND ITS SUBSIDIARY, SOLCOM SYSTEMS INC
UNAUDITED CONSOLIDATED
 PROFIT AND LOSS ACCOUNT
12 Months ended 30 June 1997

                                                        [Enlarge/Download Table]


                                                                   1997             1996   
                                                                    Li.              Li.   

                                                                                           
TURNOVER                                                          972,141          788,450 
Cost of Sales                                                     191,906          205,758 
                                                             ----------------------------- 

Gross Profit                                                      780,235          582,692 

Distribution Costs                                                140,506          180,657 

Administrative Expenses                                         1,128,569          379,936 
                                                             ----------------------------- 

OPERATING (LOSS)/PROFIT BEFORE PRP                               (488,840)          22,099 

Profit Related Pay                                                     --            1,670 
Employer's NI on PRP                                                   --              159 
                                                             ----------------------------- 

OPERATING LOSS/PROFIT                                            (488,840)          20,270 

Interest Received                                                   3,452               -- 
Interest Paid                                                     (17,974)          (5,402)
                                                             ----------------------------- 

PROFIT/(LOSS) ON ORDINARY ACTIVITIES                                                14,868 
     BEFORE TAXATION                                             (503,363)                 
Taxation                                                               --               -- 
                                                             ----------------------------- 

PROFIT FOR THE FINANCIAL YEAR                                    (503,363)          14,868 

Provision for Preference Dividend and Premium on Redemption                                
     of non-Equity Shares                                          10,200           10,200 
                                                             ----------------------------- 

RETAINED PROFIT FOR YEAR                                         (513,563)           4,668 
                                                             ============================= 


There were no recognised gains or losses other than the profit for the financial
year                                                                            

The information presented on this page has been prepared by the directors for 
memorandum purposes. It has not been audited and does not form part of the
Statutory Financial Statements

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                                                         SolCom Systems Ltd 1997

                                                        [Enlarge/Download Table]


            SOLCOM SYSTEMS LTD AND ITS SUBSIDIARY, SOLCOM SYSTEMS INC                               

                             UNAUDITED CONSOLIDATED                                                 
                          BALANCE SHEET AT 30 JUNE 1997                                             

                                                                              1997           1996   
                                                                               Li.            Li.   
FIXED ASSETS                                                                                        
                                                                                                    
Intangible Assets                                                            176,865        133,169 
Tangible Assets                                                              168,933         68,116 
                                                                       ---------------------------- 

                                                                             345,798        201,285 

CURRENT ASSETS                                                                                      
Stock                                                                        217,196        103,215 
Debtors                                                                      252,797        112,969 
Cash at Bank and in Hand                                                       7,155        349,783 
                                                                       ---------------------------- 

                                                                             477,148        565,967 

CREDITORS: amounts falling due                                                                      
     within one year                                                         705,558        204,028 
                                                                       ---------------------------- 

NET CURRENT ASSETS/(LIABILITIES)                                            (228,410)       361,939 
                                                                       ---------------------------- 

TOTAL ASSETS LESS CURRENT LIABILITIES                                        117,388        563,224 

CREDITORS: amounts falling due                                                                      
     after more than one year                                                106,947         47,867 

DEFERRED INCOME                                                                   --          1,553 
                                                                       ---------------------------- 

                                                                              10,441        513,804 
                                                                       ============================ 

SHARE CAPITAL AND RESERVES                                                                          
Called up Share Capital                                                      337,400         33,074 
Share Premium Account                                                        193,540        497,866 
Provision for Preference Dividend and Premium on Redemption                   35,700         25,500 
Profit & Loss Account                                                       (556,199)       (42,636)
                                                                       ---------------------------- 

Shareholders' Funds                                                           10,441        513,804 
                                                                       ============================ 


The information presented on this page has been prepared by the directors for 
memorandum purposes. It has not been audited and does not form part of the
Statutory Financial Statements

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SolCom Systems Ltd.                                                             

Directors' Report and Financial Statements                                      
For the year ended 30 June 1996                                                 

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                                                         SOLCOM SYSTEMS LTD 1996

DIRECTORS' REPORT AND FINANCIAL STATEMENTS                                      
Year ended 30 June 1996                                                         

CONTENTS                                                                Page    

Directory                                                               1       

Directors' report                                                       2-4     

Auditors' report                                                        5       

Profit and loss account                                                 6       

Balance sheet                                                           7       

Notes to the financial statements                                       8-16    

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                                                         SOLCOM SYSTEMS LTD 1996

DIRECTORS' REPORT AND FINANCIAL STATEMENTS                                      
Year ended 30 June 1996                                                         

DIRECTORS                                                                       

W Hugh Evans                                                                    
Peter J MacLaren                                                                
Michael D Rutterford (Chairman)                                                 
Peter A Wilson                                                                  

SECRETARY                                                                       

Peter J MacLaren                                                                

REGISTERED OFFICE AND PRINCIPAL TRADING ADDRESS                                 

SolCom House                                                                    
Meikle Road, Kirkton Campus                                                     
Livingston                                                                      
EH54 9DF                                                                        

USA SUBSIDIARY                                                                  

SolCom Systems Inc                                                              
1801 Robert Fulton Drive                                                        
Suite 400                                                                       
Reston                                                                          
VA 22091                                                                        

BANKERS                                                                         

Clydesdale Bank                             Riggs National Bank of Virginia     
27 George Street                            Burke Centre Office                 
Edinburgh                                   6035 Burke Centre Parkway           
EH2 2PA                                     Burke, VA 22015, USA                

AUDITORS                                                                        

Grant Thornton                                                                  
1/4 Atholl Crescent                                                             
Edinburgh                                                                       
EH3 8LQ                                                                         

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                                                         SOLCOM SYSTEMS LTD 1996

DIRECTORS' REPORT                                                               

The Directors  present their report  together with the financial  statements for
the 12 months ended 30 June 1996.                                               

PRINCIPAL ACTIVITIES                                                            

The company is engaged in the  development  and manufacture of both hardware and
software  products and the supply of  consultancy,  training and other services,
all aimed at supporting the management of computer networks.                    

REVIEW OF THE BUSINESS AND FUTURE DEVELOPMENTS                                  

A principal  feature of the year has been a major expansion of selling  activity
in the USA,  both  through  product  sales  and  technology  partnerships.  This
activity is expected  to bear  substantial  fruit  during  1996-97.  In terms of
product development, there has been an on-going programme of enhancements across
the company's product range.                                                    

RESULTS                                                                         

The profit for the period after  taxation,  PRP and  provisions  for  preference
dividends and premium on redemption of preference shares amounts to Li.4,668 and
is dealt with as shown in the profit and loss  account on page 5. In view of the
accumulated deficit, the directors cannot propose the payment of a dividend, and
the profit has been added to  reserves.  The  profit  reported  is after  making
provision of Li.89,414 in respect of a doubtful  debtor in the USA. Legal action
to recover this sum is proceeding.                                              

DIRECTORS AND THEIR INTERESTS                                                   

The  directors  who  served  during  the year and their  interests  in the share
capital of the company are set out below.                                       

                                                        [Enlarge/Download Table]

                                  30 June 1996                         30 June 1995            
                      Ordinary Shares       Options Over    Ordinary Shares       Options Over 
                       of Li.1 each        Ordinary Shares   of Li.1 each       Ordinary Shares

                                                                                               
W Hugh Evans                561                  292              454                 240      
Peter J MacLaren            307                  124              245                 102      
Michael D Rutterford        460                  Nil              378                 Nil      
Peter A Wilson              561                  292              454                 240      

PRODUCT DEVELOPMENT                                                             

During  the  year  the  company  has  capitalised  expenditure  related  to  the
development of its product range amounting to Li.77,803.                        

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                                                         SOLCOM SYSTEMS LTD 1996

DIRECTORS' REPORT (CONTINUED)                                                   

SHARE CAPITAL                                                                   

In December  1995 the company  raised a total of  Li.30,063 by issue of 481 Li.1
ordinary shares at Li.62.50 per share to existing shareholders. In June 1996 the
company  raised a total of Li.400,000  by issue of 369 Li.1  ordinary  shares at
Li.1.084 per share to shareholders new to the company.                          

In December 1996 the company resolved to (i) subdivide each of its Li.1 ordinary
shares into 100  ordinary  shares of  Li.0.01;  and (ii)  capitalise  the sum of
Li.303,510  from the share premium  account into  30,351,000  ordinary shares of
Li.0.01 allotted proportionately to the existing ordinary shareholders.         

POST BALANCE SHEET EVENTS                                                       

In October 1996,  SolCom Systems Inc, a wholly owned  subsidiary of the company,
was formed in the State of Delaware,  USA. This  subsidiary  took over the trade
previously  carried on by the company in the USA using the trading name, "SolCom
Systems Inc".                                                                   

In November 1996 the company moved from its office at Brucefield Industrial Park
in  Livingston  to a newly  constructed  4,300 sq ft  facility  at Meikle  Road,
Kirkton  Campus,  also in  Livingston.  The lease on the new  property is for 15
years.                                                                          

In  December  1996 the  company  drew down a loan of  Li.200,000  and secured an
overdraft  facility  totalling  Li.150,000,  both from the  Clydesdale  Bank. In
addition the Clydesdale  Bank acquired from the Bank of Scotland the outstanding
balances of loans totalling  Li.34,047,  and an overdraft  facility of Li.50,000
from the Bank of Scotland has been  cancelled.  A new  floating  charge over the
business  and  undertaking  of the  company  has been  granted  in favour of the
Clydesdale  Bank and that in favour of the Bank of Scotland  has been  released.
The new loan from the Clydesdale  Bank is repayable in equal  installments  over
the period May 1997 to April 1999.                                              

DIRECTORS' RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS                        

Company law requires  the  directors to prepare  financial  statements  for each
financial  year  which  give a true and fair view of the state of affairs of the
company and of the profit or loss of the company for that  period.  In preparing
those financial statements, the directors are required to:                      

      select suitable accounting policies and then apply them consistently

make judgements and estimates that are reasonable and prudent 

         prepare the  financial  statements on the going concern basis unless it
         is inappropriate to presume that the company will continue in business.

The  directors  are  responsible  for keeping  proper  accounting  records,  for
safeguarding  the assets of the company and for taking  reasonable steps for the
prevention and detection of fraud and other irregularities.                     

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                                                         SOLCOM SYSTEMS LTD 1996

DIRECTORS' REPORT (CONTINUED)                                                   

AUDITORS                                                                        

Grant Thornton offer  themselves  for  re-appointment  as auditors in accordance
with section 385 of the Companies Act of 1985.                                  

BY ORDER OF THE BOARD                                                           

P J MacLaren                                                                    
Secretary                                                                       
26 June 1997                                                                    

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                                                       SOLCOM SYSTEMS LTD 1996

REPORT OF THE AUDITORS TO THE MEMBERS OF SOLCOM SYSTEMS LIMITED                 

We have  audited  the  financial  statements  on pages 5 to 15 which  have  been
prepared under the accounting policies set out on pages 7 and 8.                

Respective responsibilities of directors and auditors                           

As  described  on  page  3 the  company's  directors  are  responsible  for  the
preparation  of  financial  statements.  It is our  responsibility  to  form  an
independent  opinion,  based on our audit, on those statements and to report our
opinion to you.                                                                 

Basis of Opinion                                                                

We conducted  our audit in  accordance  with  Auditing  Standards  issued by the
Auditing  Practices  Board. An audit includes  examination,  on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements. It
also includes an assessment of the significant  estimates and judgements made by
the directors in the preparation of the financial statements, and of whether the
accounting policies are appropriate to the company's circumstances, consistently
applied and adequately disclosed.                                               

We  planned  and  performed  our audit so as to obtain all the  information  and
explanations  which  we  considered  necessary  in  order  to  provide  us  with
sufficient evidence to give reasonable  assurance that the financial  statements
are  free  from  material  misstatement,   whether  caused  by  fraud  or  other
irregularity  or error.  In forming  our opinion we also  evaluated  the overall
adequacy of the presentation of information in the financial statements.        

Going Concern                                                                   

In forming our opinion,  we have considered the adequacy of the disclosures made
in note 2 of the  financial  statements  concerning  the  uncertainty  as to the
continuation  and renewal of the company's bank overdraft  facility.  In view of
the significance of this uncertainty we consider that it should be drawn to your
attention, but our opinion is not qualified in this respect.                    

Opinion                                                                         

In our opinion the financial  statements  give a true and fair view of the state
of the  company's  affairs  at 30 June 1996 and of its  profit for the year then
ended and have been properly prepared in accordance with the Companies Act 1985.

GRANT THORNTON                                                                  
REGISTERED AUDITORS                                                             
CHARTERED ACCOUNTANTS                                                           

Edinburgh                                                                       
27 June 1997                                                                    

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                                                         SOLCOM SYSTEMS LTD 1996

                                                        [Enlarge/Download Table]


                             PROFIT AND LOSS ACCOUNT                                         
                          12 Months ended 30 June 1996                                       

                                                        Note         1996             1997   
                                                                      Li.              Li.   

                                                                                             
TURNOVER                                                 3           788,450          524,615
Cost of Sales                                                        205,758          188,291
                                                              -------------------------------

Gross Profit                                                         582,692          336,324

Distribution Costs                                                   180,657           78,263

Administrative Expenses                                              379,936          223,569
                                                              -------------------------------

OPERATING PROFIT BEFORE PRP                                           22,099           34,492

Profit Related Pay                                                     1,670            3,200
Employer's NI on PRP                                                     159              304
                                                              -------------------------------

OPERATING PROFIT                                                      20,270           30,988

Interest Received                                                          -           28,499
Interest Paid                                            6             5,402                -
                                                              -------------------------------

PROFIT ON ORDINARY ACTIVITIES BEFORE                     3            14,868               52
         TAXATION                                                                            
Taxation                                                 7                 -            2,541
                                                              -------------------------------

PROFIT FOR THE FINANCIAL YEAR                                         14,868           28,499

Provision for Preference Dividend and Premium on                                             
         Redemption of non-Equity Shares                              10,200           10,200
                                                              -------------------------------

RETAINED PROFIT FOR YEAR                                               4,668           18,299
                                                              ===============================


There were no recognized gains or losses other than the profit for the financial
year

The accompanying notes form an integral part of these Financial Statements

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                                                         SOLCOM SYSTEMS LTD 1996

                                                        [Enlarge/Download Table]


BALANCE SHEET AT 30 JUNE 1996                                                                

                                                         Note            1996            1995

                                                                                             
FIXED ASSETS                                                                                 
Intangible Assets                                          8        133,169           98,698 
Tangible Assets                                            8         68,116           35,213 
                                                               ------------  --------------- 
                                                                    201,285          133,911 

CURRENT ASSETS                                                                               
Stock                                                      9        103,215           49,803 
Debtors                                                   10        112,969          102,420 
Cash at Bank and in Hand                                            349,783              621 
                                                               ------------  --------------- 
                                                                    565,967          152,844 

CREDITORS: amounts falling due within one year            11        204,028          188,728 
                                                               ------------  --------------- 

NET CURRENT ASSETS/(LIABILITIES)                                    361,939          (35,884)
                                                               ------------  --------------- 

TOTAL ASSETS LESS CURRENT LIABILITIES                               563,224           98,027 

CREDITORS: amounts falling due after more than one year   12         47,867           13,655 

DEFERRED INCOME                                           14          1,553           10,499 
                                                               ------------  --------------- 

                                                                    513,804           73,873 
                                                               ============  =============== 
SHARE CAPITALS AND RESERVES                                                                  
Called up Share Capital                                   15         33,074           32,224 
Share Premium Account                                     16        497,866           73,653 
Provision for Preference Dividend and Premium on                     25,500           15,300 
Redemption                                                                                   
Profit & Loss Account                                     16        (42,636)         (47,304)
                                                               ------------  --------------- 

Shareholders' Funds                                       17        513,804           73,873 
                                                               ============  =============== 


The financial statements were approved by the Board of Directors on 26 June 1997

PJ MacLaren                                                                     
Financial Director                                                              

The accompanying notes form an integral part of these Financial Statements

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                                                         SOLCOM SYSTEMS LTD 1996

NOTES TO THE FINANCIAL STATEMENTS                                               
Year ended 30 June 1996                                                         

1        ACCOUNTING POLICIES                                                    

The principal accounting policies adopted are described below. The policies have
remained unchanged from the previous year.                                      

Accounting Convention                                                           

The financial statements are prepared under the historical cost convention.     

Depreciation                                                                    

Depreciation  is calculated to write down the cost of all tangible  fixed assets
by equal  installments  over their expected  useful lives.  The rates  generally
applicable are:                                                                 

         Plant and Machinery                           3 Years
         Motor Vehicles (New)                          5 Years
         Motor Vehicles (Second Hand)                  3 Years
         Fixtures, Fittings, Tools and Equipment       5 Years

Stocks                                                                          

Stocks are valued at the lower of cost and net realisable value.                

Intangible Assets - Product Development                                         

Expenditure  (including  staff  salaries,  NI, and certain  overheads)  which is
incurred  directly  for  the  purpose  of  developing   marketable  products  is
capitalised when  recoverability  can be assessed with reasonable  certainty and
amortised  over the expected  product life from the date of the product  launch.
Grants  receivable in respect of such  expenditure  are  similarly  deferred and
released to profit over the same period. For the present range of products,  the
product life is estimated to be 3 years.                                        

Product Warranties                                                              

Provision is made for all known and  expected  claims under the terms of product
warranties.                                                                     

Turnover                                                                        

Turnover is the total amount  receivable  by the company for goods  supplied and
services provided, excluding VAT.                                               

Foreign Currencies                                                              

Transactions in foreign currencies are translated at the exchange rate ruling at
the  date  of the  transaction.  Monetary  assets  and  liabilities  in  foreign
currencies are  translated at the rates of exchange  ruling at the balance sheet
date. All other exchange  differences are dealt with through the profit and loss
account.                                                                        

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                                                         SOLCOM SYSTEMS LTD 1996

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)                                   
Year ended 30 June 1996                                                         

Contributions to Pension Funds                                                  
Defined Contribution Scheme                                                     

The  pension  costs  charged  against  profits   represent  the  amount  of  the
contributions payable to the scheme in respect of the accounting period.        

Leased Assets                                                                   

Assets held under finance leases and hire purchase  contracts are capitalised in
the balance sheet and depreciated over their expected useful lives. The interest
element of leasing  payments  represents  a constant  proportion  of the capital
balance  outstanding  and is charged to the  profit  and loss  account  over the
period of the lease.                                                            

All other leases are regarded as  operating  leases and the payments  made under
them are  charged to the profit and loss  account on a straight  line basis over
the lease term.                                                                 

Government Grants                                                               

Government  grants in respect of capital  expenditure are credited to a deferred
income  account and are  released to the profit and loss account by equal annual
instalments  over the expected  useful life of the relevant  assets.  Government
grants of a revenue  nature are  credited to the profit and loss  account in the
same period as the related expenditure.                                         

2        BASIS OF ACCOUNTING                                                    

The  company  meets  its day to day  working  capital  requirements  through  an
overdraft  facility  which is repayable on demand.  The nature of the  company's
business is such that there can be considerable  unpredictable  variation in the
timing of sales and hence cash  inflows.  On the basis of current  trading,  the
directors  consider that the company will continue within the facility currently
agreed and within that which they expect to be agreed on the 30th June 1997, the
facility review date. However, the margin of facilities over requirements is not
large, and inherently there can be no certainty in relation to these matters. On
this basis,  the  directors  consider it  appropriate  to prepare the  financial
statements on the going concern basis.  The financial  statements do not reflect
any adjustments that would result from a withdrawal of the overdraft facility by
the company's bankers.                                                          

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                                                         SOLCOM SYSTEMS LTD 1996

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)                                   
Year ended 30 June 1996                                                         

3        TURNOVER AND PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION             

The turnover and profit on ordinary  activities before taxation are attributable
to the  continuing  activities of  development  and  manufacture of hardware and
software  products and the supply of  consultancy,  training and other  services
aimed at supporting the management of computer  networks.  The percentage of the
company's  turnover that, in the opinion of the directors,  is  attributable  to
export markets is 48%. The profit on ordinary activities is after:              

                                                        [Enlarge/Download Table]


                                                                                        1996           1995      
                                                                                      (pound)         (pound)    

                                                                                                                 
Staff Costs:                                                                                                     
Wages & Salaries (excl PRP)                                                                251,112        129,241
Social Security Costs (excl NI related to PRP)                                              24,397         11,675
Pension Costs                                                                                6,612          6,312
                                                                                  -------------------------------
                                                                                           282,121        147,228
                                                                                  ===============================
Research and Development - Current Year Expenditure (including allocated                                         
     overheads and excluding capitalised expenditure on product development)                34,495         25,468
Depreciation and Amortisation:                                                                                   
     Intangible fixed assets                                                                43,332         37,374
     Tangible fixed assets owned                                                            17,226         12,440
     Tangible fixed assets held under finance leases and hire purchase contracts             1,324              -
Hire of Equipment                                                                            2,894          3,712
Auditors' Remuneration                                                                       2,815          1,750
                                                                                  ===============================
Credits in Respect of Government Grants:                                                                         
Amortisation of Capital Grants                                                               8,946         11,110
Revenue Grants Receivable                                                                   39,868         22,250
                                                                                  ===============================

4        DIRECTORS' REMUNERATION (INCLUDING PENSION CONTRIBUTIONS                                                
         EXCLUDING PRP)                                                                                          

Management Remuneration                                                                     66,455         62,354
                                                                                  ===============================
The Chairman                                                                                     -              -
The Highest Paid Director                                                                   32,017         29,913
                                                                                  ===============================
The remuneration of the Directors fell within the following ranges:                         Number         Number
(pound)0-(pound)5,000                                                                            2              2
(pound)25,001-(pound)30,000                                                                      -              2
(pound)30,001-(pound)35,000                                                                      2              -

In addition,  Malloy & Ball Ltd. a company controlled by Mr. MacLaren,  received
(pound)15,628 (1995: (pound)13,467) for financial management services.          

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                                                         SOLCOM SYSTEMS LTD 1996

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)                                   
Year ended 30 June 1996                                                         

5        STAFF NUMBERS                                                          

The average number of persons employed by the company during the year, including
directors, was 13 (1995: 7).                                                    

6        INTEREST PAID                                                          

                                                            1996        1995
                                                           (pound)     (pound)
On bank loans and overdrafts                                 4,802         2,541
Finance charges in respect of finance leases                   600             -
                                                       ----------- -------------
                                                             5,402         2,541
                                                       =========== =============

7        TAXATION                                                               

No liability to UK corporation  tax arises for the year due to the  availability
of tax losses.                                                                  

8        FIXED ASSETS                                                           

                                                        [Enlarge/Download Table]


                           Intangible                               Tangible                        
                         --------------- -----------------------------------------------------------
                           Expenditure                                     Fixtures,                
                           on Product     Plant and          Motor      fittings, tools       Total 
                           Development    machinery        Vehicles     and equipment      Tangible 
                           (pound)        (pound)          (pound)         (pound)           (pound)

                                                                                                    
Cost:                                                                                               
At 30 June 1995                  155,809     46,537         3,500           6,695           56,732  
Additions                         77,803     50,676             -           1,114           51,790  
Disposals                              -     (3,020)            -               -           (3,020) 
                         --------------- ---------------------------------------------------------  
At 30 June 1996                  233,612     94,193         3,500           7,809          105,502  
                         --------------- ---------------------------------------------------------  
Depreciation and                                                                                    
   amortisation:                                                                                    
At 30 June 1995                   57,111     17,024         2,528           1,967           21,519  
Charge for the year               43,332     16,120           972           1,458           18,550  
Accumulated in relation                                         -                                   
   to disposals                        -     (2,683)                            -           (2,683) 
                         --------------- ---------------------------------------------------------  
At 30 June 1996                  100,443     30,461         3,500           3,425           37,386  
                         --------------- ---------------------------------------------------------  
Net book value                                                                                      
At 30 June 1996                  133,169     63,732             -           4,384           68,116  
                         =============== =========================================================  
At 30 June 1995                   98,698     29,513           972           4,728           35,213  
                         =============== =========================================================  

The net book value of plant and machinery  include  (pound)14,566  (1995 Nil) in
respect of assets held under finance leases and hire purchase contracts.        

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                                                         SOLCOM SYSTEMS LTD 1996

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)                                   
Year ended 30 June 1996                                                         

                                                        [Enlarge/Download Table]


9        STOCKS                                                                                           

                                                                                   1996              1995 
                                                                                  (pound)          (pound)
                                                                                                          
Components                                                                        55,808            28,606
Finished Goods                                                                    47,407            21,197
                                                                                --------------------------
                                                                                 103,215            49,803
                                                                                ==========================

10       DEBTORS                                                                                          

Trade Debtors                                                                     90,334            90,063
Prepayments & Accrued Income                                                      16,952               156
Other Debtors                                                                      5,683            12,201
                                                                                --------------------------
                                                                                 112,969           102,420
                                                                                ==========================

11       CREDITORS - amounts falling due within one year                                                  

Bank of Scotland loans (Note 12)                                                   9,500             5,200
British Coal Enterprise Ltd loan (Note 12)                                         4,444             2,937
Trade creditors                                                                  118,286           106,221
Amounts due under finance leases (Note 12)                                         5,297                 -
Social security and other taxes                                                   11,123             5,135
Bank Overdraft (Note 12)                                                               -            27,818
Warranty Provision                                                                27,210            16,535
Accrued PRP and Associated Employer's NI                                           1,829             3,504
Accruals                                                                          26,339            21,378
                                                                                --------------------------
                                                                                 204,028           188,728
                                                                                ==========================

12       CREDITORS - amounts falling due after more than one year                                         

                                             Interest Rate      Last Repayment                            

Loan from Bank of Scotland                      Base + 3.0% pa          Feb-1999   6,300            10,329
Loan from Bank of Scotland                      Base + 2.5% pa          Jan-1998   1,036             3,326
Loan from Bank of Scotland                      Base + 2.5% pa          Nov-2002  23,557                 -
Loan from British Coal Enterprise Ltd.                  10% pa          Jan-2001   8,886                 -
Amounts due under finance leases (Note 11)                                         8,088                 -
                                                                                --------------------------
                                                                                  47,867            13,655
                                                                                ==========================

The above  loans  are  repayable  in  monthly  installments  ending on the dates
indicated. The current portions are shown under Note 11.                        

The loans from the Bank of Scotland and the bank overdraft are secured by a bond
and  floating  charge  over all the  assets of the  company.  Amounts  due under
finance leases are secured on the assets concerned.                             

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                                                         SOLCOM SYSTEMS LTD 1996

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)                                   
Year ended 30 June 1996                                                         

                                                                [Download Table]


13       BORROWINGS                                                             

                                                        1996              1995  
                                                       (pound)          (pound) 

                                                                                
Borrowings are repayable as follows:                                            

Repayable within one year:                                                      
Bank and other borrowings                               13,944            35,955
Finance Lease                                            5,297                 -

Repayable after one and within two years:                                       
Bank and other borrowings                               12,336             5,200
Finance Lease                                            5,297                 -

Repayable after two and within five years:                                      
Bank and other borrowings                               21,086             8,455
Finance Lease                                            2,791                 -

Repayable after 5 years:                                                        
Bank and other borrowings                                6,357                 -
                                                   -----------------------------
                                                        67,108            49,610
                                                   =============================

14       DEFERRED INCOME                                                        

Capitalised Grants:                                                             
Gross amount brought forward                            31,332            25,508
Grants receivable and capitalised during the year            -             5,824
                                                   -----------------------------

Gross amount carried forward                            31,332            31,332
                                                   =============================

Amortisation of Capitalised Grants:                                             

Accumulated amortisation brought forward                20,833             9,723
Amortisation during the year                             8,946            11,110
                                                   -----------------------------

Accumulated amortisation carried forward                29,779            20,833
                                                   =============================

Net Capitalised Grants at 30 June                        1,553            10,499
                                                   =============================


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                                                         SOLCOM SYSTEMS LTD 1996

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)                                   
Year ended 30 June 1996                                                         

15       SHARE CAPITAL                                                          

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                                        1996       1996     1995    1995  
                                         No   (pound)        No   (pound) 
Authorised:                                                               
                                                                          
Ordinary shares of(pound)1 each       3,889      3,889    2,814      2,814
Preference Shares of(pound)1 each    30,000     30,000   30,000     30,000
                                              --------            --------
                                                33,889              32,814
                                              ========            ========
Allotted, called up and fully paid:                                       
Ordinary shares of(pound)1 each       3,074      3,074    2,224      2,224
Preference Shares of(pound)1 each    30,000     30,000   30,000     30,000
                                              --------            --------
                                                33,074              32,224
                                              ========            ========


Holders of the preference shares, which are non-equity shares, are entitled to a
cumulative  dividend at the rate of 8% per year and to redemption of one half of
the  shares  by end 1998 and the  remainder  by end  1999  (or  earlier,  at the
company's option) at the following prices:                                      

                                                              Redemption
                                                               Price
                                                               per Share
Date of Redemption                                               (pound)        
On or prior to 31 December 1995                                       1.25      
1 January 1996 to 31 December 1996                                    1.48      
1 January 1997 to 31 December 1997                                    1.80      
1 January 1998 to 30 December 1998                                    2.20      
31 December 1998 to 30 December 1999                                  2.80      
On or after 31 December 1999                                          3.00      

On a winding up or  reduction of capital the holders of  preference  shares will
rank ahead of  holders of  ordinary  shares in  respect of a final  dividend  of
(pound)3 per share.                                                             

If any part of a  preference  dividend  is in  arrears  at the time of a General
Meeting of the company,  then the holders of the Preference  Shares are entitled
to one vote per 30 shares, such votes ranking equally with those of the ordinary
shareholders  (one  vote  per  ordinary  share).  Due to the  unavailability  of
distributable  profits,  at the end of the year preference  dividends  totalling
(pound)6,000 were in arrears (1995-(pound)3,600).                               

Allotments during the year                                                      
On 30 November  1995 the company made an  allotment  of 481  ordinary  shares of
(pound)1 at  (pound)62.50  per share by way of an issue to existing  members.  A
further issue of 369 ordinary (pound)1 shares at (pound)1,084 per share was made
on 21 June 1996 by an issue to new investors.  The difference  between the total
consideration  of  (pound)430,063  and the total nominal value of (pound)850 has
been credited to the share premium account, less issue costs of (pound)5,000.   

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                                                         SOLCOM SYSTEMS LTD 1996

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)                                   
Year ended 30 June 1996                                                         

15       SHARE CAPITAL (CONTINUED)                                              

The company has granted options over a total of 816 ordinary shares. All options
are exercisable up to December 2003, at the following prices:                   

                                             Price per Share
Date of Exercise                                              (pound)           

On or prior to 31 December 1995                              156                
1 January 1996 to 31 December 1996                           188                
1 January 1997 to 31 December 1997                           219                
1 January 1998 to 31 December 2003                           375                

16       SHARE PREMIUM ACCOUNT AND RESERVES                                     

                                          Share Premium      Profit & Loss
                                          Account            Account
                                          (pound)            (pound)

At 30 June 1995                                   73,653           (47,304)     
Profit for the year                                    -             4,668      
In respect of shares issued during the year      424,213                 -      
                                      ------------------------------
At 30 June 1996                                  497,866           (42,636)     
                                      ==============================

In  accordance  with S263 of the  Companies  Act 1985 the  balance  on the share
premium account may not be distributed.                                         

17       RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS                     

                                                     1996           1995
                                                (pound)        (pound)

Retained Profit for the year                              4,668        18,299   
Issue of shares                                         425,063             -   
Preference Dividend and Premium on Redemption of         10,200        10,200   
Preference Shares (not paid)                                              
                                               ---------------------------
Net increase in shareholders' funds                     439,931        28,499   
Shareholders' funds at 1 July 1995                       73,873        45,374   
                                               ---------------------------
Shareholders' funds at 30 June 1996                     513,804        73,873   
                                               ===========================
Attributable to:                                                                
Equity shareholders                                     458,304        28,573   
Non-equity shareholders                                  55,500        45,300   
                                               ---------------------------
                                                     513,804        73,873
                                               ===========================

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                                                         SOLCOM SYSTEMS LTD 1996

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)                                   
Year ended 30 June 1996                                                         

18       LEASING COMMITMENTS                                                    

Operating lease payments  amounting to (pound)12,550  (1995;  (pound)12,550) are
due within one year. The property  lease to which these payments  relate expires
between one and five years.                                                     

19       CAPITAL COMMITMENTS                                                    

The company had no capital commitments at 30 June 1996 or at 30 June 1995.      

20       CONTINGENT LIABILITIES                                                 

The company had no contingent liabilities at 30 June 1996 or at 30 June 1995.   

21       POST BALANCE SHEET EVENTS                                              

Post balance sheet events are detailed in the Directors' Report on Page 3.      

22       PENSIONS                                                               

Defined Contribution Scheme                                                     

The company  operates a defined  contribution  pension scheme for the benefit of
certain  directors and employees.  The assets of the scheme are  administered by
trustees in a fund independent from those of the company.                       

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 SolCom Systems Ltd.
Unaudited Interim Financial Statements
 December 1998

Notes:                                                                          

1.  These  financial  statements  have been prepared by the directors  using the
    same accounting principles as were applied in the preparation of the audited
financial statements at March 31, 1998.                                 

2.  These financial statements have not been audited.                           

3.  In the opinion of the  directors,  these  financial  statements  include all
    adjustments  which are necessary in order to make the  financial  statements
not misleading.                                                         

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SOLCOM SYSTEMS LIMITED                                                                                         
UNAUDITED CONSOLIDATED BALANCE SHEETS                                                                          
                                                                                      In thousands             
                                                                                (except per share data)        
                                                                         Dec. 31       Sept. 30        June 30,
                                                                          1998           1998            1998  
                                                                      (pound)         (pound)           (pound)

                                                                                                               
ASSETS                                                                                                         
Current Assets:                                                                                                
Cash and cash equivalents                                                      83            5               - 
Accounts receivable                                                           370          135              64 
Other receivables                                                             115           21              26 
Prepaid merger expenses                                                                      5               - 
Other prepayments                                                              11           32              34 
Inventories                                                                   217          235             306 
                                                                      -----------  -----------  -------------- 
Total current assets                                                          796          433             430 
Property and equipment, net                                                   142          124             134 
                                                                      -----------  -----------  -------------- 
Total assets                                                                  938          557             564 
                                                                      -----------  -----------  -------------- 
LIABILITIES AND SHAREHOLDERS' EQUITY                                                                           
Current liabilities:                                                                                           
Bank overdraft                                                                  4           54              17 
Current portion of bank loans                                                  36           46              84 
Current portion of capital leases                                               3            6               9 
Convertible Loan Notes                                                        150          150                 
Accounts payable                                                            1,189          852             705 
Accrued expenses                                                              450          378             264 
                                                                      -----------  -----------  -------------- 
Total current liabilities                                                   1,832        1,486           1,079 
Long term portion of capital leases                                             -            -               - 
Long term portion of bank loans                                                22           23              16 
Cumulative redeemable preference(pound)1 stated value, 30,000 shares                                           
authorised and outstanding                                                     30           30              30 
Commitments and contingencies                                                   -            -               - 
Shareholders' deficit                                                                                          
Ordinary(pound)0.01 stated value, 54,250,000 (March 31, 1998 -                                                 
48,960,000) shares authorised, issued and outstanding 38,814,390                                               
(March 31, 1998 - 36,140,000) shares                                          413          413             388 
Additional paid in capital                                                    823          823             662 
Accumulated deficit                                                        (2,183)      (2,219)         (1,613)
Cumulative translation adjustment                                               1            1               2 
                                                                      -----------  -----------  -------------- 
Total shareholder's deficit                                                  (946)        (982)           (561)
                                                                      -----------  -----------  -------------- 
Total liabilities and shareholders'  deficit                                  938          557             564 
                                                                      -----------  -----------  -------------- 


 The accompanying notes are an integral part of these consolidated
financial statements. 

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SOLCOM SYSTEMS LIMITED                                                                                              
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS                                                                     
--------------------------------------------------------------------------------------------------------------------
                                                                                       In thousands                 
                                                                                 (except per share data)            
                                                                           3 months    3 months      3 months       
                                                                             ended       ended        ended         
                                                                           Dec. 31,    Sept. 30,     June 30,       
                                                                             1998        1998          1998         
                                                                          (pound)       (pound)       (pound)       

                                                                                                                    
Sales                                                                        912         253            238         
Cost of sales                                                                (22)        (91)           (55)        
                                                                      ---------- ----------- --------------         

Gross profit                                                                 890         162            183         

Operating expenses                                                          (660)       (681)          (485)        

Research and development expenses                                           (192)        (73)           (76)        

Interest income                                                                0          --              1         

Interest expense                                                               6         (11)           (16)        
                                                                      ---------- ----------- --------------         

Net loss                                                                      44        (603)          (393)        
                                                                      ---------- ----------- --------------         

Loss per share - basic and diluted                                          (.01)       (.01)          (.01)        


 The accompanying notes are an integral part of these consolidated
financial statements. 

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SOLCOM SYSTEMS LIMITED                                                                             
UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS DEFICIT                                          

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

                                                           Addi-                                   
                                                           tional       Accumu-      Cumulative    
                               Ordinary      Shares       Paid-in        lated      Translation    
                                Shares       Amount       Capital       Deficit      Adjustment    
                                 No.         (pound)      (pound)       (pound)       (pound)      

                                                                                                   
Balance at July 1, 1997            30,740          307            222        (768)        -        

Net income                                                                   (439)        -        
Share capital issued                5,400           54            211                              
Translation adjustment                                                                    3        
Preference dividend declared                                                  (10)                 
                             ------------  ----------- -------------- ----------- ---------------- 

Balance at March 31, 1998          36,140          361            433      (1,217)        3        

Net income                                                                   (393)                 
Share capital issued                2,674           27            229                              
Translation adjustment                                                                  (1)        
Preference dividend declared                                                   (3)                 
                             ------------  ----------- -------------- ----------- ---------------- 

Balance at June 30, 1998           38,814          388            662      (1,613)        2        

Net income                                                                   (603)                 
Share capital issued                2,474           25            161                              
Translation adjustment                                                                  (1)        
Preference dividend declared                                                   (3)                 
                             ------------  ----------- -------------- ----------- ---------------- 

Balance at September 30, 1998      41,288          413            823      (2,219)        1        
                             ------------  ----------- -------------- ----------- ---------------- 

Net income                                                                     44                  
Share capital issued                                                                               
Translation adjustment                 --            0                                    0        
Preference dividend declared                                                   (5)                 
                             ------------  ----------- -------------- ----------- ---------------- 

Balance at September 30, 1998      41,288          413            823      (2,180)        1        
                             ------------  ----------- -------------- ----------- ---------------- 

 The accompanying notes are an integral part of these consolidated
financial statements. 

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SOLCOM SYSTEMS LIMITED                                                                                               
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                      
--------------------------------------------------------------------------------                                     
                                                                                        In thousands                 
                                                                                  (except per share data)            
                                                                              3 months       3 months      3 months  
                                                                               ended          ended         ended    
                                                                              Dec. 31,      Sept. 30,      June 30,  
                                                                                1998           1998          1998    
                                                                               (pound)       (pound)        (pound)  

                                                                                                                     
Cash flows from operating activities                                                                                 
Net loss                                                                             105         (239)          (241)

Adjustments to reconcile net loss to net cash used in operating activities                                           
Depreciation                                                                          62           34             17 
Employee stock compensation                                                            -            -              - 
(Increase) in inventories                                                             34           16            (55)
Decrease/(increase) in receivables and prepayments                                  (190)          24             90 
Increase in accounts payable and accrued expenses                                    200         (148)           (45)
                                                                        ---------------- ------------ -------------- 

Total adjustments                                                                    106          (74)             7 
                                                                        ---------------- ------------ -------------- 

Net cash used in operating  activities                                               211         (313)          (234)

Cash flows from investing activities                                                                                 
Capital expenditures                                                                 (57)         (11)            (4)
                                                                        ---------------- ------------ -------------- 

Net cash used in investing activities                                                (57)         (11)            (4)

Cash flows from financing activities                                                                                 
Bank overdraft                                                                        (7)          43              6 
Proceeds from issuance of long term debt                                               -            -              - 
Principal payments under long term debt and capital leases                           (80)         (66)           (32)
Proceeds from issuance of shares                                                     442          442            256 
                                                                        ---------------- ------------ -------------- 

Net cash provided by financing activities                                            355          419            230 

Effect of exchange rate changes on cash and cash equivalents                           1            1              2 
                                                                        ---------------- ------------ -------------- 

Net increase/(decrease) in cash and cash equivalents                                  70           (7)           (12)

Cash and cash equivalents at beginning of period                                      12           12             12 
                                                                        ---------------- ------------ -------------- 

Cash and cash equivalents at end period                                               82            5              - 
                                                                        ---------------- ------------ -------------- 

Supplemental disclosure of cash flow information:                                                                    
Cash paid during the period for:                                                                                     
Interest on bank loans and overdraft                                                   5           11             15 
                                                                        ---------------- ------------ -------------- 

 The accompanying notes are an integral part of these consolidated
financial statements. 

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SOLCOM SYSTEMS LIMITED                                                                                                          
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)                                                                

NOTE A - INVENTORIES                                                                                                            
Inventories at December 31, September 30, June 30 and March 31,                                                                 
consists of the following:                                                                       (In thousands)                 
                                                                                     Dec. 31,      Sept. 30,       June 30,     
                                                                                       1998           1998           1998       
                                                                                     (pound)         (pound)       (pound)      

                                                                                                                                
Raw materials                                                                                119           119              172 
Finished goods                                                                                98           116              134 
                                                                                  --------------  ------------ ---------------- 
                                                                                             217           235              306 
                                                                                  --------------  ------------ ---------------- 

NOTE B - PROPERTY AND EQUIPMENT                                                                                                 

Property  and  equipment  at December  31,  September  30, June 30 and March 31,                                                
consists of the following:                                                                                                      

                                                                                                 (In thousands)                 
                                                                                     Dec. 31,      Sept. 30,       June 30,     
                                                                                       1998           1998           1998       
                                                                                    (pound)          (pound)        (pound)     

Plant and machinery                                                                          251           216              209 
Fixtures and fittings                                                                         98            87               87 
                                                                                  --------------  ------------ ---------------- 
                                                                                             349           303              296 
Less accumulated depreciation                                                               (207)         (178)            (162)
                                                                                  --------------  ------------ ---------------- 
                                                                                             142           125              134 
                                                                                  --------------  ------------ ---------------- 

NOTE C - ACCRUED EXPENSES                                                                                                       

Accrued expenses at December 31, September 30, June 30 and March 31, consists of                                                
the following:                                                                                                                  
                                                                                                 (In thousands)                 
                                                                                     Dec. 31,      Sept. 30,       June 30,     
                                                                                       1998           1998           1998       
                                                                                     (pound)        (pound)         (pound)     

Social Security and other taxes                                                              169            84               82 
Other                                                                                         59            30               30 
Sundry creditors                                                                             168           213              103 
Provision for preference dividend and provision on redemption                                                                   
  of preference share                                                                         54            51               49 
                                                                                  --------------  ------------ ---------------- 
                                                                                             450           378              264 
                                                                                  --------------  ------------ ---------------- 


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SOLCOM SYSTEMS LIMITED                                                                                                         
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)                                                               
--------------------------------------------------------------------------------                                               

NOTE D - LONG-TERM OBLIGATIONS                                                                                                 

Long-term  obligations  at  December  31,  September  30, June 30, and March 31,                                               
consists of the following:                                                                                                     
                                                                                                  (In thousands)               
                                                                                      Dec 31,       Sept 30,       June 30,    
                                                                                       1998           1998           1998      
                                                                                   (pound)             (pound)       (pound)   

                                                                                                                               
Secured loan repayable in yearly installments of(pound)3,000 (excluding interest) until                                        
November 1999, carrying interest of 10% per annum.                                             6             7                8

Secured loans - the loans are secured by a floating charge over the assets of the                                              
Company.  The interest rate is 2.5% over bank base rate (7.25%).                              51            62               92
                                                                                   -------------  ------------ ----------------
                                                                                              58            69              100
less current portion                                                                          36            46               84
                                                                                   -------------  ------------ ----------------
                                                                                              22            23               16
                                                                                   -------------  ------------ ----------------

Aggregate  maturities  of  long-term  obligations  at  December  31, 1998 are as                                               
follows::                                                                                                                      

                                                                                                  (In thousands)               
                                                                                         (pound)       (pound)          (pound)

                                       1998                                                   84            84               84
                                       1999                                                    8             8                8
                                       2000                                                    8             8                8
                                       2001                                                    2             2                2
                                                                                   -------------  ------------ ----------------
                                                                                             102           102              102
                                                                                   -------------  ------------ ----------------

 -6-

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APPENDIX F

MICROFRAME, INC. FORM 10-KSB
 FOR THE PERIOD ENDED MARCH 31, 1998

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 U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 FORM 10-KSB

[X]      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
OF 1934                                                       

For the fiscal year ended March 31, 1998                      

OR

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
ACT OF 1934                                                   

For the transition period from ____________ to ____________   

Commission File No.: 0-13117

MICROFRAME, INC.
----------------
(Name of Small Business Issuer in Its Charter)

    New Jersey                                22-2413505
--------------------------------------       -----------------------------------
      (State or Other Jurisdiction of       (IRS Employer Identification Number)
Incorporation or Organization)                                      

21 Meridian Road, Edison, New Jersey                     08820            
----------------------------------------     -----------------------------------
(Address of Principal Executive Offices)                (Zip Code)            

Issuer's telephone number, including area code:  (732) 494-4440                 

Securities registered under Section 12(b) of the Exchange Act:  None            

Securities  registered  under Section  12(g) of the Exchange Act:  Common Stock,
$.001 par value                                                                 

Check whether the issuer:  (1) filed all reports required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.                       

Yes X        No       
---          ---

[ ]      Check if there is no  disclosure  of  delinquent  filers in response to
         Item  405 of  Regulation  S-B is not  contained  in this  form,  and no
         disclosure will be contained, to the best of registrant's knowledge, in
         definitive proxy  information  statements  incorporated by reference in
    Part III of this Form 10-KSB or any amendment to this Form 10-KSB.

The issuer's revenues for its most recent fiscal year totaled $10,217,911.      

The aggregate market value of the voting stock held by  non-affiliates  computed
by  reference  to the  average of the bid and asked  prices as  reported  by the
National Quotation Bureau as of June 25, 1998 was approximately $17,531,345.    

There were 5,296,479 shares of Common Stock outstanding as of June 25, 1998.    

 DOCUMENTS INCORPORATED BY REFERENCE

None

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PART I

1. Description of Business.                         
General                                                                         
-------                                                                         
              MicroFrame,  Inc.,  a  New  Jersey  corporation  (the  "Company"),
founded in 1982,  designs,  develops and markets a broad range of remote network
management and remote  maintenance  and security  products for mission  critical
voice and data communications networks. The Company's products provide for alarm
and fault monitoring,  proactive administration and reporting capabilities which
are being used as a basis for remote,  intranet and internet network  management
and  maintenance.  In  addition,  by  incorporating  a variety of  hardware  and
software options for security and user authentication, these products can deter,
as well as  prevent,  unauthorized  dial-in  and/or  in-band  access to  network
elements and systems (such as computers,  local area networks (LANs),  wide area
networks  (WANs),  routers,  hubs,  servers,  Private Branch Exchange  telephone
switches ("PBXs") as well as other network elements).  In addition they continue
to allow  authorized  personnel  access to  perform  needed  administration  and
maintenance of host devices and networks from remote locations.                 

              In  May  1993,  the  Company  completed  a  private  placement  to
accredited investors of an aggregate of 800,000 shares (after giving effect to a
reverse stock split as noted below) of common stock,  par value $.001 per share,
of the Company (the "Common Stock"), for $1,000,000.                            

              In September  1993, the Company  effected a  one-for-five  reverse
stock  split of the  issued  and  outstanding  shares of the  Common  Stock (the
"Reverse Stock Split").                                                         

              In September  1995, the Company formed a wholly-owned  subsidiary,
MicroFrame  Europe  N.V.,  which,  in  turn,  acquired  all  of the  issued  and
outstanding shares of capital stock of European Business Associates BVBA ("EBA")
of Brussels, Belgium.                                                           

              In April 1996,  the Company  completed  a private  placement  (the
"1996 Private  Placement") to accredited  investors of an aggregate of 1,101,467
Units for gross proceeds of $1,376,933.75,  each unit consisting of one share of
Common  Stock and one Class A Warrant and one Class B Warrant,  each of which is
exercisable  into one share of Common  Stock at an  exercise  price of $1.50 and
$2.00, respectively.                                                            

Principal Products and Markets                                                  
------------------------------                                                  

              The  Company  has   established  a  strong   customer  base  (both
domestically and internationally) through the development of a family of modular
industry  standards based hardware and software  offerings designed to interface
with a customer's existing dial-up and/or in-band WAN communications and network
management environment and/or on a standalone basis. The Company                

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believes that each of these offerings, when combined with the programmability as
provided by the Company's software, support and meet the needs of wide varieties
of  customer   element  network   management  and   intranet/internet   security
requirements.  The software is designed to permit relatively easy  modification,
thus allowing customized solutions for monitoring and controlling telemanagement
(intelligent agent) and/or network access.                                      

              The  Company  develops  and  markets  a  broad  range  of  network
management,  remote  maintenance  and  security  products  for  voice  and  data
communications  networks.  The  Company's  products  are based  upon a family of
hardware and software components that, when combined with the Company's software
"engine," provide  programmability and modification wherein customized solutions
for  network  access,   monitoring  and   telemanagement   of   mission-critical
applications and network elements can readily be accommodated.                  

              In  fiscal  1997  and  continuing  in  fiscal  1998,  the  Company
continued  its  evolutionary  development  of products to address its  strategic
direction and goal of  establishing a competitive  position in the combined data
and  voice  Network  Management/  Distributed  Device  Management  and  Security
marketplaces.  The  introduction  of  a  new  family  of  products  referred  to
collectively  as Secure  Network  Systems/ 2000  ("SNS/2000")  based on industry
standards-based  products is  designed to address the growing  demand for remote
network  management  of  mission  critical  integrated  voice  and data  network
elements.  The SNS/2000  product  family  consists  primarily of Sentinel  2000,
Sentinel 2000S and Manager 2000.                                                

              These products integrate element monitoring,  fault management and
security    management    as    well    as    remote    access    and    problem
identification/resolution  into a  suite  of  network  management  solutions  to
monitor,  maintain and  increase the  operational  integrity,  availability  and
access for mission-critical networks.                                           

              As telecommunications  networks continue to expand to support more
and more mission-critical  applications, the economic impact of downtime and the
importance  of secure  remote  access  to manage  and  maintain  these  networks
increase exponentially.  According to a third party study, "network downtime for
a typical network consisting of two servers and 100 personal computers" can cost
companies,  on average,  up to $1,000 per minute in lost  revenues  and employee
productivity.  The technical support staff necessary to administer,  support and
maintain  combined voice and data networks of a large distributed base of legacy
and standards-based  networking devices remain extremely costly and inefficient.
Faced with  budget  constraints  and a lack of skilled  staff  resources  due to
downsizing  programs,  network and system  managers  today are searching for new
tools to more  effectively  manage,  secure  and  control  their  expanding  and
increasingly  more  complex  networks.  The Company  believes  that the SNS/2000
family of products  provides cost  effective  solutions to these  problems.  The
products  are  completely  modular by design.  Each product  element  provides a
stand-alone feature/function set enabling one to choose only the products needed
to enhance the performance of their existing  network  management  systems.  For
maximum advantage,  the elements may be integrated into a secured telemanagement
and remote access  control  solution that can be customized and tailored to meet
specific organizational requirements.                                           

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              Secure Remote Telemanagement/Telemaintenance.  One major aspect of
the SNS/2000  family of products is its design which is to  specifically  reduce
network "downtime" by significantly  enhancing and bringing new capabilities for
detection, reporting, handling and resolution of alarm/fault conditions. It also
directly   addresses  the  requirement  to  manage  both  "legacy"  as  well  as
standards-based  communications  resources across widely dispersed heterogeneous
network  environments.   The  SNS/2000  product  set  is  fully  Simple  Network
Management Protocol ("SNMP") compliant. It offers stand-alone network management
and  remote  access  solutions  which  can be  fully  integrated  into  existing
SNMP-based central management systems and/or Trouble Ticket Management  Systems.
Its SNMP proxy agent capability  enables non-SNMP legacy devices,  such as PBXs,
to  communicate  with  SNMP  network  managers  (e.g.,  HP/Openview,   Cabletron
Spectrum,  IBM's Netview,  et al.) for more cohesive  centralized control of all
communications resources.                                                       

              SNS/2000 provides  redundant,  secured access and alarm monitoring
to all network  resource  maintenance  ports via both  in-band  and  out-of-band
connectivity  to  increase  system  reliability,  access and  availability.  All
network  access  and/or  access to network  elements may be channeled  through a
secure central gateway where users are authenticated  and  transparently  routed
only to  authorized  destinations.  Network  elements  are  monitored  by  local
intelligent  agents to proactively detect (and in many cases resolve) alarms and
fault  conditions  as well as threshold  violations.  This  monitoring  includes
ensuring that  environmental  conditions (e.g.  temperature,  moisture,  battery
voltage,  etc.)  at  various  points  in the  network  are  also  within  preset
thresholds.  Critical fault  conditions are promptly  identified and 1) resolved
via the  intelligent  agent  technology of these products  and/or 2) immediately
transmitted to the appropriate  management  center for analysis,  trouble ticket
generation,  corrective action,  and escalation where appropriate.  This enables
organizations  to improve network  availability  through  proactive  response to
potential network problems before they manifest  themselves in potential network
outages.                                                                        

              Secure Remote  Access.  A second aspect of the SNS/2000  family of
products is designed to address a rapidly growing group of telecommuters who are
redefining  the  boundaries of the  traditional  workplace.  They are placing an
increasing demand for convenient remote access to network resources.  By opening
the  networks  to meet  these  demands,  the  networks  are left  vulnerable  to
unauthorized  entry. Such unauthorized  access carries security  liabilities and
exposure to critical  company  resources,  data and  information.  In  addition,
unauthorized  users are  consuming  valuable  network  bandwidth,  thus reducing
availability  for  legitimate  users.  SNS/2000  offers remote  access  security
solutions for host computers,  LANs and WANs, as well as other network  elements
by providing front-end barriers to prevent unauthorized entry. Access control is
managed, monitored and administered via client server architecture.  Centralized
administration is provided to facilitate ease of administration,  monitoring and
maintenance.  Alerts are issued when user defined events occur and/or thresholds
are  exceeded.   Reporting  capabilities  are  provided  which  are  useful  for
identifying  trends  and  analyzing  network   utilization.   A  wide  range  of
authentication  technology is supported and, based on operational  needs, can be
incorporated into the Company's remote access security solutions.               

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              SNS/2000  feature/function/benefit  set.  The primary  benefits of
SNS/2000 include:                                                               

o             SNMP Agent/Proxy                                                  
----------------                                    
              Standards-based  SNMP  Proxy  alarm  reporting  for  non-compliant
              legacy  devices.  Centralized  telemaintenance  for both voice and
data communications networks.                       

o             Alarm Reporting & Evaluation                                      
----------------------------                        
              Distributed  Rules Based  (Intelligent  Agent) alarm  filtering to
              reduce network bandwidth consumption as well as insure delivery of
              critical   alarms/faults.    Multilevel   alarm   reporting   with
              programmable  escalation to insure prompt response. PBX toll fraud
              detection  and  reporting  to  reduce/minimize   toll  fraud  loss
potential.                                          

o             Remote Maintenance & Monitoring                                   
-------------------------------                     
              Programmed  monitoring of device fault tables to enable  proactive
              maintenance activity. Locally executed auto-recovery procedures to
reduce costly downtime.                             

o             Security                                                          
--------                                            
              Secured  in-band/out-of-band  access to insure network  integrity.
              Secured  remote  telecommuting  access to  eliminate  unauthorized
network access.                                     

o             Graphical User Interface ("GUI") Based System                     
---------------------------------------------       
              Central  GUI-based  system  administration  for convenient  system
management.                                         

o             Open Database ("ODBC") Compliant                                  
--------------------------------                    
              Integration  with  major  database  offerings   (Oracle,   Sybase,
SQL/Server, Informix, etc.)                         

o             Controlled Access & Ethernet Capabilities                         
-----------------------------------------           
              Controlled vendor access for secure  out-of-band device management
              and   administration.   Ethernet  and  dial  access  allowing  for
              redundant    access/reporting    paths   for   increased   network
              reliability.  Distributed intelligent agent device controllers for
reduced bandwidth utilization.                      

o             Buffering/Database Capabilities                                   
-------------------------------                     
              Central  relational  database  with ad hoc report  generation  for
              convenient activity/  utilization  analysis.  Buffering system for
              storage/retrieval of data (i.e. CDR Records, Critical Logs, etc.).

              SENTINEL 2000. Represents the flagship member of the Company's new
family of SNS/2000  products.  In the first  quarter of fiscal 1997,  MicroFrame
introduced  the  Sentinel  2000.  The  Sentinel  2000 is a  stand-alone,  secure
multi-port  programmable  Remote Site Element Manager which utilizes  integrated
application  software designed to provide alarm/fault  monitoring,  security and
remote access for  controlling/managing  remote voice and data network  elements
via their out-of-band  dial-up maintenance ports as well as via in-band Ethernet
connectivity.  The system provides device alarm/fault  monitoring and reporting,
SNMP  management and SNMP proxy  functionality,  PCMCIA high speed modem(s) plus
Ethernet  connectivity,   environmental  monitoring  and  control,  and  secured
in-band/out-of-band access to device maintenance and control ports. The Sentinel
2000 is an element management  solution that facilitates  convenient,  reliable,
remote network  element  telemanagement  and  telemaintenance  of voice and data
networks.                                                                       
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              Based on the Motorola 68360  Multi-controller  processor chip, the
Sentinel 2000 is  administered  and maintained  with the Company's new GUI-based
Manager 2000 software  product  offering.  The Sentinel  2000  integrates a wide
range of  applications  that provide for Secure Remote Network  Management for a
wide  variety  of  network  elements  (either  directly  or  via an  SNMP  proxy
function).  These  include  Access  Security,  Alarm  Management,  Environmental
Monitoring  and Control,  PBX Toll Fraud  Detection and Remote Device Reboot and
power management capabilities.                                                  

              The Company has continued seeing strong acceptance of the Sentinel
2000 from such companies as PTT Holland, MCI, AT&T, Vyvx, Ameritech,  U.S. West,
TeleFinland,  Kaiser  Permanente,  and Telstra  Australia.  In fiscal 1998,  the
Company shipped  approximately 2,500 units of the Sentinel 2000,  generating net
revenues of  approximately  $6,000,000,  representing  60% of the  Company's net
revenues for the year. In fiscal 1997, the Company shipped  approximately  1,100
units of the Sentinel 2000, generating net revenues of approximately $2,670,000,
representing 36% of the Company's net revenues for the year.                    

              MANAGER  2000.  During the  fourth  quarter  of fiscal  1997,  the
Company  introduced a second member of the SNS/2000 family of products,  Manager
2000, a set of software  applications that  collectively  provide a solution for
remote site-management and the servicing of real-time alarms generated by remote
monitoring  equipment.  Manager 2000 integrates the Sentinel 2000 and IPC/Secure
Sentinel programmable remote-site managers with central-site management tools to
provide  maintenance  managers and technicians with a seamless network overview.
Manager 2000 automates many time-consuming  remote management tasks for a faster
response time,  improved fault  isolation,  identification  and resolution,  and
differentiation  of  critical  and  non-critical  events.  In  conjunction  with
Sentinel systems, Manager 2000 can limit access to maintenance ports and devices
to  authorized  individuals  only.  The  authorized  access is controlled at the
central  management  site. This permits  frequent  changes and the assignment of
temporary   privileges  to  outsiders.   Manager  2000  features  include  Alarm
Processing, Trouble Ticket Management, Secured Remote Site Access, Security, and
Remote  Site  Administration.  All of this is done  based on  industry  standard
architecture (Windows 3.1, Windows/95, Windows N/T, ODBC, etc.), and is designed
for scalability.                                                                

New Products and Markets                                                        
------------------------                                                        

              During  fiscal 1998,  the Company  introduced  the Sentinel  2000S
Slimline programmable Remote Site Manager that is designed to provide a "Virtual
Technician" that operates 24-hours-a- day,  7-days-a-week to manage, monitor and
provide secured remote access to voice, video, and data network elements such as
PBXs,  bridges,  hubs and routers.  The Slimline is a lower-cost offering with a
feature set  comparable  to the Sentinel  2000(TM)  from the  Company,  with the
exception of the 28 host port expandability.                                    

              The Sentinel 2000S  Slimline  provides  alarm/fault  management by
monitoring data from remote network  elements.  When the Sentinel  determines an
alarm status, the appropriate  corrective-action  procedures are initiated,  and
the alarms can be sent to a technician via ASCII text, pager or                 

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E-mail, or to a central SNMP management product such as HP OpenView or Cabletron
Spectrum. Alarms can be escalated if a timely response is not received.  Network
security is managed by a variety of  authentication  technologies.  The Sentinel
monitors,  controls  and logs all  activity  on each port and  provides  central
and/or local audit reports, and can also detect PBX toll fraud by monitoring CDR
ports for activity that violates  pre-defined  threshold  levels in various call
classifications.                                                                

              On April 9, 1998, the Company signed a letter of intent to acquire
privately held Solcom Systems, Ltd. (Solcom), based in Livingston, Scotland. The
Company  proposes  to  issue to the  shareholders  of  SolCom  an  aggregate  of
approximately  5,600,000  shares of its common stock and/or  options to purchase
shares of its common  stock in  exchange  for all of the issued and  outstanding
share  capital and options of SolCom.  SolCom is a leading  developer  of remote
monitoring (RMON) technology.  Originally  approved by the Internet  Engineering
Task Force (IETF) in 1992,  Remote  MONitoring,  or RMON, is a standard protocol
for users to proactively manage multiple LANS and WANs from a central site. RMON
1 identifies  errors,  alerts  administrators  to network problems and baselines
networks in addition to its remote network analyzer capabilities.  RMON's recent
enhancement,  RMON 2, enables  trouble-shooting  and effective  network capacity
planning.  Consummation  of the transaction is subject to execution and delivery
of a definitive acquisition agreement,  approval of the shareholders of both the
Company and Solcom as well as various regulatory approvals.                     

Other Products and Markets                                                      
--------------------------                                                      

              The Company's first major product success,  the  DL-4000(TM),  was
introduced  in  1986  and  is  designed  to  protect  mainframe  computers  from
unauthorized  dial-up  access.  Since that time, more than 1,000 units have been
installed  worldwide  and the product  continues  to be a part of the  Company's
product offerings.                                                              

              Recognizing that  organizations were restructuring data processing
away from centralized  mainframes and into various network  configurations,  the
Company  re-engineered its original  fixed-function,  "black box" product into a
flexible,  programmable hardware/software system capable of securing access at a
wide variety of "nodes" in the network. The foundation of this re-design was the
development   of  a  proprietary   software   "engine,"   which   maximizes  the
programmability  of the hardware,  defining and  controlling the functions to be
performed by various hardware components.                                       

              Beginning  in 1991,  the  Company  determined  that an  additional
related  market  opportunity  was  developing  with the  proliferation  of PBXs,
voice-mail  systems and other privately owned voice  communications  systems and
security  devices.  The Company  believes that theft of long distance  telephone
services  ("toll  fraud")  through  unauthorized  access  to these  devices  has
resulted in substantial losses. Thus the support of PBXs through the development
and marketing of data communications security products has witnessed substantial
customer demand for greater system  reliability,  protection  against toll fraud
and security against network intrusion.                                         

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              A  vulnerability  of these systems results from the fact that PBXs
and  other  devices  used  in  the  voice  communications   system  have  remote
maintenance   and   administrative   "ports."   These  ports   permit  a  system
administrator  or maintenance  personnel to "dial in" or gain access to a device
electronically,  by  telephone,  and to monitor  and,  if  necessary,  change or
manipulate  the  software and hardware  embedded in the  equipment.  This can be
accomplished  without having a physical presence at the site where the equipment
is located.  Without proper security,  an unauthorized user can gain access to a
system through one of these ports, a potential exposure of PBX customers to toll
fraud.  With a remote  maintenance  facility,  PBX and other  telecommunications
product vendors can respond to and provide their  customers with  cost-effective
solutions that address customer demand for highly  responsive  service for their
products.                                                                       

              After initiating discussions with major PBX suppliers, the Company
developed a group of products,  referred to as  "Intelligent  Port  Controllers"
("IPC"), designed to provide security for the dial-in access remote ports. Among
these products are a Remote Port Security Device (RPSD(TM)),  which was designed
and  manufactured  exclusively for AT&T (now Lucent  Technologies)  beginning in
1991 and the Secure Sentinel(TM) family of devices, which were introduced by the
Company in 1992.                                                                

              The RPSD is provided on an original equipment manufacturer ("OEM")
basis  under  Lucent  Technologies'  own label as a  security  device for Lucent
Technologies'  Definity  PBX. Over 16,200 RPSD units have been shipped to Lucent
Technologies  since 1991 and the Company has  commenced  shipping the product to
other  customers as well.  During fiscal 1997,  sales from the RPSD product line
were responsible for approximately 15% of the Company's overall revenue.        

              The  Secure  Sentinel(TM)  is a family  of  programmable  hardware
platforms  that  combine  security   management  of  remote  maintenance  ports,
protection against toll fraud, fault and alarm reporting functions and real-time
call detail record analysis.  Since its  introduction,  the Company has expanded
both the number of Secure  Sentinels(TM)  offered and the functionality of each,
shipping more than 12,000 units which has accounted for more than $14,500,000 in
revenue.  During fiscal 1998,  sales from the Secure  Sentinel(TM)  product line
were responsible for approximately 15% of the Company's overall revenue.        

              Beginning  in  fiscal  1993,  the  Company  began  offering  a new
product,  the Secured  Database Server  (SDS(TM)).  Like the DL-4000,  this is a
programmable  system  designed  to  prevent  unauthorized  dial-in  access  to a
computer or data  communications  network.  The SDS,  however,  incorporates the
technology of the DL-4000 in a personal  computer,  allowing  storage of greater
amounts of user data,  which permits a customer to both monitor a greater number
of users and to store more detailed identification data about each user. The SDS
also  incorporates  redundant  processor  elements,  reducing the possibility of
system  downtime.  This product is thus  suitable for  protecting  significantly
larger systems and is currently implemented by MCI to provide secured access for
network  administration  of over  500 of its  long  distance  service  switching
facilities, as well as for Chemical Bank, Key Corp., Lockheed/Marietta and other
major companies worldwide.                                                      

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              Building on the SDS, in fiscal 1994,  the Company  introduced  the
Secured Gateway System  (SeGaSys(TM)),  designed to provide centrally controlled
access to and  administration of a large number of remotely located  maintenance
ports on both voice and data communications devices. The SeGaSys system contains
a  "communication  firewall"  or secured  gateway  that  controls and routes all
access to remote port destinations,  a central database  management server which
uses the SDS  software  to  administer  and  control  user  access and  resource
authorizations,  remote  security  modems and/or alarm  reporting  devices which
provide  fault/alarm  management  capabilities.  SeGaSys  effectively  manages a
number of Secure Sentinel  devices located at remote  locations that provide the
security, alarm monitoring and reporting for those locations.                   

Overall Target Markets                                                          
----------------------                                                          

              The Company  believes  its products  are well  positioned  to take
advantage  of  what  it  believes  are  current   significant   trends  in  data
communications and voice communications  networks.  In the view of the Company's
management,  organizations  are seeking to increase  productivity  by  providing
sophisticated  communications networks that connect all of their separate units,
whether  locally,  nationally  or  internationally.  As the  price of  equipment
decreases and power increases, such networks become cost effective,  justifiable
and  possible  for more and more  groups,  and it becomes  feasible to introduce
sophisticated  networks into technologically less advanced regions regardless of
size. At the same time, more of such organizations' data and other resources are
being made  available  to more  users by means of these  systems.  These  market
dynamics are causing  networks to become an ever  increasing and vital source of
revenue  generation  as  well as  employee  productivity.  Therefore,  proactive
management of these  networks to insure  network  availability,  which,  in turn
supports employee  productivity as well as revenue  generation,  is increasingly
becoming a  necessary  imperative  for all  companies.  Because of these  market
factors,  the Company believes that the security and network  management  issues
resulting from this growth will generate demand for the Company's products.     

Remote Network Management and Remote Telemaintenance Markets                    
------------------------------------------------------------                    

              The requirement  for increased  service levels and overall network
availability,  especially for mission-critical  networks,  has created a rapidly
growing market demand for remote  element  network  management  and  distributed
device  management.  Remote element network  management  offerings include alarm
monitoring systems which monitor network elements and their internal  diagnostic
routines and fault tables,  determine alarm status,  and  automatically  execute
appropriate reporting and/or corrective action procedures.                      

              Alarm Monitoring: The Sentinel 2000 and Secure Sentinel(TM) alarms
can be  transmitted/reported  to central  network  management  systems  (such as
Cabletron's  Spectrum,  HP's  Openview,  IBM's  Netview,  etc.),  trouble ticket
management  packages  (such as  Remedy),  a single  or  multiple  PCS  (personal
communication system), personal pagers,. as well as provide for an alarm        

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to be  escalated  to  ensure  timely  response.  The  Sentinel  2000 and  Secure
Sentinel(TM)also  allow programmed  administration of the host devices via their
maintenance port connection.                                                    

              Alarm  Reporting:  This  provides for  automatic  transmission  of
information  regarding  network  element  statuses,  alarms,  etc. It allows for
automatic  escalation  of alarms when there is no response.  Information  may be
automatically  transmitted  to computers  via modem,  or to humans via pager and
recorded voice.                                                                 

              "Help Desk" Enhancements: Most data networks include a "help desk"
operator,  a resource available to assist other personnel and to resolve network
problems  encountered by dial-in users.  The Company's  proprietary  HelpNET(TM)
software  permits  the user to page the help  desk  terminal  and  automatically
effect  an  interactive  link  with  the  help  desk  operator  when the page is
acknowledged.  Without leaving the control  station,  the help desk operator can
then directly  observe and  participate  in the user's session with the relevant
network  device  and, if  necessary,  take  temporary  command of the session to
correct the problem,  thus providing more cost-effective  corrections than would
occur if the help desk operator  physically  had to visit the device in question
or had to "talk the user through" the necessary procedures.                     

              Environmental   Monitoring  and  Control:   Since   communications
equipment  is sensitive  to changes in the  physical  environment,  the Sentinel
2000, as well as the Secure Sentinel(TM),  can be enhanced to monitor changes in
temperature,  humidity,  moisture,  battery  voltage,  LED  indicators and other
similar  environmental  indicators to determine if current trends exceed pre-set
limits.  If such limits are  exceeded,  the device can be programmed to issue an
appropriate  alarm or take corrective  action using multiple  internal relays to
activate necessary environmental controls.                                      

Security Market                                                                 
---------------                                                                 

              As   previously   noted,   widely   distributed   data  and  voice
communications  networks  incorporate  network elements and devices with dial-in
ports.  The  Company  offers a  variety  of  products,  e.g.,  Manager  2000 and
SeGaSys(TM),   which  when   combined  with  the  Sentinel  2000  and/or  Secure
Sentinel/IPCs, permits centralized control for secure remote access to all ports
on the network.  All users (such as maintenance  providers and others authorized
to service or administer  devices in the network) dial a single telephone number
and/or are  connected/authorized  in-band for access. Upon successful validation
of access  for the  requested  device  the user is  automatically  routed to the
targeted device by the Manager 2000 system and/or  SeGaSys(TM).  This eliminates
the security  risk inherent in providing  lists of telephone  numbers and access
codes for numerous devices,  as well as reduces the burden of administering many
remotely  located  security  devices.   Once   authenticated  and  routed,   the
transaction  (including  session activity,  if desired),  is logged to a central
database, available for audit review and analysis.                              

              The  Sentinel  2000  and  IPC  family  of  products  - the  Secure
Sentinel(TM)   and  the  RPSD,  are  designed  to  secure  the  maintenance  and
administration  ports on a wide variety of network  elements                    

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and  communications  equipment.  In addition to preventing  unauthorized  access
through  these ports,  the products can be  customized  to provide the following
features:                                                                       

              Security  Management:  Provide a secure  path to network  elements
both via in-band (Ethernet) as well as out-of-band (dial up) protocols.         

              PBX  Toll  Fraud/Abuse   Control:   PBXs  and  voice-mail  systems
frequently  permit  dial-in users access to outbound trunk lines to enable users
to take advantage of a company's WATs lines or similar services.  However, abuse
of these services can result in substantial  charges.  The product offerings can
be  programmed  to monitor and analyze all dial-in call activity to determine if
current activity exceeds specified parameters or selected criteria indicative of
potential  toll fraud or abuse.  If the  activity  exceeds the  parameters,  the
system  issues an alarm to the  appropriate  personnel or  initiates  protective
procedures.                                                                     

              The  DL-4000  can be used to  secure  dial-up  access  to any host
computer,  LAN or WAN by  monitoring  and  centrally  administering  up to 4,096
dial-up "ports" or telephone  access points located in up to 256 locations.  The
SDS(TM),  as noted above,  expands the number of users and other features of the
DL-4000 by  incorporating  the same technology into a personal  computer.  Using
"open system" software, the products allow the system administrator to configure
each channel separately with one or more access control technologies as required
by the application assigned to the channel or as preferred by the user.         

              The Sentinel  2000, IPC and  SeGaSys(TM)  incorporate a high-level
programming  language  and  program  editor  developed  specifically  for  these
products,  which is referred to as the  Communication  Control Language ("CCL").
This language allows standard  programs  incorporated  into these products to be
modified or enhanced to meet specific customer  requirements.  The incorporation
of CCL into these  products  also  facilitates  the  introduction  of additional
product enhancements.                                                           

Support Services                                                                
----------------                                                                

              In  addition  to the  normal  training,  installation  and  repair
services, the Company also provides professional services, including consulting,
specialized programming and turnkey installations.                              

Marketing and Distribution                                                      
--------------------------                                                      

              The Company  believes that the markets for remote element  network
management, distributed device management, and security are rapidly emerging and
growing.  Therefore,  the Company is  approaching  each of these markets with an
integrated marketing strategy.  The SNS/2000 family of products, the DL-4000 and
the SDS(TM), data communications security products                              

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have  been  sold  and  will  continue  to be  sold to  major  telecommunications
companies,   networking   companies,   network   security   customers,   systems
integrators,  facility  managers  and  others  via the  Company's  direct  sales
organization, in-house telemarketing efforts and selected distributors.         

              In fiscal  1995,  the Company  commenced  expansion  of its direct
sales force and its network of distributors into major geographic markets in the
United States as well as internationally. As this sales and distribution network
is  established  and  continues  to  grow,  the  telemarketing  effort  will  be
redirected to generate sales leads by the Company and to provide support for the
field organization. In addition, the Company will look to continue to expand its
channels of distribution via major systems  integrators,  facilities  management
companies and network outsourcers.                                              

              With respect to the  communications  security market,  the Company
has recognized  that product sales could be effected more  economically if major
telecommunications companies could be convinced to promote the products to their
own customers.  The Company has established  contractual relations in the United
States with Lucent Technologies,  MCI, Southwestern Bell, US WEST and Ameritech.
During fiscal 1995, the Company expanded its distribution  into Canada through a
non-exclusive   distribution  agreement  with  TTS  Meridian  Systems,  Inc.  of
Willowdale,  Ontario,  a Northern  Telecom  subsidiary.  The Company  expects to
continue to seek additional  arrangements with the other network element and PBX
systems vendors and distributors in North America.                              

              In connection with the foreign  distribution of its products,  the
Company  appointed  EBA of Brussels,  Belgium in November  1993 as its exclusive
sales  representative  for Europe to provide sales and technical  support to the
Company's authorized distributors and to directly sell the Company's products to
accounts  in that  region.  In  September  1995,  the Company  acquired  through
MicroFrame  Europe  NV,  its  wholly-owned  subsidiary,  all of the  issued  and
outstanding shares of capital stock of EBA. In fiscal 1995, the Company signed a
five-year agreement with LM Ericsson ("Ericsson") of Stockholm, Sweden, a global
telecommunications   equipment   manufacturer  and  distributor.   Ericsson  has
qualified for use and will promote the Company's  Secure Sentinel  products with
Ericsson  PBX  equipment,  worldwide,  with an initial  roll-out in Europe,  the
Pacific Rim and the United States. During fiscal 1995, a three-year distribution
agreement  was  also  entered  into  with  Racal  Australia  PTY,  Ltd.  ("Racal
Australia") of Brookdale,  South Wales,  Australia, a wholly-owned subsidiary of
Racal  Electronics plc of the United Kingdom.  Racal  Australia,  which provides
data communications, data security and digital cellular equipment throughout the
Pacific Rim, will distribute the Company's  product line  throughout  Australia,
New Zealand,  Singapore and Hong Kong.  Additionally,  during  fiscal 1995,  the
Company signed its first  distribution  agreement in Eastern Europe with Netlink
of Prague,  in the Czech Republic.  With the acquisition of EBA in place and the
maturation of the agreements consummated in previous years, the revenues related
to the international  market were approximately  $1,530,000 (21%) in fiscal 1997
and approximately $2,500,000 (25%) in fiscal 1998.                              

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Competition                                                                     
-----------                                                                     

              The markets for remote  element  network  management,  distributed
device  management as well as security products to monitor and control access to
computer and telecommunications  network elements are highly competitive.  There
can be no assurance that the  proprietary  technology  which forms the basis for
most of the Company's  products will continue to enjoy market acceptance or that
the Company will be able to compete successfully on an on-going basis.          

              The Company believes the principal factors  affecting  competition
in this  market  include:  (1) the  products'  ability to conform to the network
topologies  and/or  computer  systems;   (2)  the  products'  ability  to  avoid
technological  obsolescence;  (3) the  willingness  and  ability  of a vendor to
support customization, training, and installation; and (4) price.               

              Although  the  Company  believes  that its  present  products  and
services are  competitive,  the Company  competes in its general  markets with a
number of large computer, electronics and telecommunications manufacturers which
have financial,  research and development,  marketing,  and technical  resources
substantially  greater  than  those  of the  Company.  The  Company  also  faces
competition  from a  variety  of niche  market  players.  In the  context,  such
competitors include Security Dynamics,  Inc., Digital Pathways, Inc. and the Lee
Mah Data Systems  Corp. In the remote  network  management  and  telemaintenance
context,  they  include  TSB  International,  Inc.  and  Teltronics,  Inc.  Such
companies may succeed in producing and  distributing  competitive  products more
effectively  than the Company,  and may also  develop new products  that compete
effectively with those of the Company.                                          

Sources and Availability of Materials                                           
-------------------------------------                                           

              The Company designs its products utilizing readily available parts
manufactured  by  multiple  suppliers  and the Company  currently  relies on and
intends to continue to rely on these suppliers. The Company has been and expects
to continue to be able to obtain the parts generally required to manufacture its
products without any significant interruption or sudden price increase, although
there can be no assurance that the Company will be able to continue to do so.   

              The Company sometimes utilizes a component available from only one
supplier.  If a supplier  were to cease to supply  this  component,  the Company
would most likely have to redesign a feature of the  affected  device.  In these
situations,  the Company  maintains a greater supply of the component on hand in
order to allow the time necessary to effectuate a redesign or alternative course
of action should the need arise.                                                

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Dependence on Particular Customers                                              
----------------------------------                                              

              The Company has  continued to expand its customer base and broaden
its sales mix. These efforts have resulted in the Company  becoming less reliant
on any one particular customer. However, the Company sells a substantial portion
of  its  products  to  several  major  customers,   i.e.,  PTT  Holland,  Lucent
Technologies and MCI. Sales to PTT Holland,  Lucent  Technologies,  AT&T and MCI
represented  approximately 61% of the Company's revenue in fiscal 1998. The loss
of any of these customers could have a material  adverse effect on the Company's
business.                                                                       

              The Company's  installed customer base is estimated to number over
200 companies  constituting  more than 2,300  customer sites  worldwide.  In the
United  States,  virtually  all of the  Company's  customers  are Fortune  1,000
industrial  companies and large U.S.  financial  institutions.  Customers in the
U.S.   represented   approximately  75%  and  79%  of  the  Company's   revenue,
respectively, in fiscal 1998 and fiscal 1997.                                   

              Under an agreement with Lucent Technologies,  the Company has been
manufacturing  the RPSD for Lucent's resale to its PBX customers.  As of the end
of fiscal 1998, Lucent had purchased and installed more than 17,000 RPSD units. 

              In fiscal 1996, MCI and the Company  expanded  their  relationship
across  multiple  operating  units within MCI,  including that  responsible  for
outsourcing and "Concert",  MCI's joint venture with British Telecom, as well as
with MCI/SHL.                                                                   

Intellectual Property, Licenses and Labor Contracts                             
---------------------------------------------------                             

              The Company  holds no patents on any of its  technology.  Although
the Company  licenses some of its  technology  from third  parties,  it does not
consider any of these licenses to be critical to the Company's operations.      

              The Company has made a  consistent  effort to minimize the ability
of competitors to duplicate the Company's  software  technology  utilized in its
products.  However,  the  possibility of  duplication of the Company's  products
remains and competing products have already been introduced.                    

              The Company's  name and the Secure  Sentinel  name are  registered
trademarks  of the Company  filed with the United  States  Patent and  Trademark
Office ("PTO"). The Company also has trademark applications pending with the PTO
for SeGaSys,  Sentinel 2000,  Sentinel  2000S,  Manager 2000,  PassKEY,  SofKEY,
Secure Network Systems 2000, the Company's  logo, the MicroFrame  Wizard and the
tagline  "We  Bring  Wizardry  To  Remote  Network   Management."   The  Company
anticipates  that  these  trademarks  shall be  registered  but  there can be no
assurance that such will occur.                                                 

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              None of the Company's  employees are  represented by labor unions.
The Company considers its relations with its employees to be satisfactory.      

Governmental Approvals Required and Effect of Government Regulation             
-------------------------------------------------------------------             

              Due  to  the  sophistication  of the  technology  employed  in the
Company's  products,  export thereof is subject to governmental  regulation.  As
required by law or demanded by customer  contract,  the Company obtains approval
of its products by Underwriters' Laboratories. Additionally, because many of the
Company's products interface with telecommunications  networks, its products are
subject to several  key Federal  Communications  Commission  ("FCC")  rules that
often requires FCC approval.                                                    

              Part 68 of the FCC rules  contains the  majority of the  technical
requirements  with  which  telephone  systems  must  comply to  qualify  for FCC
registration  for  interconnection  to the  public  telephone  network.  Part 68
registration  requires  telecommunication  equipment interfacing with the public
telephone  network  comply  with  certain  interference   parameters  and  other
technical  specifications.  FCC Part 68 registration for the Company's  products
has been granted and the Company  intends to apply for FCC Part 68  registration
for all of its new and future products.                                         

              Part  15  of  the  FCC  rules  requires  equipment  classified  as
containing  a Class A  computing  device to meet  certain  radio and  television
interference  requirements,  especially  as they  relate  to  operation  of such
equipment in a residential area.  Certain of the Company's  products are subject
to and comply with Part 15.                                                     

              The European Community has developed a similar set of requirements
for its members and the Company has begun the compliance process of its products
for Europe.                                                                     

              Although  the  Company  has  not  experienced   any   difficulties
obtaining such approvals, failure to obtain approval for new and future products
could have a material adverse effect on the Company's business.  The Company has
obtained  licenses to export  certain of its products in limited  quantities  to
Sweden, Norway,  Switzerland,  South Africa, the United Kingdom,  France, Italy,
Germany, Australia and Singapore.                                               

Research and Development Activities                                             
-----------------------------------                                             

              During fiscal 1998, the Company continued development of its "next
generation" of products built on a new architecture that is ultimately  intended
to replace  its IPC  products - the Secure  Sentinel(TM)  and RPSD - referred to
collectively as SNS/2000.  As discussed  previously,  this family of products is
designed to address the growing demand for remote element network management and
security of  mission-critical  integrated voice and data networks.  Research and

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development  expenses in connection therewith were $1,117,151 in fiscal 1998 and
$893,852 in fiscal 1997.                                                        

Costs of Compliance with Environmental Laws                                     
-------------------------------------------                                     

              The  Company's  business is not subject to  regulations  involving
discharge of materials into the environment.                                    

Employees                                                                       
---------                                                                       

              As of June 23, 1998, the Company had 46 employees, all of whom are
full-time employees,  and of which 20 are technical  personnel,  9 are in sales,
marketing and support,  7 are in production  and 10 are in executive,  financial
and administrative capacities.                                                  

2. Description of Property.                         

              The  Company  currently  leases  8,900  square feet of space at 21
Meridian Road,  Edison, New Jersey for its  administrative,  sales and marketing
and research and development  functions (the "Lease").  The Lease provides for a
monthly  rental of  $5,428.55  and  expires  on June 30,  1999.  From the period
commencing  July 1, 1997  through  June 30, 1999,  the total  monthly  rental is
$5,579.17 per month.  An additional  2,000 square feet of office space and 2,600
square feet of  warehouse  space is  currently  leased to another  tenant with a
concurrent  expiration  date of June 30, 1999. The Company is the sole guarantor
for the full  performance  of this tenant's  obligations  through the expiration
date.                                                                           

              In  addition,  the Company  currently  leases 5,112 square feet of
space at 300E Corporate  Court,  South  Plainfield,  New Jersey for its finance,
manufacturing,  and  warehousing  functions.  This lease  provides for a monthly
rental of $3,408.00 and expires on June 30, 1999.                               

              In addition,  the Company  currently  leases 245 square  meters of
office space in Antwerp, Belgium for its European operating headquarters..  This
lease  provides  for a  monthly  rental  of  81,083  Belgian  Francs  per  month
(US$2,316.00 at an exchange rate of 35BEF to 1US$) and expires on July 31, 2005,
with an option of the Company to terminate  the lease on either July 31, 1999 or
July 31, 2002, as applicable.                                                   

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3. Legal Proceedings.                               

              The  Company   reached  a  settlement  with  the  New  York  State
Department  of  Taxation  and Finance in April 1997 as it related to a sales tax
assessment of $227,391.90  imposed in a Notice of  Determination  in March 1996.
The settlement amount of $55,512.73 was paid in full as of April 1997.          

   4. Submission of Matters to a Vote of Security Holders.

None.                                               

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 PART II

        5. Market For Common Equity and Related Stockholder Matters.

Market Information                                                              
------------------                                                              

              The Company's Common Stock commenced trading on August 17, 1995 on
the NASDAQ  SmallCap  Market under the symbol  "MCFR".  Prior to that date,  the
Common  Stock was not traded on any  registered  national  securities  exchange,
although several  registered  broker-dealers  made a market in the Common Stock.
The  following  table sets forth the high and low bid prices of the Common Stock
in the over-the-counter  market as reported by National Quotation Bureau through
August 16, 1995 and by NASDAQ from August 17, 1995 through  March 31, 1998.  The
quotations  set  forth  below  do  not  include  retail  markups,  markdowns  or
commissions and may not represent actual transactions.                          

                                  HIGH                 LOW
                                  ----                 ---
Fiscal 1997                                           
-----------                                           
   June 30                        $2.88                $1.75
   September 30                    2.25                 1.06
   December 31                     2.56                 1.50
   March 31                        2.44                 1.56

Fiscal 1998                                           
-----------                                           
   June 30                        $1.88                $1.56
   September 30                    1.63                 1.25
   December 31                     1.84                 1.31
   March 31                        2.75                 1.13

Holders                                                                         
-------                                                                         

              The  Company  believes  that  as of  June  25,  1998,  there  were
approximately 363 record holders of its Common Stock (including  brokers holding
in street name).                                                                

Dividends                                                                       
---------                                                                       

              The Company has not paid any cash  dividends  on its Common  Stock
during the two fiscal years ended March 31, 1998 and March 31, 1997. The Company
presently intends to retain all earnings to finance its operations and therefore
does not  presently  anticipate  paying any cash  dividends  in the  foreseeable
future.                                                                         

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              Under the terms of the  Company's  credit  agreement  with  United
National Bank, the Company may not,  without the prior written consent of United
National  Bank,  declare or pay any dividends in cash or otherwise on any shares
of capital stock of the Company.                                                

6. Management's Discussion and Analysis.            

A number of statements  contained in this report are forward-looking  statements
within the meaning of the Private Securities  Litigation Reform Act of 1995 that
involve  risks and  uncertainties  that  could  cause  actual  results to differ
materially from those expressed or implied in the applicable  statements.  These
risks and uncertainties include, but are not limited to, the recent introduction
and the costs  associated  with,  a new family of  products;  dependence  on the
acceptance  of this new  family of  products;  risks  related  to  technological
factors;  potential manufacturing  difficulties;  dependence on third parties; a
limited customer base; and liability risks.                                     

Plan of Operation                                                               
-----------------                                                               

              During the next 12 months, the Company will continue its effort to
expand its existing customer  relationships and marketplace  penetration through
internal growth and the proposed  acquisition of Solcom Systems,  Ltd, a leading
developer of RMON technology,  while tightly controlling  operating costs. There
can be no assurance,  however,  that such acquisition  will be consummated.  The
Company anticipates placing substantial  emphasis on the distribution of its new
family of products as well as its acquired  products and begin  development of a
new family of products based on a combination of existing features  incorporated
in the Sentinel and Solcom's RMON technology, along with continued international
business expansion.  The Company will also look to continue its three-year trend
of reducing its reliance on several major customer organizations,  most notably,
MCI and Lucent.                                                                 

              During fiscal 1998, the Company continued its development of a new
generation  of products  based on more  advanced  technology.  The products were
formally introduced at an industry trade show in January,  1996. The new network
management product family,  known as SNS/2000,  integrates  network  management,
security  management and fault  management as well as problem  resolution into a
suite of network management solutions.  This technology will allow for increased
operational  integrity  and  access  to voice  and data  networks.  The  Company
commenced  shipment of the new product of this next  generation  product family,
the Sentinel 2000 in May, 1996 and volume  production  shipments  began in June,
1996. To date, approximately 3,000 units of the Sentinel 2000 have been shipped.
In January,  1997,  another member of the SNS/2000 family, the Manager 2000, was
introduced.  Manager 2000 is a set of software  applications  that  collectively
provide tools for remote site  management and the servicing of real-time  alarms
being  generated  by remote  monitoring  equipment.  In October 1997 the Company
announced its newest product,  the Sentinel 2000S Slimline,  and began shipments
of this product in early 1998.                                                  

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              With the  addition  of several  major new  customers,  the Company
continues to strengthen  its worldwide  customer  base,  which includes U.S. and
international  telecommunications  providers,  Private Branch  Exchange  ("PBX")
vendors,   financial  institutions,   Fortune  500  companies  and  governmental
agencies.  The Company has more than 2,300  installations  across North America,
South  America,  Europe and the Pacific Rim. The September  1995  acquisition of
European  Business  Associates  ("EBA")  has caused the Company to focus more on
expanding the international  customer base. Based in Brussels,  Belgium, EBA had
acted as the Company's  exclusive  sales  representative  in the European market
since November,  1993, providing both sales support and technical support to the
Company's  authorized  distributors,  as well as selling directly to accounts in
the region.  During the latter part of fiscal 1996, the Company's  international
revenue stream increased as it capitalized on relationships  with new global PBX
suppliers  including  LM  Ericsson  of  Stockholm,  Sweden and  Alcatel  Bell of
Antwerp, Belgium. A major new contractual relationship was formed in fiscal 1997
as a result of this improved focus.  After announcing this new relationship with
TELE Business  Communications  of Finland,  a subsidiary of Telecom Finland,  in
November,  1996,  the  Company  proceeded  to ship  over  $260,000  of  product,
primarily the Sentinel 2000, in the last four months of fiscal 1996. As a result
of this  continued  focus,  the Company  entered  into a  relationship  with PTT
Holland  during  fiscal  1998 for its  Sentinel  technology.  This  relationship
resulted in shipments of over  $2,000,000 to PTT during the year ended March 31,
1998. The Company  anticipates  continuing this  relationship  into fiscal 1999.
Additionally,  the Company  expanded its  distribution in the Pacific Rim with a
significant increase in shipments to Racal Australia.                           

              During  fiscal  1998,  the Company  forged  several  new  domestic
relationships  principally to offset a reduction in the Company's revenue stream
in respect of two major customers,  MCI and Lucent Technologies (formerly AT&T).
The most  significant was the new contractual  relationship  formed in September
1996 with US WEST Communications Services. Ongoing relationships, primarily with
Southwestern Bell Communications, were maintained.  Relationships in fiscal 1996
improved,   primarily  Ameritech   Information  Systems.   Finally,   other  new
relationships  were formed,  including Vyvx, Inc., Sprint  Communications and in
fiscal 1998, PTT Holland.  As a result of the above,  overall revenues generated
from the Company's two primary  customers has dropped from 60% in fiscal 1995 to
49% in fiscal 1996 to 34% in fiscal 1997 to 25% in fiscal 1998.  In fiscal 1999,
the Company  expects to continue to reduce such  percentages  through  continued
diversification of its customer base and the creation of new relationships. MCI,
Lucent and PTT remain the three  largest,  and most  significant to the Company.
The Company's  relationship with MCI extends to multiple  operating units within
the  organization,  each with  divergent  business  needs and  different  market
characteristics.  The Company  ships  multiple  products to MCI for security and
alarm management of various internal switch  installations,  including shipments
to Concert Global Networks, MCI's joint venture with British Telecom, as well as
to various  out-source  relations which MCI manages.  In its  relationship  with
Lucent  Technologies,  the Company has manufactured Remote Port Security Devices
(RPSDs) for Lucent's resale to its PBX customers.  The RPSD is a  secured-access
product provided under Lucent's own label and is custom designed to operate with
Lucent's PBX, Key Systems and Voice Processing  products (primarily the Definity
product line). As of the fiscal year ended March 31, 1997,  Lucent had purchased
and installed  more than 16,200 RPSDs since 1991.  In October 1995,             

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the Company signed a two-year renewal of an OEM agreement,  through which Lucent
purchases RPSDs.                                                                

              The Company's employee base dropped from 42 full-time employees in
fiscal 1996 to 37 full-time employees during fiscal 1997. However, the Company's
employee  base  increased  to 46  full-time  during  fiscal  1998 as the Company
returned to greater  profitability.  Additional  resources  resulting  from such
profitability  are being devoted primarily to the marketing and development of a
more extensive  system  integration  capability that would enable the Company to
gain an  increasing  share of the  market.  Due to the growth  that the  Company
experienced  in fiscal 1995, an  additional  facility in South  Plainfield,  New
Jersey was leased with  expiration  terms  concurrent with its existing lease in
Edison, New Jersey. The Company's operations group relocated to this facility in
August  1995.  The  Company's  European  operation  also moved to a new,  larger
facility in Antwerp,  Belgium in August 1996.  The Company  believes that it has
space adequate to meet its growth requirements for the foreseeable future.      

              The Company  believes that as data and voice networks  continue to
grow and companies grow more reliant on such networks for revenue generation and
employee productivity,  the recognition of system vulnerability will continue to
increase  and the  Company's  products  will be in  greater  demand.  After  the
unsatisfactory performance in fiscal 1996, the Company rebounded in fiscal 1997,
achieving management's primary mission for such year of returning the Company to
profitability.                                                                  

 RESULTS OF OPERATIONS

Fiscal Year 1998 Compared to Fiscal Year 1997                                   
---------------------------------------------                                   

              Revenues  for the year ended  March 31, 1998 were  $10,217,911  as
compared  with  revenues of  $7,343,624  for the year ended March 31,  1997,  an
increase of  approximately  39%.  The increase  was  primarily  due to increased
international  shipments of the Company's Sentinel 2000 product combined with an
overall  increase in Sentinel  2000  shipments.  The  Company  continued  to see
revenues  with  respect to the other member of the family of SNS  products,  the
Manager 2000.                                                                   

              The  Company's  revenues  were  positively  impacted by  increased
domestic  sales and as a result of increased  shipments to the European  market,
including  shipments  under its contract  with PTT Holland.  Shipments to Europe
were  approximately  $3,000,000  for the year ended March 31,  1998  compared to
approximately $1,000,000 for the year ended March 31, 1997.                     

              The Company's  cost of goods sold  increased to $4,285,134 for the
year ended March 31, 1998  compared to  $2,903,705  for the year ended March 31,
1997  as a  result  of  increased  shipment  levels.  Cost  of  goods  sold as a
percentage of sales increased from 40% for the previous comparable fiscal period
to 42% for this fiscal  period,  primarily due to the increased  sales volume of
the Company's newer product line.                                               

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              Research and  development  expenses,  net of capitalized  software
development,  increased  from  $893,852  in the year  ended  March  31,  1997 to
$1,117,151  in the  current  fiscal  year,  an  increase  of 25%.  Research  and
development  expenses  as a  percentage  of  revenues  decreased  slightly  from
approximately 12% to 11%. Selling, general and administrative expenses increased
32% from  $3,355,961  for the prior year to $4,419,521  for the year ended March
31, 1998. This increase was primarily the result of added sales personnel during
the fiscal year.  However as a  percentage  of  revenues,  selling,  general and
administrative  expenses  decreased from 46% for the previous  period to 43% for
the current fiscal period.                                                      

              The Company had income before taxes of $406,649 for the year ended
March 31, 1998  compared to income of $201,286 for the year ended March 31, 1997
primarily  due to increased  sales.  The net income for the year ended March 31,
1998 was $711,310  compared to net income of $342,451 for the prior fiscal year.
At March 31,  1997,  the  Company  had  provided a partial  valuation  allowance
against its  existing  deferred tax assets.  At March 31, 1998,  the Company has
reversed the remaining approximately $300,000 of valuation allowance relating to
its  federal  net  operating  losses  and  has  recorded  a  benefit  for  other
operational  temporary  difference  items.  The  expiration  dates  for  its net
operating losses range from the years 2001 through 2011.                        

Fiscal Year 1997 Compared to Fiscal Year 1996                                   
---------------------------------------------                                   

              The Company's revenues for fiscal 1997 were $7,343,624 as compared
with revenues of $6,258,243 for fiscal 1996, an increase of 17.3%. This increase
in  revenues  was  primarily  attributable  to the  expansion  of the  Company's
customer base outside of its two major customers,  MCI and Lucent  Technologies,
especially in the United States. Net revenues  generated in the U.S.,  excluding
revenue  attributable  to MCI and Lucent,  increased  from  approximately  $1.91
million to $3.33  million that  represented  a 74% increase  from fiscal 1997 to
fiscal  1996.  The Company  also showed  substantial  growth in the Pacific Rim,
where  net  revenues  (primarily  attributable  to  one  major  customer,  Racal
Australia) increased over threefold from approximately $98,000 to $350,000.     

              The Company's cost of sales  increased from  $2,789,855 for fiscal
year 1996 to  $2,903,705  for  fiscal  year  1997.  However,  cost of sales as a
percentage  of sales  decreased  from 44.6% for fiscal  1996 to 39.5% for fiscal
1997. This substantial  decrease is primarily the result of a reduced  provision
for inventory  obsolescence (from $150,000 to $75,000,  or approximately 1.0% of
revenue),  a reduction in capitalized  software  amortization  (from $279,000 to
$163,000,  or  approximately  1.6% of  revenue),  and a general  improvement  in
purchasing and materials  efficiencies,  which was responsible for the remaining
2.5%  reduction.  This  improvement  was  achieved  despite the  initial  volume
shipments of the Sentinel 2000 that  witnessed  higher  initial costs  typically
associated with new product  introductions.  These initially lower gross margins
were more than offset by continuous improvements in the Company's mature product
lines.                                                                          

              Selling,   general  and  administrative  expenses  decreased  from
$4,043,356  for fiscal 1996 to $3,355,961  for fiscal 1997, a decrease of 17.0%.
As a percentage of revenues,  the decrease was                                  

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more pronounced as this reduction occurred while revenues increased. Fiscal 1997
showed an  improvement  to 45.7% of sales  from  64.6% of sales in fiscal  1996.
While  approximately  $250,000  of such  decrease  was  related to the  one-time
adjustments recorded at the end of fiscal 1996, the major factor contributing to
this decrease was the Company's commitment to reduce administrative  overhead in
order to achieve its targeted goal for fiscal 1997 of a return to profitability.

              Research  and  development  costs,  net  of  capitalized  software
development,  increased  from  $713,441  during  fiscal year 1996 to $893,852 in
fiscal  year  1997.  As a  percentage  of  sales,  the  Company's  research  and
development  costs  increased  from 11.4% in fiscal year 1996 to 12.2% in fiscal
1997. This increase is directly attributable to the Company's increased activity
related to the  development  of the SNS/2000  family of products  introduced  in
fiscal 1997.                                                                    

              The income tax benefit of  $141,165 in fiscal 1997  relates to the
Financial Accounting Standards Board's Statement No. 109, "Accounting for Income
Taxes."  This  Statement,  issued in  February  1992 and  adopted by the Company
effective  April 1, 1993,  requires  deferred tax assets and  liabilities  to be
recorded for the  difference  between the  financial  statement and tax bases of
assets and  liabilities  (temporary  differences)  using enacted tax rates.  The
Statement also requires that the Company record a valuation allowance when it is
"more  likely than not that some  portion or all of the deferred tax assets will
not be realized." It further states that "forming a conclusion  that a valuation
allowance is not needed is  difficult  when there is negative  evidence  such as
cumulative  losses in resent  years." Due to the operating  loss in fiscal 1996,
the  realization  of the deferred tax asset was more uncertain and, as a result,
the Company provided a full valuation  allowance  against deferred tax assets at
March 31, 1996. At March 31, 1997, the deferred tax asset and related  valuation
allowance  have been reduced  primarily  due to the  utilization  of federal and
state net operating loss carry forwards.                                        

Liquidity and Capital Resources                                                 
-------------------------------                                                 

              During fiscal 1998,  the  Company's  financial  position  improved
substantially  as  assets  increased  from  $4,682,373  to  $6,375,432  and  the
Company's  working  capital  increased  from  $2,381,178 to  $2,563,503,  net of
deferred  tax  assets.  The  primary  contributor  to  this  improvement  in the
Company's  working capital  position was net income of  approximately  $712,000.
Included in this income were  non-cash  charges of  approximately  $500,000  for
depreciation and amortization.                                                  

             The Company's  operations provided  approximately  $54,500 of cash,
which  included a use of cash of  approximately  $55,000 to satisfy its New York
State tax settlement.  The Company also utilized  approximately $450,000 of cash
for capital and software-related expenditures and utilized approximately $50,000
of cash to pay down its long-term debt.                                         

              The Company previously had a credit agreement with CoreStates Bank
("CoreStates") for a credit line of $1,000,000 to finance future working capital
requirements,  collateralized by accounts receivable,  inventory,  equipment and
all other  assets of the  Company,  as well as a  $150,000                      

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credit  facility to finance  purchases of machinery and  equipment,  convertible
into a three-year secured term loan when utilized. The Company borrowed $124,000
against this  facility in November,  1995, at which time this debt was converted
into a three-year term loan. As of March 31, 1997, $72,644 remained  outstanding
on this loan. The Company was informed in June,  1996,  that the working capital
credit line would not be renewed upon its expiration  date of July 31, 1996. The
outstanding  balance  was  repaid  by the  Company  on  September  5,  1996,  in
accordance  with an agreement with  CoreStates.  On August 30, 1996, the Company
executed a credit agreement with Farrington Bank of North Brunswick,  New Jersey
(subsequently acquired by United National Bank of Bridgewater, New Jersey). This
agreement  provides the Company with a $500,000 line of credit to finance future
working  capital  requirements,  collateralized  by accounts  receivable  of the
Company.                                                                        

              On August 30, 1997,  the Company's  line of credit  agreement with
United  National Bank of Bridgewater,  New Jersey expired.  In November 1997 the
Company successfully negotiated with United National to provide the Company with
a  $1,000,000  line of  credit,  collateralized  by all  business  assets of the
Company, to finance future working capital  requirements.  As of March 31, 1998,
the Company had utilized $300,000 of this line.                                 

              Based on its current cash and working capital position, as well as
its available line of credit,  the Company believes that it will have sufficient
capital to meet its operational needs over the next twelve months.              

              Effective  with the first  quarter of fiscal year 1999 the Company
will adopt SFAS No. 130, "Reporting  Comprehensive Income". SFAS 130 establishes
the  standards  for  reporting  and  displaying  comprehensive  income  and  its
components  (revenues,  expenses,  gains  and  losses)  as part of a full set of
financial statements. This statement requires that all elements of comprehensive
income be reported  in a financial  statement  that is  displayed  with the same
prominence as other financial  statements.  Since this standards applies only to
the  presentation of  comprehensive  income,  it will not have any impact on the
Company's results of operations, financial position or cash flows.              

              In June 1997, the Financial Accounting Standards Board issued SFAS
131,  "Disclosure about Segments of an Enterprise and Related Information" which
becomes effective for financial  statements for periods beginning after December
15, 1997. This Statement  establishes standards for the way that public business
enterprises  report  information  about operating  segments in annual  financial
reports and requires that those  enterprises  report selected  information about
operating segments in interim financial reports issued to shareholders.  It also
establishes  standards  for related  disclosures  about  products and  services,
geographic  areas, and major customers.  Management is currently  evaluating the
impact of SFAS 131 on the financial statements.                                 

              In February 1998, the Financial  Accounting Standards Board issued
SFAS 132,  "Employers'  Disclosures  about  Pensions  and  Other  Postretirement
Benefits" which becomes effective for the Company's financial statements for the
year ended March 31,  1999.  SFAS No. 132  requires  revised  disclosures  about
pension and other  postretirement  benefits  plans and is not expected to have a
material impact on the Company's financial statements.                          

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              In June 1998, The Financial Accounting Standards Board issued SFAS
133,  "Accounting  for  Derivative  Instruments  and Hedging  Activities"  which
becomes  effective for all fiscal  quarters of fiscal years beginning after June
15, 1999.  This Statement  establishes  accounting  and reporting  standards for
derivative  instruments,  including certain derivative  instruments  embedded in
other contracts,  and for hedging  activities.  The adoption of this standard is
not expected to have a material impact on the Company's financial statements.   

7. Financial Statements.                            

              The financial  statements required hereby are located on pages F-1
through F-20.                                       

              8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.                                                          

None                                                

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PART III

              9. Directors,  Executive Officers,  Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.                              

Directors and Executive Officers                                                
--------------------------------                                                

Name                       Age        Position Held with the Company            
----                       ---        ------------------------------            

Stephen M. Deixler         62         Chairman of the Board of Directors        

Stephen B. Gray            40         President,  Chief Executive Officer, Chief
                       Operating Officer, Director

Michael Radomsky           45         Executive   Vice   President,   Secretary,
    Director

William H. Whitney         43         Chief   Technology    Officer,    Director
                            (resigned effective May 19,1998)

John F. McTigue            37         Vice President Operations, Chief Financial
                                      Officer, Assistant Secretary and Treasurer

Robert M. Groll            64         Vice President Business Development       

David I. Gould             67         Director (resigned effective June 16,1998)

Stephen P. Roma            50         Director                                  

Alexander C. Stark         65         Director                                  

              All  directors  of the Company  hold office  until the next annual
meeting  of  shareholders  and until  their  successors  have been  elected  and
qualified.  No family  relationship  exists  between any  director or  executive
officer and any other director or executive officer of the Company.             

              The  officers of the Company are elected by the Board of Directors
at its first meeting after each annual meeting of the Company's shareholders and
hold office until their successors are chosen and qualified,  until their death,
or until they resign or have been removed from office.                          

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              STEPHEN M.  DEIXLER has been  Chairman  of the Board of  Directors
since 1985 and served as Chief Executive  Officer of the Company from April 1996
to May 1997, as well as from June 1985 through October 1994. He was President of
the Company from May 1982 to June 1985.  Mr.  Deixler served as Treasurer of the
Company from its formation in 1982 until  September 1993 and since October 1994.
During  April  1995,  Mr.   Deixler  sold  his  interest  in  Princeton   Credit
Corporation,  a company engaged in the business of buying,  selling, and leasing
high  technology  products,  to Greyvest  Capital Inc., a Toronto Stock Exchange
company.  Prior to the sale,  Mr.  Deixler  was  Chairman  of  Princeton  Credit
Corporation.  He  previously  served  as  President  of  Atlantic  International
Brokerage,  a leasing  company,  which is a wholly owned  subsidiary of Atlantic
Computer  Systems,  Inc.,  which was  liquidated  as a result of the  bankruptcy
proceedings  of its parent  company,  Atlantic  Computer  Systems PLC.  Prior to
holding  this  position,  he was  President  and sole  shareholder  of Princeton
Computer Associates,  Inc. ("PCA"). PCA was a company engaged in the business of
buying,  selling  and  leasing  of  large-scale  computer  systems  as  well  as
functioning  in consulting  and  facilities  management and was sold to Atlantic
Computer Systems, Inc. in 1988.                                                 

              STEPHEN B. GRAY has been President,  Chief Operating Officer and a
director since April 1996. He was elected to serve in the additional capacity as
the Chief  Executive  Officer in May 1997.  He also is a director of  MicroFrame
Europe N.V. He Served as Senior Vice  President-Sales,  Marketing and Support of
the Company  From  December  1994  through  March 1996.  From July 1993  through
December 1994, Mr. Gray was an independent consultant, engaged in assisting both
private  and  publicly-held   companies  with  strategy  development,   internal
operational reviews and shareholder value enhancement  programs.  From September
1988 through June 1993, he held a series of management  positions within Siemens
Nixdorf  USA,  the last as Vice  President,  (reporting  to the Chief  Executive
Officer  and  Board of  Directors),  and a  member  of the  executive  committee
overseeing Siemens Information Systems businesses in the United States. Prior to
joining  Siemens,  Mr.  Gray  previously  held a series of  rapidly  progressive
positions  within  IBM  including   various   technical,   sales  and  marketing
assignments.                                                                    

              ALEXANDER  C.  STARK  JR.  is the  president  of  AdCon,  Inc.,  a
consulting  firm  organized  to advise and  counsel  senior  officers  of global
telecom  companies.  Mr. Stark  previously  worked for 40 years at AT&T.  Ten of
those years he served as a Senior Vice  President.  Recently  retired from AT&T,
Mr. Stark is a former member of the Institute of Radio Engineers and a past Vice
President and  Treasurer  and a past Vice  President and Treasurer of Lambda Chi
Alpha. He is a former member of: the Board of Directors  College Careers Fund of
Westchester;  the Board of adjustment of Allendale; and the County Trust Company
Board of Advisors.  He was the 1977  General  Campaign  Chairman,  United Way of
Westchester,  and cited by the National  Conference of  Christians  and Jews for
imaginative  community  leadership.  Mr. Stark was honored as the  Distinguished
Engineer  of the Year by Rutgers  University  in 1991.  He also  served for many
years as a Director-at Large of the American Electronics Association and Chaired
the International Public Affairs Committee.                                     

              MICHAEL  RADOMSKY  is an  original  founder of the Company and has
been the Executive Vice  President and a director since the Company's  formation
in 1982 and has served as                                                       

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Secretary of the Company since  November 1994. He is currently  responsible  for
multiple  tasks,  the  most  important  being  the  identification  of  industry
directions,  and the  technical  appropriateness  of Company  designs as well as
products acquired,  licensed or jointly developed with others. In addition,  Mr.
Radomsky has been  responsible  for the design of network  topologies  for large
corporate customers,  ensuring  compatibility for future products.  Mr. Radomsky
has also  previously  been  responsible  for the  Company's  technical  support,
purchasing  and  manufacturing  operations.  Prior to  1989,  Mr.  Radomsky  was
responsible  for the  mechanical  and  electronic  engineering  of the Company's
products.                                                                       

              WILLIAM H.  WHITNEY is an original  founder of the Company and has
been the Chief  Technology  Officer  (formerly  titled Vice President - Software
Development) and a director since the Company's formation in 1982 and has served
as  Assistant  Secretary  of the Company  since  November  1994.  Along with Mr.
Radomsky,  he developed all of the  Company's  initial  products,  including the
DL-4000 and the IPC product line. As Chief Technology  Officer,  Mr. Whitney has
been  responsible  for  development  of  hardware  and  software  for all of the
Company's standard offerings,  including all products being sold through OEM and
distributor channels.  Mr. Whitney has tendered his resignation from the Company
and the Board effective May 19,1998.                                            

              JOHN F. MCTIGUE has been the Company's Vice President - Operations
and Chief Financial Officer and Treasurer since July 1997. His  responsibilities
include finance,  administration,  information systems,  quality and production.
Mr. McTigue is a finance professional and Certified Public Accountant. From 1996
through 1997, he was with the Fundtech  Corporation,  a software developer where
he served as Chief  Financial  Officer.  From 1989 to 1996, Mr. McTigue was with
Dawn  Technologies,  Inc, a manufacturer of high-tech goods,  where he served as
the Chief Executive  Officer from 1994 through 1996 and Chief Financial  Officer
and Treasurer from 1989 through 1994.  Prior to this, he was with Rothstein Kass
& Company.                                                                      

              ROBERT M. GROLL has been Vice President - Marketing of the Company
since March 1986.  From 1970 until joining the Company in June 1985, as Director
of Marketing,  Mr. Groll was the President of PTM Associates,  Inc.  ("PTM"),  a
firm engaged in management  consulting  in the areas of technical  marketing and
computer  system design.  While with PTM, during 1983 and 1984, Mr. Groll became
Vice President of Cable Applications,  Inc. a New York corporation, where he was
responsible for initiating and managing new product development efforts.        

              DAVID I. GOULD, retired as Vice Chairman of the Board of Directors
at the end of April 1995, a position in which he had served since December 1993.
He  presently  is a director of the Company and has been since April 1985 and he
is President of Gould  Consulting  since May 1, 1995. He served as President and
Chief  Operating  Officer of the Company from June 1985 until  December 1993. He
was Vice  President-Marketing  of the  Company  from April 1985 until June 1985.
From 1982 until  joining the Company in 1985,  he was an officer of The Ultimate
Corporation  ("Ultimate"),  a computer manufacturer listed on the New York Stock
Exchange,  eventually serving as Senior Vice President of Marketing.  During his
three years at Ultimate, Mr. Gould managed the growth of that                   

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company's  revenues  from $40 million to more than $100  million.  Mr. Gould has
tendered his resignation from the Board of the Company effective June 16, 1998. 

              STEPHEN P. ROMA has been a director  of the Company  since  August
1991 and since August 1994 is the President and Chief Executive  Officer of WOW!
Work Out World a chain of neighborhood health and fitness centers.  During April
1995, he sold his interest in Princeton Credit Corporation, a company engaged in
the  business of buying,  selling  and  leasing  high  technology  products,  to
Greyvest Capital, Inc., a Toronto Stock Exchange company. Prior to the sale, Mr.
Roma was President and Chief Operating Officer of Princeton Credit  Corporation.
He previously  served as Vice  President of  Sales/Northeast  Region of Atlantic
Computer  Systems,  Inc.,  which was  liquidated  as a result of the  bankruptcy
proceedings of its parent  company,  Atlantic  Computer  Systems,  PLC. Prior to
holding this  position,  he was a principal and  President  and Chief  Operating
Officer of Princeton  Computer Group,  Inc., which was sold to Atlantic Computer
Systems, Inc. in 1988.                                                          

Compliance with Section 16(a) of the Exchange Act                               
-------------------------------------------------                               

              The  following  persons  have  failed  to file on a  timely  basis
certain reports required by Section 16(a) of the Securities Exchange Act of 1934
as follows:  Each of Messrs.  Stephen M.  Deixler,  Stephen P. Roma and David I.
Gould filed one late report on Form 5,  disclosing  the grant of a  non-employee
stock option  pursuant to the Company's  1994 Stock Option Plan, as amended (the
"1994 Plan"). Each of Messrs. Stephen B. Gray, Michael Radomsky, William Whitney
and John F.  McTigue  filed one late report,  a Form 4  disclosing  the grant of
stock  option.  Mr.  William  Whitney  has  filed  two late  reports  on Form 4,
disclosing  the sale of stock.  During the fiscal year ended March 31, 1998, the
Company  is not aware of other  late  filings,  or  failure  to file,  any other
reports required by Section 16(a) of the Exchange Act.                          

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10. Executive Compensation.                         

              The following table summarizes the compensation paid or accrued by
the  Company  during the three  fiscal  years  ended  March 31,  1998,  to those
individuals  who as of March 31, 1998 served as the  Company's  Chief  Executive
Officer  during  fiscal 1998 and to the Company's  four most highly  compensated
officers  other  than  those who served as the Chief  Executive  Officer  during
fiscal 1998 (these five executive officers being hereinafter  referred to as the
"Named Executive Officers").                                                    

                                                        [Enlarge/Download Table]


                                                  SUMMARY COMPENSATION TABLE                                            

                   Annual Compensation                                            Long Term Compensation                
       ------------------------------------------                       ------------------------------------------      
                                                                           Awards                       Payouts         
                                                                        --------------            ----------------      

                                                                  Other                                                 
                                                                 Annual    Restricted  Securities              All Other
Principal                                                        Compen-      Stock    Underlying     LTIP      Compen- 
Position               Year          Salary($)   Bonus($)(3)    sation($)  Award(s)($) Options (#) Payouts($)  sation($)
--------               ----          ---------   -----------    ---------  ----------- ----------- ----------  ---------

                                                                                                                        

Stephen M. Deixler     1998                                                                                             
Chairman, Chief        1997        14,000(1)            --        --          --         10,000       --           --   
Executive Officer(1)   1996               --            --        --          --             --       --           --   

Stephen B. Gray        1998         252,829                                              75,000                         
President, Chief       1997         163,386             --        --          --        400,000       --           --   
Executive Officer (2), 1996         134,675             --        --          --          2,309       --           --   
Chief Operating                                                                                                         
Officer                                                                                                                 

Michael Radomsky       1998         139,858                                              42,839                         
Executive Vice-        1997         128,773             --        --          --         90,000       --       541(4)   
President              1996         122,800             --        --          --          8,208       --     1,047(4)   
William H. Whitney     1998         127,980                                              42,839                         
Chief Technology       1997         128,773             --        --          --         90,000       --     2,318(4)   
Officer                1996         122,800             --        --          --          8,136       --     2,152(4)   

John F. McTigue (5)    1998          92,482                                             100,760              1,418(4)   
V-P, Operations, Chief                                                                                                  
Financial Officer, Treasurer                                                                                            
And Assistant Secretary                                                                                                 

Mark A. Simmons        1998                                                                                             
V-P, Operations, Chief 1997         116,956             --        --          --         40,000       --     2,105(4)   
Financial Officer      1996          92,800             --        --          --          6,579       --     1,612(4)   


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

(1)        The Company  does not have a written  employment  agreement  with Mr.
           Stephen M.  Deixler,  the Company's  Chairman of the Board.  However,
           under an informal agreement, the Company has agreed to pay him $1,000
per day to perform such services as jointly  agreed       

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           to by the  Company  and Mr.  Deixler,  and  approved  by the Board of
           Directors. Mr. Deixler ceased to serve as the Chief Executive Officer
of the Company on May 19, 1997.                           

(2)        Mr. Gray was elected to serve in the additional capacity as the Chief
           Executive  Officer of the Company on May 19, 1997.  Compensation  for
           Mr. Gray includes  payments he earned as consultant to the Company in
           the amount of $42,000. Mr. Gray served as a consultant to the Company
           prior to the time he  became a  full-time  employee  pursuant  to his
 employment agreement with the Company dated March 27, 1995.

(3)        Represents  compensation  earned under the Company's  Incentive Bonus
           Plan for the fiscal year ended March 31, 1995 (the "Incentive Plan").
           The Incentive Plan covers all Company  employees and was effective as
           of October 1, 1994.  The Incentive  Plan is based on  achievement  in
           three specific areas - Company revenue, Company operating income, and
individual/ departmental objectives.                      

(4)        Represents  contribution  of the Company under the  Company's  401(k)
Plan.                                                     

(5)        Represents  compensation  for the  period  from July 2, 1997 (date of
hire) through March 31, 1998.                             

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 Option Grants in Fiscal Year 1998

              The  following  table sets forth  certain  information  concerning
stock option grants during the year ended March 31, 1998 to the Named  Executive
Officers:                                                                       

                     Individual Grants
                       ---------------------------------------------------------

     Percent
Number of       of Total          
        Securities      Options           Exercise
       Underlying      Granted to        or Base
                      Options         Employees in      Price       Expiration
Name                   Granted(#)      Fiscal Year       ($/Sh)      Date       
------------------     ----------      ------------      --------    ---------- 

Stephen M. Deixler     10,000(1)             N/A         $1.50       9/17/01    

Stephen B. Gray        75,000(2)            4.2%         $1.75       05/04/07   

Michael Radomsky       42,839(2)            2.4%         $1.75       05/04/07   

William H. Whitney     42,839(2)            2.4%         $1.75       05/04/07   

John F. McTigue        70,760(2)            3.9%         $1.34       07/02/07   
                    30,000               2.5%         $1.34       07/02/07
------------------------                                                        

(1)        Represents  stock options granted to Mr. Deixler under the 1994 Stock
           Option  Plan in  consideration  of his  service  to the  Company as a
director.                                                 

(2)        Represent  options issued under a Time  Accelerated  Restricted Stock
Award Program (TARSAP).                                   

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 Aggregated Option Exercises in Fiscal Year 1998
 and Fiscal Year-End Option Values

              The following table sets forth certain information concerning each
exercise of stock options during the fiscal year ended March 31, 1998 by each of
the Named  Executive  Officers and the number and value of  unexercised  options
held by each of the Named Executive Officers on March 31, 1998.                 

                                                        [Enlarge/Download Table]

                                                                          Value of                 
                                               Number of Securities       Unexercised              
                                               Underlying Unexer-         In-the-Money             
                    Shares                     cised Options              Options at               
                    Acquired on   Value        at FY-End(#)               FY-End($)(1)             
Name                Exercise (#)  Realized($)  Exercisable/Unexercisable  Exercisable/Unexercisable
----                ------------  -----------  -------------------------  -------------------------
                                                                                                   

Stephen M. Deixler  --            --           27,500/2,500               $22,625/$3,275           

Stephen B. Gray     --            --           477,309/0                  $725,250/$0              

Michael Radomsky    --            --           142,239/0                  $192,007/$0              

William H. Whitney  --            --           142,184/0                  $192,018/$0              

John F. McTigue     --            --           100,760/0                  $145,094/$0              


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

(1)        The average  price for the Common  Stock as reported by the  National
           Quotation  Bureau on March 31,  1998 was  $2.78 per  share.  Value is
           calculated on the basis of the difference between the option exercise
           price and $2.78  multiplied  by the number of shares of Common  Stock
underlying the options.                                   

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Compensation of Directors                                                       
-------------------------                                                       

              On September 17, 1997 Stephen M. Deixler,  Stephen P. Roma,  David
I. Gould and Alexander C. Stark, the Company's non-employee directors, were each
granted a  non-employee  director  option.  Pursuant to the Company's 1994 Plan,
each  Director  received an option to  purchase  10,000  shares of Common  stock
exercisable as to 2,500 shares upon each three-month  anniversary of the date of
grant,  provided  that  such  individual  continues  to serve as a  non-employee
director of the Company on such dates.                                          

              In addition,  the Company adopted a policy  commencing  October 1,
1995,  that all  non-employee  directors  traveling  more than fifty  miles to a
meeting of the Board of directors shall be reimbursed for all reasonable  travel
expenses.                                                                       

Employment   Contracts,   Termination   of  Employment  and  Change  of  Control
Arrangements                                                                    
--------------------------------------------------------------------------------

              The Company has no employment agreements other then the employment
agreement  with  Stephen B. Gray,  the  Company's  Chief  Executive  Officer and
President.                                                                      

              11.Security Ownership of Certain Beneficial Owners and Management.

              The  following  table  sets  forth  the  number  of  shares of the
Company's  Common Stock owned by each person or institution  who, as of June 29,
1998, owns of record or is known by the Company to own  beneficially,  more than
five (5%)  percent of such  securities,  and by the  Company's  Named  Executive
Officers  and by its  Directors,  both  individually  and as a  group,  and  the
percentage of such  securities  owned by each such person and the group.  Unless
otherwise  indicated,  such persons have sole voting and  investment  power with
respect to shares listed as owned by them.                                      

Name and Address                           Shares Owned    Percent of Class     
----------------                           ------------    ----------------     

Stephen M. Deixler (1)                        760,532            15.4%          
371 Eagle Drive                                                                 
Jupiter, Florida 33477                                                          

David I. Gould (2)                            199,337             4.0%          
10844 White Aspen Way                                                           
Boca Raton, Florida  33428                                                      

Stephen B. Gray (3)(12)                       477,309             9.7%          

Michael Radomsky (4)                          356,643             7.2%          
8 Zaydee Drive                                                                  

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Edison, New Jersey 08837                                                        
William H. Whitney (5)                        214,998             4.5%          
15 Jackson Avenue                                                               
Chatham, New Jersey 07928                                                       

Robert M. Groll (6)                           100,852             2.1%          
52 Village Lane                                                                 
Freehold, New Jersey 07728                                                      

John F. McTigue (7)(12)                       100,760             2.0%          

Stephen P. Roma (8)                           484,399             9.8%          
91 Durand Drive                                                                 
Marlboro, New Jersey 07748                                                      

Special Situations Fund, III, L.P.(9)         855,863            16.7%          

MGP Advisers Limited Partnership (9)          855,863            16.7%          

AWM Investment Company, Inc. (9)            1,157,133            22.2%          

Austin W. Marxe (9)                         1,157,133            22.2%          

Jay Associates LLC (10)                       480,000             9.3%          
1118 Avenue J                                                                   
Brooklyn, New York  11230                                                       

Alpha Investments LLC (11)                    336,000             6.6%          
5611 North 16th Street #300                                                     
Phoenix, Arizona  85016                                                         

Alexander C. Stark (12)(13)                    85,000             1.6%          

Directors and executive                                                         
officers as a group (9 Persons)           2,779,830            52.5%        

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

(1)        Does  not  include  214,436  shares  of  Common  Stock  owned  by Mr.
           Deixler's wife, mother, children and grandchildren as to which shares
           Mr. Deixler disclaims beneficial  ownership.  Includes 120,406 shares
           of Common Stock held by Merrill Lynch Pierce Fenner & Smith custodian
           f/b/o Stephen M. Deixler, IRA. Includes 27,500 shares of Common Stock
           which may be acquired pursuant to currently exercisable  non-employee
director  options under the                               

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           1994 Plan.  Also  includes  53,330  shares  issuable upon exercise of
           currently  exercisable  Class A and  Class  B  Warrants  of the  1996
Private Placement.                                        

(2)        Includes 50,000 shares of Common Stock which may be acquired pursuant
           to currently  exercisable  options granted outside the Company's 1984
           Stock Option Plan and the 1994 Plan.  Also includes  52,500 shares of
           common Stock which may be acquired pursuant to currently  exercisable
non-employee director options under the 1994 Plan.        

(3)        Includes  400,000  shares  of  Common  Stock  which  may be  acquired
           pursuant  to  currently   exercisable  options  granted  outside  the
           Company's  1994 Plan.  Also  includes  77,309  shares of Common Stock
           which may be  acquired  pursuant  to  currently  exercisable  options
granted under the Company's 1994 Plan.                    

(4)        Includes 90,000 shares of Common Stock which may be acquired pursuant
           to currently  exercisable  options granted outside the Company's 1994
           Plan.  Also  includes  52,339  shares  of Common  Stock  which may be
           acquired pursuant to currently  exercisable options granted under the
Company's 1994 Plan.                                      

(5)        Includes 90,000 shares of Common Stock which may be acquired pursuant
           to currently  exercisable  options granted outside the Company's 1994
           Plan.  Also  includes  52,184  shares  of Common  Stock  which may be
           acquired pursuant to currently  exercisable options granted under the
Company's 1994 Plan.                                      

(6)        Includes 56,684 shares of Common Stock which may be acquired pursuant
   to currently exercisable options granted under the 1994 Plan.

(7)        Includes  100,760  shares  of  Common  Stock  which  may be  acquired
           pursuant to currently exercisable options granted under the Company's
1994 Plan.                                                

(8)        Includes  47,877 shares of Common Stock held by  Donaldson,  Lufkin &
           Jenrette Securities Corporation custodian f/b/o Stephen P. Roma, IRA.
           Includes  8,400  shares of Common Stock held by Mr. Roma and his wife
           as joint tenants.  Also includes  27,500 shares of common Stock which
           may  be  acquired  pursuant  to  currently  exercisable  non-employee
           director  options under the 1994 Plan.  Also  includes  53,330 shares
           issuable upon exercise of currently  exercisable  Class A and Class B
           Warrants of the 1996 Private Placement. Does not include 1,200 shares
           of Common Stock held by Mr. Roma as  custodian  for his son or 29,108
           shares  owned by Mr.  Roma's  wife,  some of  which  are held in Mrs.
           Roma's  individual  retirement  account,  as to which shares Mr. Roma
disclaims beneficial ownership.                           

(9)        Special  Situations  Fund III, L.P., a Delaware  limited  partnership
           (the "Fund"),  MGP Advisers Limited  Partnership,  a Delaware limited
           partnership  ("MGP"),  AWM  Investment  Company,   Inc.,  a  Delaware
           corporation  ("AWM"),  and Austin W. Marxe have filed a Schedule 13G,
           the  latest  amendment  of which  is  dated  January  27,  1997.  All
           presented  information is based on the  information  contained in the
           Schedule 13G and  subsequent  information  known to the Company.  The
address of each of the reporting persons is 153           

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           East 53rd Street,  New York, New York 10022. The Fund has sole voting
           and dispositive  power with respect to 855,863  shares;  MGP has sole
           dispositive power with respect to 855,863 shares; AWM has sole voting
           power with respect to 301,270 shares and sole dispositive  power with
           respect to 1,157,133 shares; and Mr. Marxe has sole voting power with
           respect to  301,270  shares,  shared  voting  power  with  respect to
           855,863 shares and sole  dispositive  power with respect to 1,157,133
           shares.  MGP is a general  partner of and  investment  advisor to the
           Fund. AWM, which is primarily owned by Mr. Marxe, is the sole general
           partner of MGP. Mr. Marxe,  the principal  limited partner of MGP and
           the President of AWM, is principally  responsible  for the selection,
           acquisition  and  disposition  of the portfolio  securities by AWM on
           behalf  of MGP,  the Fund and  another  fund that  beneficially  owns
           shares  included  in the  shares  beneficially  owned  by AWM and Mr.
           Marxe.  Also  includes  267,242  shares  issuable  upon  exercise  of
           currently  exercisable  Class A and  Class  B  Warrants  of the  1996
           Private  Placement  held  by the  Fund  and MGP  and  364,422  shares
           issuable upon exercise of currently  exercisable  Class A and Class B
       Warrants of the 1996 Private Placement held by AWM and Mr. Marxe.

(10)       Includes   320,000   shares   issuable  upon  exercise  of  currently
           exercisable  Class  A and  Class  B  Warrants  of  the  1996  Private
Placement.                                                

(11)       Includes   224,000   shares   issuable  upon  exercise  of  currently
           exercisable  Class  A and  Class  B  Warrants  of  the  1996  Private
Placement.                                                

(12)       The address of such person is c/o the  Company,  21 Meridian  Avenue,
Edison, New Jersey 08820.                                 

(13)       Includes 35,000 shares of Common Stock which may be acquired pursuant
           to currently  exercisable  options  granted under the Company's  1994
Plan.                                                     

12. Certain Relationships and Related Transactions. 

              Mr. David I. Gould,  formerly an executive officer and director of
the Company  entered into a consulting  agreement with the Company,  that became
effective on May 1, 1995 upon the expiration date of his employment agreement on
April 30, 1995. The consulting  agreement provides for a four-year term, with an
automatic one year renewal,  and  compensation at the rate of $1,000 per day for
services provided. The consulting agreement further provides that Mr. Gould will
not receive  less than  $40,000 nor more than  $220,000  per year,  and that the
rendering of any services  above $40,000 must be with the prior  approval of the
Company. During fiscal 1998, Mr. Gould was paid $40,000 under this agreement.   

              On  April  1,  1996,   the  Company   entered   into  a  six-month
compensation  agreement with Mr. Lonnie L. Sciambi,  a former executive  officer
and director of the Company after the  expiration  of the  Company's  employment
agreement with Mr. Sciambi. The compensation agreement provided for compensation
in the aggregate sum of $100,000,  as well as certain  benefits during the term.
In                                                                              

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addition,  Mr.  Sciambi was granted a stock option under the  Company's  1994   
Plan to purchase 23,196 shares of Common Stock.                                 

              In April 1996, the Company completed the 1996 Private Placement to
accredited  investors of an aggregate of 1,101,467  Units for gross  proceeds of
$1,376,933.75, each Unit consisting of one share of Common Stock and one Class A
Warrant and one Class B Warrant, each of which are exercisable into one share of
Common  Stock.  Stephen M. Deixler,  an executive  officer and a director of the
Company and Stephen P. Roma, a director of the Company, who each held preemptive
rights to purchase  Units in this  offering,  each  purchased  26,665 Units at a
price  of  $1.25  per  Unit  for  the  aggregate   consideration  of  $33,331.25
Additionally,  in connection with the 1996 Private Placement, Special Situations
Fund III, L.P., also the holder of preemptive rights, purchased 133,621 Units at
$1.25 for the aggregate consideration of $167,026.25.                           

              In September  1995, the Company formed a wholly-owned  subsidiary,
MicroFrame  Europe  N.V.,  which,  in  turn,  acquired  all  of the  issued  and
outstanding shares of capital stock of European Business Associates BVBA ("EBA")
of Brussels,  Belgium from Marc Kegelaers,  its sole shareholder.  In connection
with  such  acquisition,  MicroFrame  Europe  N.V.  entered  into  a  consulting
agreement with Mr. Kegelaers for a term of five years. The consulting  agreement
provides for a consulting  fee in the  aggregate sum of U.S.  $75,000  annually,
with annual 5% increases over the term, as well as the  reimbursement of certain
expenses during the term.                                                       

13. Exhibits and Reports on Form 8-K.               

                                                        [Enlarge/Download Table]


(a)    Exhibits                                                                        
       --------                                                                        

Exhibit                                                                                
No.       Description                      Exhibit Reference                           
-------   -----------                      -----------------                           

                                                                                       

3.1       Certificate of Incorporation of  Incorporated by reference to Exhibit 3.2 of 
          the Company                      the Form 10-K for the fiscal year ended     
                                           March 31, 1992 (the "1992 10-K")            

3.2       By-Laws of the Company           Incorporated by reference to Exhibit 3.2 of 
                                           Amendment No. 1 to the Company's            
                                           Registration Statement on Form SB-2 (No.    
                                           33-66688) dated October 26, 1993            
                                           ("Amendment No. 1 to the Registration       
                                           Statement")                                 

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3.3       Amendment to Certificate of      Incorporated by reference to Exhibit 3.3 of 
          Incorporation filed September    the Form 10-KSB for the fiscal year ended   
          14, 1992                         March 31, 1993 (the "1993 10-KSB")          

3.4       Amendment to Certificate of      Incorporated by reference to Exhibit 3.4 of 
          Incorporation filed September    Amendment No. 1 to the Registration         
          20, 1993                         Statement                                   

3.5       Form of Specimen Common          Incorporated by reference to Exhibit 3.5 of 
          Stock Certificate                Amendment No. 2 to the Company's            
                                           Registration Statement on Form SB-2 (No.    
                                           33-66688) dated December 1, 1993            
                                           ("Amendment No. 2 to the Registration       
                                           Statement")                                 

10.1      1984 Stock Option Plan           Incorporated by reference to Exhibit 10.4 of
                                           the of the Form 10-K for the fiscal year    
                                           ended March 31, 1985                        

10.2      Amendment No. 2 to 1984          Incorporated by reference to Exhibit 10.5 of
          Stock Option Plan                the Form 10-K for the fiscal year ended     
                                           March 31, 1986 (the "1986 10-K")            

10.3      Lease Agreement                  Incorporated by reference to Exhibit 10.6 of
                                           the Form 10-K for the fiscal year ended     
                                           March 31, 1991 (the "1991 10-K")            

10.4      Stock Purchase Agreement         Incorporated by reference to Exhibit 10.4 of
          dated May 10, 1993 pursuant to   the 1993 10-KSB                             
          Private Placement                                                            

10.5      Employment Agreement dated       Incorporated by reference to Exhibit 10.5 of

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          as of May 2, 1992 between        Amendment No. 2 to the Registration         
          David I. Gould and the           Statement                                   
          Company                                                                      

10.6      Loan Agreement between the       Incorporated by reference to Exhibit 10.6 of
          Company and New Jersey           the 199310-KSB                              
          National Bank                                                                

10.7      Letter Agreement dated April     Incorporated by reference to Exhibit 10.7 of
          28, 1993 between the Company     Amendment No. 1 to the Registration         
          and New Jersey National Bank     Statement                                   

10.8      Form of Consulting Agreement     Incorporated by reference to Exhibit 10.8 of
          between David I. Gould and the   Amendment No. 1 to the Registration         
          Company                          Statement                                   

10.9      Agreement between American       Incorporated by reference to Exhibit 10.9 of
          Telephone and Telegraph          Amendment No. 2 to the Registration         
          Company and the Company          Statement                                   
          dated September 17, 1993                                                     

10.10     Joint Marketing Agreement        Incorporated by reference to Exhibit 10.10  
          between MCI Telecommunica        of Amendment No. 2 to the Registration      
          tions Corporation and the        Statement                                   
          Company dated September 1,                                                   
          1992, together with Amend                                                    
          ment No. 1 dated July 7, 1993                                                

10.11     Employment Agreement dated       Incorporated by reference to Exhibit 10.11  
          as of January 1, 1994 between    of Form 10-KSB for the fiscal year ended    
          Michael Radomsky and the         March 31, 1994 (the "1994 10-KSB")          
          Company                                                                      

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10.12     Employment Agreement dated       Incorporated by reference to Exhibit 10.12  
          as of January 1, 1994 between    of the 1994 10-KSB                          
          William H. Whitney and the                                                   
          Company                                                                      

10.13     Employment Agreement dated       Incorporated by reference to Exhibit 10.13  
          as of January 1, 1994 between    of the 1994 10-KSB                          
          Robert M. Groll and the                                                      
          Company                                                                      

10.14     Employment Agreement dated       Incorporated by reference to Exhibit 10.15  
          as of January 1, 1994 between    of Amendment No. 2 to the Registration      
          P. David Bocksch and the         Statement                                   
          Company                                                                      

10.15     Amendments to Lease              Incorporated by reference to Exhibit 10.15  
                                           of the 1994 10-KSB                          

10.16     Amendment to Loan and            Incorporated by reference to Exhibit 10.16  
          Security Agreement between       of Form 10-QSB for the quarter ended        
          the Company and CoreStates       September 30, 1994                          
          Bank, N.A. dated September 8,                                                
          1994.                                                                        

10.17     Consulting Agreement between     Incorporated by reference to Exhibit 10.17  
          the Company and P. David         to Form 8-K dated November 30, 1994         
          Bocksch dated November 14,                                                   
          1994                                                                         

10.18     Employment Agreement dated       Incorporated by reference to Exhibit 10.18  
          as of October 11, 1994 between   to Form 10-QSB for the quarter ended        
          the Company and Lonnie L.        December 31, 1994                           
          Sciambi                                                                      

10.19     Incentive Bonus Plan of the      Incorporated by reference to Exhibit 10.19  
          Company for the fiscal year      to Form 10-QSB for the quarter ended        
          ended March 31, 1995             December 31, 1994                           

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10.20     Letter from Feldman Sablosky     Incorporated by reference to Exhibit 10.20  
          & Company to the Securities      to Form 8-K dated March 13, 1995            
          and Exchange Commission                                                      
          relating to Item 4 of Form 8-K                                               

10.21     1994 Stock Option Plan           Incorporated by reference from the          
                                           Company's Proxy Statement dated August      
                                           15, 1994 for the Company's Annual Meeting   
                                           of Shareholders held on September 19, 1994  

10.22     Non-Qualified Stock Option       Incorporated by reference to Exhibit 10.22  
          Agreement dated December 19,     of the 1994 10-KSB                          
          1994 between the Company and                                                 
          Cameron Towey Neilson, Inc.                                                  

10.23     Purchase Agreement dated         Incorporated by reference to Exhibit 10.23  
          December 21, 1994 between the    of the 1994 10-KSB                          
          Company and Ericsson Business                                                
          Networks AB                                                                  

10.24     Employment Agreement dated       Incorporated by reference to Exhibit 10.24  
          as of March 27, 1995 between     of the 1994 10-KSB                          
          the Company and Stephen B.                                                   
          Gray                                                                         

10.25     Letter dated April 5, 1995 from  Incorporated by reference to Exhibit 10.25  
          the Company to P. David          of the 1994 10-KSB                          
          Bocksch terminating his                                                      
          Consulting Agreement                                                         

10.26     Incentive Bonus Plan of the      Incorporated by reference to Exhibit 10.26  
          Company for the fiscal year      of the 1994 10-KSB                          
          ending March 31, 1996                                                        

                                       42                                              

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10.27     Letter of Intent dated April 9,  Filed herewith                              
          1998 With Solcom Systems,                                                    
          Ltd.                                                                         

10.28     Line of Credit Agreement with    Filed herewith                              
          United National Bank Dated                                                   
          November 17, 1997                                                            

23.1      Consent of Pricewaterhouse       Filed herewith                              
          Coopers LLP                                                                  


(b)    Reports on Form 8-K                                                      

               On May 19, 1998,  the Company filed a Current  Report on Form 8-K
disclosing  a press  release in  connection  with the  execution  of a letter of
intent relating to the Company's proposed acquisition of SolCom Systems Limited.

43

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                                                        [Enlarge/Download Table]

                          Index to Financial Statements                                  

                                                                                         

Report of Independent Accountants.                                                    F-1

Consolidated Balance Sheets as of March 31, 1998 and March 31, 1997.                  F-2

Consolidated Statements of Income for the years ended March 31, 1998 and 1997.        F-3

Consolidated Statements of Cash Flows for the years ended March 31, 1998 and 1997.    F-4

Consolidated Statements of Changes in Stockholders' Equity for the years ended           
March 31, 1998 and March 31, 1997.                                                    F-5

Notes to Consolidated Financial Statements.                                        F-6-18


44

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SIGNATURES

              In accordance with the  requirements of Section 13 or 15(d) of the
Securities  Exchange Act of 1934, the registrant caused this report to be signed
on its behalf by the  undersigned,  thereunto duly  authorized,  in this City of
Edison and State of New Jersey, on June 29, 1998.                               

                  MICROFRAME, INC.

                  By:  /s/ Stephen B. Gray
                                         ---------------------------------------
                                   Stephen B. Gray, President, Chief
                                        Executive Officer, and Chief Operating
         Officer

              In accordance with the requirements of the Securities Exchange Act
of 1934,  this report has been signed by the following  persons on behalf of the
registrant and in the capacities and on the dates indicated.                    

 Signature and Title
 -------------------

/s/ Stephen B. Gray                                  June 29, 1998              
---------------------------------------                                         
Stephen B. Gray, President, Chief                                               
Executive Officer, Chief Operating                                              
Officer (Principal Executive Officer)                                           

/s/ John F. McTigue                                  June 29, 1998              
---------------------------------------                                         
John F. McTigue, Vice President -                                               
Operations, Chief Financial Officer, Treasurer and                              
Assistant secretary (Principal Financial Officer and                            
Principal Accounting Officer)                                                   

/s/ Stephen M. Deixler                               June 29, 1998              
---------------------------------------                                         
Stephen M. Deixler, Chairman of the                                             
Board of Directors, Treasurer                                                   

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/s/ Michael Radomsky                                 June 29, 1998              
---------------------------------------                                         
Michael Radomsky, Executive Vice                                                
President, Secretary, Director                                                  

/s/ Stephen P. Roma                                                             
---------------------------------------              June 29, 1998              
Stephen P. Roma, Director                                                       

/s/ Alexander C. Stark                                                          
---------------------------------------              June 29, 1998              
Alexander C. Stark, Director                                                    

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Exhibit Index                                                                                            

Exhibit                                                                                                  
No.       Description                             Exhibit Reference                                      
-------   -----------                             -----------------                                      
                                                                                                         

3.1       Certificate of Incorporation of the     Incorporated by reference to Exhibit 3.2 of the Form   
          Company                                 10-K for the fiscal year ended March 31, 1992 (the     
                                                  "1992 10-K")                                           

3.2       By-Laws of the Company                  Incorporated by reference to Exhibit 3.2 of            
                                                  Amendment No. 1 to the Company's Registration          
                                                  Statement on Form SB-2 (No. 33-66688) dated            
                                                  October 26, 1993 ("Amendment No. 1 to the              
                                                  Registration Statement")                               

3.3       Amendment to Certificate of             Incorporated by reference to Exhibit 3.3 of the Form   
          Incorporation filed September 14, 1992  10-KSB for the fiscal year ended March 31, 1993 (the   
                                                  "1993 10-KSB")                                         

3.4       Amendment to Certificate of             Incorporated by reference to Exhibit 3.4 of            
          Incorporation filed September 20, 1993  Amendment No. 1 to the Registration Statement          

3.5       Form of Specimen Common Stock           Incorporated by reference to Exhibit 3.5 of            
          Certificate                             Amendment No. 2 to the Company's Registration          
                                                  Statement on Form SB-2 (No. 33-66688) dated            
                                                  December 1, 1993 ("Amendment No. 2 to the              
                                                  Registration Statement")                               

10.1      1984 Stock Option Plan                  Incorporated by reference to Exhibit 10.4 of the of the
                                                  Form 10-K for the fiscal year ended March 31, 1985     

10.2      Amendment No. 2 to 1984 Stock           Incorporated by reference to Exhibit 10.5 of the Form  
          Option Plan                             10-K for the fiscal year ended March 31, 1986 (the     
                                                  "1986 10-K")                                           

10.3      Lease Agreement                         Incorporated by reference to Exhibit 10.6 of the Form  
                                                  10-K for the fiscal year ended March 31, 1991 (the     
                                                  "1991 10-K")                                           

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10.4      Stock Purchase Agreement dated May      Incorporated by reference to Exhibit 10.4 of the 1993  
          10, 1993 pursuant to Private Placement  10-KSB                                                 

10.5      Employment Agreement dated as of        Incorporated by reference to Exhibit 10.5 of           
          May 2, 1992 between David I. Gould      Amendment No. 2 to the Registration Statement          
          and the Company                                                                                

10.6      Loan Agreement between the Company      Incorporated by reference to Exhibit 10.6 of the       
          and New Jersey National Bank            199310-KSB                                             

10.7      Letter Agreement dated April 28, 1993   Incorporated by reference to Exhibit 10.7 of           
          between the Company and New Jersey      Amendment No. 1 to the Registration Statement          
          National Bank                                                                                  

10.8      Form of Consulting Agreement            Incorporated by reference to Exhibit 10.8 of           
          between David I. Gould and the          Amendment No. 1 to the Registration Statement          
          Company                                                                                        

10.9      Agreement between American              Incorporated by reference to Exhibit 10.9 of           
          Telephone and Telegraph Company         Amendment No. 2 to the Registration Statement          
          and the Company dated September 17,                                                            
          1993                                                                                           

10.10     Joint Marketing Agreement between       Incorporated by reference to Exhibit 10.10 of          
          MCI Telecommunications Corporation      Amendment No. 2 to the Registration Statement          
          and the Company dated September 1,                                                             
          1992, together with Amendment No. 1                                                            
          dated July 7, 1993                                                                             

10.11     Employment Agreement dated as of        Incorporated by reference to Exhibit 10.11 of Form     
          January 1, 1994 between Michael         10-KSB for the fiscal year ended March 31, 1994 (the   
          Radomsky and the Company                "1994 10-KSB")                                         

10.12     Employment Agreement dated as of        Incorporated by reference to Exhibit 10.12 of the 1994 
          January 1, 1994 between William H.      10-KSB                                                 
          Whitney and the Company                                                                        

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10.13     Employment Agreement dated as of        Incorporated by reference to Exhibit 10.13 of the 1994 
          January 1, 1994 between Robert M.       10-KSB                                                 
          Groll and the Company                                                                          

10.14     Employment Agreement dated as of        Incorporated by reference to Exhibit 10.15 of          
          January 1, 1994 between P. David        Amendment No. 2 to the Registration Statement          
          Bocksch and the Company                                                                        

10.15     Amendments to Lease                     Incorporated by reference to Exhibit 10.15 of the 1994 
                                                  10-KSB                                                 

10.16     Amendment to Loan and Security          Incorporated by reference to Exhibit 10.16 of Form     
          Agreement between the Company and       10-QSB for the quarter ended September 30, 1994        
          CoreStates Bank, N.A. dated                                                                    
          September 8, 1994.                                                                             

10.17     Consulting Agreement between the        Incorporated by reference to Exhibit 10.17 to Form 8-  
          Company and P. David Bocksch dated      K dated November 30, 1994                              
          November 14, 1994                                                                              

10.18     Employment Agreement dated as of        Incorporated by reference to Exhibit 10.18 to Form     
          October 11, 1994 between the            10-QSB for the quarter ended December 31, 1994         
          Company and Lonnie L. Sciambi                                                                  

10.19     Incentive Bonus Plan of the Company     Incorporated by reference to Exhibit 10.19 to Form     
          for the fiscal year ended March 31,     10-QSB for the quarter ended December 31, 1994         
          1995                                                                                           

10.20     Letter from Feldman Sablosky &          Incorporated by reference to Exhibit 10.20 to Form 8-  
          Company to the Securities and           K dated March 13, 1995                                 
          Exchange Commission relating to Item                                                           
          4 of Form 8-K                                                                                  

10.21     1994 Stock Option Plan                  Incorporated by reference from the Company's Proxy     

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                                                  Statement dated August 15, 1994 for the Company's      
                                                  Annual Meeting of Shareholders held on September       
                                                  19, 1994                                               

10.22     Non-Qualified Stock Option              Incorporated by reference to Exhibit 10.22 of the 1994 
          Agreement dated December 19, 1994       10-KSB                                                 
          between the Company and Cameron                                                                
          Towey Neilson, Inc.                                                                            

10.23     Purchase Agreement dated December       Incorporated by reference to Exhibit 10.23 of the 1994 
          21, 1994 between the Company and        10-KSB                                                 
          Ericsson Business Networks AB                                                                  

10.24     Employment Agreement dated as of        Incorporated by reference to Exhibit 10.24 of the 1994 
          March 27, 1995 between the Company      10-KSB                                                 
          and Stephen B. Gray                                                                            

10.25     Letter dated April 5, 1995 from the     Incorporated by reference to Exhibit 10.25 of the 1994 
          Company to P. David Bocksch             10-KSB                                                 
          terminating his Consulting Agreement                                                           

10.26     Incentive Bonus Plan of the Company     Incorporated by reference to Exhibit 10.26 of the 1994 
          for the fiscal year ending March 31,    10-KSB                                                 
          1996                                                                                           

10.27     Letter of Intent dated April 9, 1998    Filed herewith                                         
          With SolCom Systems, Ltd.                                                                      

10.28     Line of Credit Agreement with United    Filed herewith                                         
          National Bank Dated November 17,                                                               
          1997                                                                                           

23.1      Consent of Pricewaterhouse Coopers      Filed herewith                                         
          LLP                                                                                            

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                                                                   Exhibit 10.27

MICROFRAME, INC.                                                                
21 Meridian Avenue                                                              
Edison, New Jersey 08820                                                        

                         April 9, 1998

CONFIDENTIAL                                                                    
------------                                                                    

SolCom Systems Limited                                                          
SolCom House                                                                    
Meikle Road                                                                     
Kirkton Campus                                                                  
Livingston EH547DE                                                              
Scotland                                                                        

SolCom Systems, Inc.                                                            
1801 Robert Fulton Drive                                                        
Suite 400                                                                       
Reston, Virginia 20191                                                          

Shareholders of SolCom Systems Limited                                          
set forth on Signature Page hereto                                              

Gentlemen:                                                                      

               MicroFrame,  Inc.,  a New Jersey  corporation  ("MicroFrame")  is
pleased to present to you this  Letter of Intent  with  respect to  MicroFrame's
interest  in  acquiring,  as set  forth  in  Sections  1  through  6 below  (the
"Transaction"),  all of the  outstanding  stock of  SolCom  Systems  Limited,  a
corporation  organized  under the laws of  Scotland  (the  "Parent")  and SolCom
Systems, Inc., a                                                                

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Delaware corporation and wholly-owned subsidiary of SolCom (the "Subsidiary" and
together with the Parent, "SolCom").                                            

                The  following  Sections  1 through  5 of this  Letter of Intent
reflect our  current  mutual  understanding  of the  matters  described  therein
(collectively,  the "Non-Binding Provisions").  Except as set forth in Section 6
hereof, none of the provisions set forth herein shall be binding upon any of the
parties hereto,  and none of the parties to this Letter of Intent shall have any
liability to any other party based upon,  arising from or relating to any of the
Non-Binding Provisions.                                                         

               The  terms  of our  proposal  regarding  the  Transaction  are as
follows:                                                                        

         1. Basic  Transaction.   MicroFrame  or  a  newly-formed   wholly-owned
subsidiary  corporation of MicroFrame would acquire all or substantially  all of
the outstanding  capital stock or assets of SolCom through a statutory merger or
other  acquisition  structure.  The parties will  consult with their  respective
attorneys,  accountants  and  advisors  for  the  purpose  of  entering  into  a
definitive merger agreement or other applicable  definitive  agreement  together
with any other necessary or appropriate agreements or instruments  (collectively
referred to herein as the "Merger  Agreement").  In structuring  the Transaction
and the Merger  Agreement,  the parties  would seek to qualify  for  "pooling of
interest"  accounting  treatment and would seek to minimize any taxes applicable
to the  Transaction  or to the  parties  and  their  respective  affiliates  and
subsidiaries after the completion of the Transaction, including, but not limited
to, the treatment of the Transaction as a tax-free  reorganization  under United
States and United  Kingdom laws,  the reduction or  elimination of income taxes,
capital gains taxes and withholding  taxes, and the utilization and preservation
of tax attributes  (e.g.,  net operating losses and foreign tax credits) arising
prior to and subsequent to completion of the Transaction. In connection with the
Transaction, MicroFrame may elect to reincorporate in the State of Delaware.    

         2. Issuance of  MicroFrame   Common  Stock.   At  the  closing  of  the
Transaction  pursuant to the Merger Agreement (the "Closing"),  MicroFrame would
issue to the shareholders  and  optionholders of SolCom that number of shares of
common stock of MicroFrame,  par value $.001 per share (the "Common Stock"), or,
in the case of  optionholders,  if  appropriate  and  agreed to by the  parties,
options  therefor,  equal to one  hundred  (100%)  percent of the sum of (i) the
number of issued and  outstanding  shares of Common  Stock as of the date of the
Merger Agreement and (ii) any and all outstanding  options to purchase shares of
Common Stock (collectively,  the "Merger Shares"), it being the intention of the
parties  to  exclude  from the  calculation  of the  Merger  Shares  any and all
outstanding warrants to purchase shares of Common Stock. The Merger Shares would
be issued in  accordance  with  Regulation S pursuant to the  Securities  Act of
1933, as amended (the "Act") or other  exemption  under the Act as determined by
MicroFrame and its counsel.  The Merger Shares would be "restricted  securities"
within the  meaning of the Act and could  only be resold in  accordance  with an
exemption  under the Act  satisfactory  to  counsel  for  MicroFrame  or upon an
effective registration statement with respect to the Merger Shares.             

         3. Representations and Warranties. MicroFrame, SolCom and Peter Wilson,
Peter  McLaren  and  Hugh  Evans,  as  principal   shareholders  of  the  Parent
(collectively, the "Shareholders"),  together with any other shareholders of the
Parent to be agreed to by the parties,  will be expected to make representations
and warranties upon terms mutually agreed to by the relevant parties and subject
to  disclosure  schedules in the Merger  Agreement.  The Merger  Agreement  will
contain  certain                                                                

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limitations  of  liability  to be agreed to by the parties  with  respect to the
representations and warranties and the indemnities referred to below.           

         4. Indemnification.  MicroFrame, SolCom and the Shareholders would also
agree to indemnify each other in the Merger Agreement  against various potential
liabilities,  upon terms mutually agreed to by the relevant  parties and subject
to disclosure schedules in the Merger Agreement.                                

         5. Conditions  to  Proposed  Transaction. The  Merger  Agreement  would
contain such representations, warranties, indemnities, conditions and agreements
appropriate to  transactions  of this nature as may be agreed to by the relevant
parties and in  addition,  would  specifically  provide  that the closing of the
Transaction  would be subject to the following terms and conditions in a manner,
form and  substance  acceptable  to  MicroFrame,  SolCom  and  their  respective
attorneys:                                                                      

                  a.  completion of due diligence  satisfactory  to the parties,
                      which  due  diligence  would  be  completed  prior  to the
           execution and delivery of the Merger Agreement;

                  b.  receipt  of  all  necessary   consents  and  approvals  of
                      governmental bodies, lenders, lessors, vendors, landlords,
    and other contractual and third parties;

                  c.  absence of any  material  adverse  change in  SolCom's  or
                      MicroFrame's   business,   financial  condition,   assets,
                      prospects or  operations  from the execution of the Merger
                      Agreement   until   such  time  as  the   Transaction   is
consummated;                        

                  d.  absence of material pending or threatened  litigation with
respect to SolCom or MicroFrame;    

                  e.  delivery  of a legal  opinion,  closing  certificates  and
                      other appropriate  documentation  requested by MicroFrame,
                      SolCom  and  their  respective  counsel  as  agreed by the
parties;                            

                  f.  delivery by SolCom of (i) audited financial  statements of
                      SolCom  through  March 31, 1998 and (ii)  unaudited  "stub
                      period"  financial   statements  for  subsequent   periods
                      satisfactory  to  MicroFrame  and its  accountants,  which
                      financial   statements  shall  be  prepared  in  a  format
                      consistent with accounting policies in effect with respect
                      to  those  audited  financial  statements,  together  with
                      short-term  projections  for the period from April 1, 1998
                      through March 31, 1999 prepared in a quarterly format; and
                      delivery by MicroFrame of audited financial  statements of
                      MicroFrame for the year ended March 31, 1998 and unaudited
                      "stub period" financial statements for subsequent periods,
                      which financial statements shall be prepared in accordance
                      with   United   States   Generally   Accepted   Accounting
Principles;                         

                  g.  approval  of  the  Transaction  by  the   shareholders  of
MicroFrame and SolCom;              

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                  h.  clearance by the Securities and Exchange  Commission  (the
                      "Commission")  of an  Information  Statement  pursuant  to
                      Regulation 14C under the Securities  Exchange Act of 1934,
as amended;                         

                  i.  delivery  of a  fairness  opinion in  connection  with the
                      Transaction  satisfactory  to the boards of  directors  of
                      MicroFrame  and SolCom,  which  opinion would be delivered
                      prior  to  the   execution  and  delivery  of  the  Merger
Agreement;                          

                  j.  election to the  MicroFrame  Board of Directors of two (2)
nominees selected by SolCom; and    

                  k.  piggyback  registration  rights with respect to the Merger
                      Shares and an  undertaking  by  MicroFrame to use its best
                      efforts to register the Merger Shares with the  Commission
                    within 12 months of the consummation of the Transaction.

         6. Binding Provisions. Upon execution by SolCom and the Shareholders of
this  Letter  of  Intent,  the  matters  described  in  each  of  the  following
subsections of this Section 6  (collectively,  the "Binding  Provisions")  shall
constitute  the  valid,  legally  binding  and  enforceable  agreements  of  the
respective  parties bound therein and shall continue  indefinitely from the date
hereof except as otherwise explicitly set forth herein.                         

                  a.  Exclusivity.   SolCom,  the  Shareholders  and  MicroFrame
                      acknowledge  that each such party will devote  substantial
                      time and  resources  and  incur  substantial  expenses  in
                      connection with the investigation and documentation of the
                      Transaction. To induce each such party to devote such time
                      and  resources  and to incur such  expenses,  the  parties
                      agree  that  prior to the  earlier  of (I) the date of the
                      execution  and  delivery  by the  parties  of  the  Merger
                      Agreement  or (II)  forty-  five  (45)  days from the date
                      hereof,  they will not (without the prior written  consent
                      of the other party) directly or indirectly,  nor will they
                      knowingly permit any officer, director, employee, agent or
                      advisor of MicroFrame  or SolCom,  as the case may be, to:
                      (i) solicit,  initiate, accept, encourage or engage in any
                      discussions  with  respect to proposals or offers from any
                      corporation,  partnership, limited liability entity, trust
                      or any other  person  or  entity,  or any  group  thereof,
                      relating  to (A) any  acquisition,  purchase  or option to
                      purchase  any of the shares of capital  stock of SolCom or
                      MicroFrame  or any of the  assets  (other  than  sales  of
                      inventory in the ordinary  course of business)  of, or any
                      other equity interest in, SolCom or MicroFrame, or (B) any
                      merger,   consolidation   or   other   form  of   business
                      combination  or joint  venture with SolCom or  MicroFrame;
                      (ii) continue (and cause any officer, director,  employee,
                      agent or advisor of SolCom or MicroFrame  to  discontinue)
                      any of the  foregoing in the event that such has commenced
                      prior to the execution of this Letter of Intent;  or (iii)
                      furnish to any such person or entity any information  with
                      respect to any of the foregoing. If any party receives any
                      such  proposals  or offers,  such party  shall  notify the
                      other  party in  writing  of such  proposals  or offers as
promptly as reasonably practicable. 

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                  b.  Standstill.   In  the  event  that  the   Transaction   is
                      consummated, for a period of one (1) year from the date of
                      such consummation,  the Shareholders shall not acquire any
                      shares  of Common  Stock  except  in  accordance  with the
Merger Agreement.                   

                  c.  Access.  For the period  through and including the earlier
                      of (I)  the  date of the  execution  and  delivery  by the
                      parties of the Merger  Agreement or (II)  forty-five  (45)
                      days from the date hereof,  each of SolCom and  MicroFrame
                      shall  hereafter  provide to each other complete access to
                      its facilities, books and records, in each instance during
                      normal  business  hours and upon  reasonable  notice,  and
                      shall   cause   its   directors,    officers,   employees,
                      accountants,     attorneys,     agents,    advisors    and
                      representatives   (collectively,   "Representatives")   to
                      cooperate fully with SolCom or MicroFrame, as the case may
                      be, and their  respective  Representatives  in  connection
                      with the Transaction, the review and investigation of each
                      party, and the assets, contracts, liabilities, operations,
                      records  and other  aspects of the  business of SolCom and
MicroFrame.                         

                  d.  Confidentiality.  The parties hereby acknowledge and agree
                      that  MicroFrame  and  the  Subsidiary  are  parties  to a
                      certain  Mutual  Non-Disclosure   Agreement  dated  as  of
                      January 30,  1998 (the  "Non-Disclosure  Agreement").  The
                      parties  hereto  hereby  agree  that  the   Non-Disclosure
                      Agreement shall (i)  additionally  apply in each and every
                      respect  to the Parent  and the  Shareholders  and (ii) be
                      supplemented  such that neither SolCom,  the  Shareholders
                      nor MicroFrame  shall,  for a period of two (2) years from
                      the date hereof, solicit directly or indirectly,  or cause
                      any third  party to  solicit  directly  or  indirectly  on
                      behalf of any party,  as the case may be, any  employee of
                      any other party or its affiliates  (while such persons are
                      so  employed by such other  party or its  affiliates)  for
employment or other services.       

                  e.  Conduct of Business.  For the period through and including
                      the earlier of (I) the date of the  execution and delivery
                      by the parties of the Merger  Agreement or (II) forty-five
                      (45) days  from the date  hereof,  (i) each of SolCom  and
                      MicroFrame  shall  hereafter  (A) conduct its business and
                      operations only in the ordinary course,  (B) not engage in
                      any  material  transaction  outside  the  ordinary  course
                      without the other party's prior written  consent,  and (C)
                      use its reasonable  commercial  efforts to preserve intact
                      its business organization,  keep available the services of
                      its  employees,  and maintain  satisfactory  relationships
                      with   suppliers,   contractors,    customers,   potential
                      customers and others having  business  relationships  with
                      such  party;  and (ii)  except as  otherwise  required  by
                      applicable  law or  contract  (as  determined  in the sole
                      discretion of counsel to MicroFrame), MicroFrame shall not
                      issue any new equity securities or securities  convertible
into equity securities.             

                  f.  Disclosure. Except as and to the extent required by law or
                      by the rules and  regulations  of NASDAQ (as determined in
                      the sole discretion of counsel to MicroFrame), without the
                      prior written  consent of each of  MicroFrame  and SolCom,
                      neither SolCom or the  Shareholders,  on the one hand, nor
                      MicroFrame,  on the  other  hand,  shall,  and each  shall
     direct each  Representative of such party

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                      not to,  directly or indirectly  make any public  comment,
                      statement or  communication  with respect to, or otherwise
                      disclose  or  permit  the   disclosure   or  existence  of
                      discussions  regarding,  a possible transaction among them
                      or any of the terms,  conditions  or other  aspects of the
          Transaction proposed in this Letter of Intent.

                  g.  Costs. SolCom and MicroFrame shall each be responsible for
                      and bear its  respective  costs and  expenses  (including,
                      without  limitation,  any fees of attorneys,  accountants,
                      brokers  or  finders)  incurred  in  connection  with this
                      Letter  of Intent or the  proposed  Transaction,  provided
                      that, in the event that during the time period  subsequent
                      to the execution of this Letter of Intent and prior to the
                      execution  and  delivery of the Merger  Agreement,  either
                      SolCom  or  the   Shareholders,   on  the  one  hand,   or
                      MicroFrame,  on the other hand,  breaches any provision of
                      this Section 6 to any material extent and such breach,  if
                      capable of remedy,  is not remedied to the satisfaction of
                      the other parties within a period of fourteen (14) days of
                      notice such  breach  having  been  delivered  to the other
                      relevant  parties,  the other  party  shall be entitled to
                      terminate  this  Letter of Intent and shall be entitled to
                      liquidated damages in an amount equal to the lesser of (i)
                      such  party's  actual  legal,  accounting  and other costs
                      reasonably  incurred in connection with the Transaction or
                      (ii)   $150,000.   Each  of  the  parties   hereto  hereby
                      represents  and  warrants  to the  other  parties  that no
                      broker's or finder's fees have been or will be incurred by
                      any of them in  connection  with this  Letter of Intent or
                      the   proposed   Transaction.   SolCom  shall  only  incur
                      liability  hereunder  if and to the extent that SolCom may
                      lawfully  incur  such  liability  in  accordance  with the
applicable laws of Scotland.        

                  h.  Governing  Law;  Venue.  This  Letter of  Intent  shall be
                      governed by and construed in  accordance  with the laws of
                      the State of New York without giving effect to conflict or
                      choice  of law  principles  thereof.  The  parties  hereto
                      hereby  consent  to  the  jurisdiction  and  venue  of the
                      federal and state courts  located in New York County,  New
                      York, in any action or proceeding  relating to the subject
matter of this Letter of Intent.    

                  i.  Entire  Agreement;  Assignment.  This  Letter  of  Intent,
                      together with the Non-  Disclosure  Agreement,  as amended
                      herein,  constitutes  the  entire  agreement  between  the
                      parties,   superseding   all   prior   oral  and   written
                      agreements, understandings, representations and warranties
                      and courses of conduct  dealing  between the parties  with
                      respect to the subject matter hereof.  Except as otherwise
                      provided  herein,  this Letter of Intent may be amended or
                      modified  only  by a  writing  executed  by  each  of  the
                      parties.  No party may assign this Letter of Intent or any
                      of its respective rights or obligations  hereunder without
           the prior written consent of the other parties.

                  j.  Survival. This Letter of Intent shall be superseded in all
                      respects  upon the  execution  and  delivery of the Merger
                      Agreement, provided that, in the event that this Letter of
                      Intent is  terminated  prior to the execution and delivery
of the                              

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                      Merger  Agreement,  Sections 6(a),  (d), (g) and (h) shall
                      survive  such   termination   in  accordance   with  their
              respective terms notwithstanding such termination.

         Kindly  indicate  your  approval and  agreement  with the  foregoing by
executing this Letter of Intent in the space provided below and returning a copy
thereof to the undersigned.                                                     

                             Very truly yours,

                            MICROFRAME, INC.

                                   By: /s/ Stephen B. Gray
                                                 -------------------------------
                                              Stephen B. Gray, President

AGREED AND ACCEPTED:                                                            

SOLCOM SYSTEMS LIMITED                                                          

By:                                                                             
-------------------------------                                           
Name:                                                               
Title:                                                              

SOLCOM SYSTEMS, INC.                                                            

By:                                                                             
-------------------------------                                         
Name:                                                               
Title:                                                              

SHAREHOLDERS:                                                                   

/s/ Peter Wilson                                                                
--------------------------------                                                
Peter Wilson                                                                    

/s/ Peter McLaren                                                               
--------------------------------                                                
Peter McLaren                                                                   

/s/ Hugh Evans                                                                  
--------------------------------                                                
Hugh Evans                                                                      

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                                                                   Exhibit 10.28

                                                        [Enlarge/Download Table]


   PROMISSORY NOTE                                                                             
                                                                                               

Principal      Loan Date   Maturity  Loan No. Call  Collateral  Account       Officer  Initials
$1,000,000.00  11-17-1997  07-31-98  NEW      LINE  U           921101700;01  LGW              


References in the                                                               
shaded  area  are                                                               
for Lender's  use                                                               
only and  do  not                                                               
the applicability                                                               
of  this document                                                               
to any particular                                                               
loan or item.                                                                   

Borrower:  MicroFrame, Inc. (TIN: 22-2413505)   Lender:   UNITED NATIONAL BANK  
       21 Meridian Road                               1130 ROUTE 22 EAST
  Edison, NJ  08820                              P.O. BOX 6000
                                                          BRIDGEWATER, NJ  08807

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

Principal Amount: $1,000,000.00          Initial Rate: 9.000%                   
Date of Note: November 17, 1997                                                 

PROMISE TO PAY. Microframe, Inc. ("Borrower") promises to pay to UNITED NATIONAL
BANK ("Lender"),  or order, in lawful money of the United States of America, the
principal amount of One Million & 00/100 Dollars  ($1,000,000.00)  or so much as
may be outstanding,  together with interest on the unpaid outstanding  principal
balance of each  advance.  Interest  shall be  calculated  from the date of each
advance  until  repayment  of each  advance.Borrower  also  promises  to pay all
applicable fees and expenses.                                                   

PAYMENT.  Borrower will pay this loan on demand, or if no demand is made, in one
payment of all  outstanding  principal plus all accrued unpaid  interest on July
31, 1998.  In addition,  Borrower will pay regular  monthly  payments of accrued
unpaid  interest  beginning  December  17,  1997,  and all  subsequent  interest
payments are due on the same day of each month after that.  The annual  interest
rate for this Note is computed  on a 365/360  basis;  that is, by  applying  the
ratio of the annual  interest  rate over a year of 360 days,  multiplied  by the
outstanding  principal  balance,  multiplied  by the  actual  number of days the
principal  balance is outstanding.  Borrower will pay Lender at Lender's address
shown above or at such other place as Lender may  designate  in writing.  Unless
otherwise  agreed or required by applicable law,  payments will be applied first
to accrued unpaid interest,  then to principal,  and any remaining amount to any
unpaid collection costs and late charges.                                       

VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an independent index, which is the "Prime Rate"
with respect to any day means the rate of interest  adopted and made public from
time to time by the Chase Manhattan Bank, New York, N.Y.; or its successors,  as
its  Prime                                                                      

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Rate, but does not reflect the rate of interest  charged to any particular class
of borrower.  In the event that there should be a change in the announced  Prime
Rate of Chase  Manhattan  Bank  which  would  result  in a change in the rate of
interest on this Note,  then, in that event,  the rate of interest  herein shall
change  accordingly  as of the date of the said  change  without  notice  to the
Borrower(s)  or any Endorser,  Guarantor,  or Surety.  Any such change shall not
effect or alter any of the terms and conditions of this Note, all of which shall
remain in full force and effect (the "Index").  The Index is not necessarily the
lowest rate  charged by Lender on its loans.  If the Index  becomes  unavailable
during the term of this loan,  Lender may  designate  a  substitute  index after
notice to  Borrower.  Lender  will tell  Borrower  the  current  Index rate upon
Borrower's  request.  Borrower  understands  that Lender may make loans based on
other  rates as well.  The  interest  rate change will not occur more often than
each DAY.  The Index  currently  is 8.500% per annum.  The  interest  rate to be
applied to the unpaid principal  balance of this Note will be at a rate of 0.500
percentage  points over the Index,  resulting  in an initial  rate of 9.000% per
annum.  NOTICE:  Under no  circumstances  will the interest rate on this Note be
more than the maximum rate allowed by applicable law.                           

PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Early  payments will not,  unless agreed to by Lender in
writing,  relieve Borrower of Borrower's obligation to continue to make payments
of accrued unpaid interest. Rather, they will reduce the principal balance due. 

LATE  CHARGE.  If a payment  is 10 days or more late,  Borrower  will be charged
5.000% of the  regularly  scheduled  payment.  This late charge shall be paid to
Lender by Borrower  for the  purpose of  defraying  the expense  incident to the
handling of the delinquent payment.                                             

DEFAULT.  Borrower  will be in  default  if any of the  following  happens:  (a)
Borrower  fails to make any payment when due.  (b)  Borrower  breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement  related to this Note, or in any other  agreement or loan Borrower
has with Lender.  (c)  Borrower  defaults  under any loan,  extension of credit,
security  agreement,  purchase or sales agreement,  or any other  agreement,  in
favor of any  other  creditor  or  person  that  may  materially  affect  any of
Borrower's  property  or  Borrower's  ability  to  repay  this  Note or  perform
Borrower's obligations under this Note or any of the Related Documents.  (d) Any
representation  or  statement  made or  furnished  to Lender by  Borrower  or on
Borrower's  behalf is false or misleading in any material  respect either now or
at the time made or furnished.  (e) Borrower  becomes  insolvent,  a receiver is
appointed for any part of Borrower's property,  Borrower makes an assignment for
the benefit of creditors,  or any proceeding is commenced  either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's  property on or in which Lender has a lien or security
interest.  This includes a garnishment of or levy on any of Borrower's  accounts
with Lender. (g) Any guarantor dies or any of the other events described in this
default  section  occurs  with  respect to any  guarantor  of this  Note.  (h) A
material  adverse  change occurs in Borrower's  financial  condition,  or Lender
believes the prospect of payment or performance of the indebtedness is impaired.
(i) Lender in good faith deems itself insecure.                                 

If any default,  other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same  provision  of this Note  within
the preceding twelve (12) months,  it may be cured (and no event of default will
have occurred) if Borrower, after receiving written notice from Lender demanding
cure of such default:  (a) cures the default  within thirty (30) days; or (b) if
the cure requires more than thirty (30) days,  immediately initiates steps which
Lender deems in Lender's  sole  discretion  to be sufficient to cure the default
and  thereafter  continues  and  completes all  reasonable  and necessary  steps
sufficient to produce compliance as soon as reasonably practical.               

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PROMISSORY NOTE 
(Continued) 

LENDER'S  RIGHTS.  Upon default,  Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest  immediately  due,  without
notice, and then Borrower will pay that amount. Upon default,  including failure
to pay upon final maturity,  Lender, at its option, may also, if permitted under
applicable  law,  increase  the  variable  interest  rate on this  Note to 5.000
percentage  points over the Index. The interest rate will not exceed the maximum
rate  permitted by applicable  law.  Lender may hire or pay someone else to help
collect this Note if Borrower  does not pay.  Borrower also will pay Lender that
amount.  This includes,  subject to any limits under  applicable  law,  Lender's
attorneys'  fees and Lender's legal expenses  whether or not there is a lawsuit,
including  attorneys'  fees  and  legal  expenses  for  bankruptcy   proceedings
(including  efforts  to modify  or vacate  any  automatic  stay or  injunction),
appeals,  and  any  anticipated   post-judgment   collection  services.  If  not
prohibited  by  applicable  law,  Borrower  also  will pay any court  costs,  in
addition to all other sums  provided  by law.  This Note has been  delivered  to
Lender and accepted by Lender in the State of New Jersey. If there is a lawsuit,
Borrower  agrees  upon  Lender's  request to submit to the  jurisdiction  of the
courts of SOMERSET County,  the State of New Jersey.  Lender and Borrower hereby
waive the right to any jury trial in any  action,  proceeding,  or  counterclaim
brought by either  Lender or  Borrower  against  the  other.  This Note shall be
governed  by and  construed  in  accordance  with the  laws of the  State of New
Jersey.                                                                         

RIGHT OF SETOFF.  Borrower  grants to Lender a contractual  possessory  security
interest in, and hereby assigns,  conveys,  delivers,  pledges, and transfers to
Lender all Borrower's right,  title and interest in and to, Borrower's  accounts
with  Lender  (whether  checking,  savings,  or some other  account),  including
without  limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future,  excluding  however all IRA and Keogh accounts,
and all trust  accounts  for which the  grant of a  security  interest  would be
prohibited  by law.  Borrower  authorizes  Lender,  to the extent  permitted  by
applicable  law, to charge or setoff all sums owing on this Note against any and
all such accounts.                                                              

COLLATERAL.  This Note is  secured by a  Perfected  Security  Interest  by UCC-1
filings on business assets.                                                     

LINE OF CREDIT.  This Note evidences a revolving line of credit.  Advances under
this Note may be requested  orally by Borrower or as provided in this paragraph.
Lender  may,  but need not,  require  that all oral  requests  be  confirmed  in
writing.  All  communications,  instructions,  or  directions  by  telephone  or
otherwise  to Lender are to be directed  to Lender's  office  shown  above.  The
following  party or parties are  authorized  as provided  in this  paragraph  to
request advances under the line of credit until Lender receives from Borrower at
Lender's  address shown above written  notice of revocation of their  authority:
Stephen  B.  Gray,  President;  and  John F.  McTigue,  Vice  President  & Chief
Financial  Officer.  Advances under this line are at the sole  discretion of the
Bank and are in minimum amounts of One Thousand  ($1,000.00)  Dollars. To induce
the Bank to accept this Note and make advances under this Note, the  undersigned
waives any rights that it may have arising out of past or present  agreements or
representations that would obligate the Bank to make such advances. Requests for
such advances can be made by crediting the undersigned  account # 400-335-9 (the
Borrower's  account).  Borrower  agrees to be liable  for all sums  either:  (a)
advanced in accordance  with the  instructions  of an  authorized  person or (b)
credited to any of Borrower's accounts with Lender. The unpaid principal balance
owing on this Note at any time may be evidenced by  endorsements on this Note or
by Lender's internal records,  including daily computer print-outs.  Lender will
have no  obligation  to advance  funds  under this Note if: (a)  Borrower or any
guarantor  is in  default  under the terms of this  Note or any  agreement  that
Borrower or any  guarantor  has with Lender,  including  any  agreement  made in
connection  with the signing of this Note; (b) Borrower or any guarantor  ceases
doing  business or is insolvent;  (c) any guarantor                             

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PROMISSORY NOTE 
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seeks,  claims or otherwise attempts to limit, modify or revoke such guarantor's
guarantee of this Note or any other loan with  Lender;  (d) Borrower has applied
funds provided pursuant to this Note for purposes other than those authorized by
Lender; or (e) Lender in good faith deems itself insecure under this Note or any
other agreement between Lender and Borrower.                                    

ANNUAL RENEWAL. Not withstanding the foregoing,  the unpaid principal balance of
the Note shall be due and  payable,  if not called  earlier,  together  with all
accrued and unpaid interest, fees and charges from the date of this Note to July
31, 1998. The Lender will have the option to renew the Line of Credit created by
this Note and may terminate it at its absolute  discretion by giving thirty (30)
days written  notice to the Borrower at any time.  Should the Bank choose not to
renew the facility,  the Borrower(s)  shall pay the Bank the entire  outstanding
principal balance together with all accrued and unpaid interest, thereon and all
other unpaid fee, charges, and expenses.                                        

BORROWER'S FINANCIAL STATEMENTS. Borrower covenants and agrees with Lender that,
while this  Agreement is in effect,  Borrower shall furnish Lender with, as soon
as available,  but in no event later than ninety (90) days after the end of each
fiscal year,  Borrower's  balance sheet and income statement for the year ended,
audited by a certified public accountant  satisfactory to Lender.  All financial
reports  required  to be  provided  under this  Agreement  shall be  prepared in
accordance  with  generally  accepted  accounting   principles,   applied  on  a
consistent basis, and certified by Borrower(s) as being true and correct.       

INTERIM  FINANCIAL  STATEMENTS.  Borrower  shall furnish Lender with, as soon as
available,  but in no event  later  than  sixty  (60) days after the end of each
fiscal  quarter,  Profit and Loss  Statements and Account  Receivables  list and
aging report. All financial reports required to be provided under this Agreement
shall be supplied by Borrower,  prepared on a consistent  basis and certified by
Borrower as being true and correct.                                             

AUTOMATIC  PAYMENTS.  Borrower hereby authorizes Lender  automatically to deduct
from Borrower's  account numbered  400-335-9 the amount of any loan payment.  If
the funds are  insufficient to cover any payment,  Lender shall not be obligated
to advance funds to cover the payment. At any time and for any reason,  Borrower
or Lender may voluntarily terminate Automatic Payments.                         

BORROWING  BASE  REQUIREMENTS.  Borrower  covenants  and agrees with Lender that
while this Agreement is in effect: I) Maximum  borrowings shall be the lesser of
a) $1,000,000.00;  or b) 75.000% of aggregate amount of "Eligible Accounts." II)
Eligible  Accounts shall be Accounts  Receivable that are under ninety (90) days
evidenced  by  monthly  Borrowing  Base   Certificate.   III)  Monthly  Accounts
Receivable  aging  reports are to be submitted to Lender,  as soon as available,
but in no case later than ten (10) days after the end of each month.  IV) Lender
will  reserve  the  right to  conduct  an audit of  Accounts  Receivable,  twice
annually,  at the  Borrower's  expense  or at any  time and  frequency  should a
condition of default exist.                                                     

GENERAL  PROVISIONS.  This Note is payable on demand.  The inclusion of specific
default  provisions  or rights of Lender  shall not preclude  Lender's  right to
declare payment of this Note on its demand.  Lender may delay or forgo enforcing
any of its rights or remedies under this Note without losing them.  Borrower and
any other  person who signs,  guarantees  or endorses  this Note,  to the extent
allowed by law,  waive  presentment,  demand for payment,  protest and notice of
dishonor.  Upon any  change  in the terms of this  Note,  and  unless  otherwise
expressly  stated in  writing,  no party who signs this Note,  whether as maker,
guarantor,  accommodation  maker or endorser,  shall be                         

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PROMISSORY NOTE 
(Continued) 

released from liability.  All such parties agree that Lender may renew or extend
(repeatedly  and for any  length of time) this  loan,  or  release  any party or
guarantor or  collateral;  or impair,  fail to realize upon or perfect  Lender's
security interest in the collateral;  and take any other action deemed necessary
by Lender  without the  consent of or notice to anyone.  All such  parties  also
agree that  Lender  may modify  this loan  without  the  consent of or notice to
anyone other than the party with whom the modification is made.                 

PRIOR TO SIGNING THIS NOTE,  BORROWER READ AND  UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE,  INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.  BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE. 

BORROWER:                                                                       

MicroFrame, Inc.                                                                

By: /s/ John F. McTigue                                                         
-------------------------------                                         
John F. McTigue, Vice President                                         

ATTEST:                                                                         

                                  (Corporate Seal)
----------------------------------                                              

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                                                                    Exhibit 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS                                              

---------                                                                       

We consent to the  incorporation by reference in the registration  statements of
MicroFrame,  Inc.  on Form S-3 (File  No.  333-09507)  and Form S-8  (File  Nos.
33-61837 and  333-14681) of our report dated June 26, 1998, on our audits of the
consolidated financial statements of MicroFrame, Inc. and Subsidiary as of March
31, 1998 and 1997, and for the years ended March 31, 1998 and 1997, which report
is included in this Annual Report on Form 10-KSB.                               

/s/ Pricewaterhouse Coopers LLP                                                 

New York, New York                                                              
July 10, 1998                                                                   

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 MICROFRAME, INC. AND SUBSIDIARY

 CONSOLIDATED FINANCIAL STATEMENTS

 For the years ended March 31, 1998 and 1997

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Index to Consolidated Financial Statements                                      

Report of Independent Accountants                                     F-1       

Consolidated Balance Sheets as of March 31, 1998                                
and March 31, 1997                                                F-2   

Consolidated Statements of Operations for the years                             
ended March 31, 1998 and 1997                                     F-3   

Consolidated Statements of Cash Flows for the years                             
ended March 31, 1998 and 1997                                     F-4   

Consolidated Statements of Stockholders' Equity for                             
the years ended March 31, 1998 and March 31, 1997                F-5  

Notes to Consolidated Financial Statements                            F-6-20    

 -2-

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Report of Independent Accountants                                               

To the Board of Directors and Stockholders of                                   
MicroFrame, Inc. and Subsidiary:                                                

In our opinion,  the  accompanying  consolidated  balance sheets and the related
consolidated  statements  of  operations,  cash flows and  stockholders'  equity
present fairly, in all material respects,  the financial position of MicroFrame,
Inc. and Subsidiary  (the "Company") at March 31, 1998 and 1997, and the results
of their operations,  cash flows and changes in stockholders' equity for each of
the two years in the period ended March 31, 1998, in conformity  with  generally
accepted   accounting   principles.   These   financial   statements   are   the
responsibility of the Company's management;  our responsibility is to express an
opinion on these  financial  statements  based on our audits.  We conducted  our
audits of these  statements  in  accordance  with  generally  accepted  auditing
standards which require that we plan and perform the audit to obtain  reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in  the  financial  statements,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.              

/s/ PricewaterhouseCoopers LLP                                                  

New York, New York                                                              
June 26, 1998                                                                   

 F-1

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                                                        [Enlarge/Download Table]


MICROFRAME, INC. AND SUBSIDIARY                                                                                    

Consolidated Balance Sheets                                                                                        
as of March 31, 1998 and 1997                                                                                      

                                                                                    1998                1997       
                                                                              -----------------  ------------------
                                   ASSETS                                                                          

                                                                                                                   
Current assets:                                                                                                    
   Cash and cash equivalents                                                    $       507,726     $       539,214
   Accounts receivable, less allowance for doubtful                                                                
      accounts of $126,000 and $100,000, respectively                                 2,667,319           1,898,810
   Inventory, net                                                                     1,425,351           1,030,343
   Current deferred tax assets                                                          366,137             314,242
   Prepaid expenses and other current assets                                            153,568             120,990
                                                                              -----------------  ------------------

        Total current assets                                                          5,120,101           3,903,599

Property and equipment at cost, net                                                     421,701             343,123
Capitalized software, less accumulated amortization                                                                
   of $1,054,827 and $812,257, respectively                                             396,351             315,568
Noncurrent deferred tax assets                                                          326,083                   -
Goodwill, less accumulated amortization of $26,130                                                                 
   and $16,230, respectively                                                             75,480              85,380
Security deposits                                                                        35,716              34,703
                                                                              -----------------  ------------------
      Total assets                                                               $    6,375,432      $    4,682,373
                                                                              =================  ==================

        LIABILITIES AND STOCKHOLDERS' EQUITY                                                                       
Current liabilities:                                                                                               
   Bank borrowings                                                               $      300,000                   -
   Current portion of long-term debt                                                     30,009              42,266
   Accounts payable                                                                     910,842             361,537
   Accrued payroll and related liabilities                                              348,397             280,512
   Deferred income                                                                      181,573             268,518
   Other current liabilities                                                            405,263             255,346
                                                                              -----------------  ------------------

      Total current liabilities                                                       2,176,084           1,208,179
                                                                              -----------------  ------------------

Commitments and contingencies (Notes 8 and 9)                                                                      
Deferred tax liabilities                                                                196,394             173,077
Long-term debt                                                                        -                      30,398

Stockholders' equity:                                                                                              
   Preferred stock - par value $10 per share; authorized                                                           
      200,000 shares, none issued                                                                                  
   Common  stock - par value  $.001 per  share;  authorized  50,000,000  shares,                                   
      issued  4,849,531  shares,  outstanding  4,849,131  shares and  subscribed                                   
      50,000 shares at March 31, 1998; issued 4,839,203 shares and outstanding                                     
      4,838,803 shares at March 31, 1997                                                  4,899               4,839
   Additional paid-in capital                                                         6,345,613           6,212,828
   Stock subscription receivable                                                      (104,000)          -         
   Accumulated deficit                                                              (2,231,638)         (2,942,948)
   Cumulative translation adjustment                                                    (7,920)          -         
                                                                              -----------------  ------------------

                                                                                      4,006,954           3,274,719

Less - Treasury stock, 400 shares, at cost                                              (4,000)             (4,000)
                                                                              -----------------  ------------------

      Total stockholders' equity                                                      4,002,954           3,270,719
                                                                              -----------------  ------------------

        Total liabilities and stockholders' equity                               $    6,375,432      $    4,682,373
                                                                              =================  ==================


 F-2

 The accompanying notes are an integral part of these consolidated
 financial statements.

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MICROFRAME, INC. AND SUBSIDIARY                                                 

                                                        [Enlarge/Download Table]


Consolidated Statements of Operations                                                     
for the years ended March 31, 1998 and 1997                                               

                                                             1998               1997      
                                                      ------------------  ----------------

                                                                                          
Net sales                                                   $ 10,217,911       $ 7,343,624

Cost of sales                                                  4,285,134         2,903,705
                                                      ------------------  ----------------

Gross margin                                                   5,932,777         4,439,919

Research and development expenses                              1,117,151           893,852
Selling, general and administrative expenses                   4,419,521         3,355,961
                                                      ------------------  ----------------

Income from operations                                           396,105           190,106

Interest income                                                   14,888            35,560
Interest expense                                                 (4,344)          (24,380)
                                                      ------------------  ----------------

Income before income tax benefit                                 406,649           201,286

Income tax benefit                                             (304,661)         (141,165)
                                                      ------------------  ----------------

Net income                                                   $   711,310       $   342,451
                                                      ==================  ================

Per share data:                                                                           
Basic                                                     $         0.15    $         0.07
Diluted                                                   $         0.14    $         0.07
                                                      ------------------  ----------------

Weighted average number of common shares outstanding           4,840,357         4,730,713
                                                      ------------------  ----------------


 The accompanying notes are an integral part of these consolidated
financial statements. 

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MICROFRAME, INC. AND SUBSIDIARY                                                 

                                                        [Enlarge/Download Table]


Consolidated Statements of Cash Flows                                                             
for the years ended March 31, 1998 and 1997                                                       

                                                                   1998               1997        
                                                             -----------------  ----------------- 

                                                                                                  
Cash flows from operating activities:                                                             
  Net income                                                       $  711,310            342,451  
   Adjustments to reconcile net income to net cash                                                
      provided by operating activities:                                                           
      Depreciation and amortization                                    485,738            360,263 
      Provision for doubtful accounts                                   26,000             55,751 
      Provision for inventory obsolescence                            (15,000)             75,000 
      Noncash stock-based compensation charge                           15,150                  --
      Deferred tax provision                                         (354,661)          (141,165) 
      Changes in operating assets and liabilities:                                                
        Accounts receivable                                          (794,509)          (414,000) 
        Inventory                                                    (380,008)           (20,473) 
        Prepaid expenses and other current assets                     (32,578)           (43,564) 
        Security deposits                                              (1,013)                280 
        Accounts payable                                               549,305           (34,082) 
        Accrued payroll and related liabilities                         67,885             10,738 
        Deferred income                                               (86,945)              9,662 
        Other current liabilities                                      141,997          (179,869) 
                                                             -----------------  ----------------- 

                 Net cash provided by operating activities             332,671             20,992 
                                                             -----------------  ----------------- 

Cash flows from investing activities:                                                             
   Capital expenditures                                              (311,846)          (120,131) 
   Capitalized software                                              (323,353)          (212,174) 
                                                             -----------------  ----------------- 

                 Net cash used in investing activities               (635,199)          (332,305) 
                                                             -----------------  ----------------- 

Cash flows from financing activities:                                                             
   Borrowings under line of credit                                     300,000         --         
   Repayments of debt                                                 (42,655)          (538,923) 
   Issuances of common stock                                            13,695          1,341,148 
                                                             -----------------  ----------------- 

                 Net cash provided by financing activities             271,040            802,225 
                                                             -----------------  ----------------- 

Net (decrease) increase in cash and cash equivalents                  (31,488)            490,912 

Cash and cash equivalents - beginning of period                        539,214             48,302 
                                                             -----------------  ----------------- 

Cash and cash equivalents - end of period                        $     507,726            539,214 
                                                             =================  ================= 

Supplemental information:                                                                         
      Cash paid during period for interest                      $        4,344             24,380 
                                                             -----------------  ----------------- 

Noncash investing and financing activities:                                                       
   Common stock issued in connection with European Business                                       
      Associates share earn out agreement                               12,538             15,877 
                                                             =================  ================= 


The accompanying notes are an integral part of these consolidated financial 
statements. 

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MICROFRAME, INC. AND SUBSIDIARY                                                 

                                                        [Enlarge/Download Table]


Consolidated Statements of Stockholders' Equity                                                                               
for the years ended March 31, 1998 and 1997                                                                                   

                             Common Stock        Additional     Stock                     Cumulative                 Total    
                                          Par     Paid-in    Subscription  Accumulated   Translation   Treasury  Stockholders'
                             Shares       Value   Capital     Receivable     Deficit      Adjustment     Stock      Equity    
                           -----------   ------  ----------  ------------  ------------   ----------  ---------    -----------

                                                                                                                              
Balance, March 31,1996       3,717,675    3,718  $4,856,924                $(3,285,399)   $           $  (4000)    $ 1,571,243

Net income                                                                      342,451                                342,451

Issuances of common stock    1,121,128    1,121   1,355,904                                                          1,357,025
                           -----------   ------  ----------  ------------  ------------   ----------  ---------    -----------

Balance, March 31, 1997      4,838,803    4,839   6,212,828                 (2,942,948)                 (4,000)      3,270,719
                           -----------   ------  ----------  ------------  ------------   ----------  ---------    -----------

Net income                                                                     711,310                                711,310 

Issuances of common stock       10,328       10      13,685                                                             13,695

Noncash stock-based                                                                                                           
compensation                                         15,150                                                             15,150

Stock subscription              50,000       50     103,950  $  (104,000)                                                     

Translation adjustments                                                                      (7,920)                   (7,920)
                           -----------   ------  ----------  ------------  ------------   ----------  ---------    -----------

Balance, March 31, 1998      4,899,131    4,899  $6,345,613  $  (104,000)  $(2,231,638)   $  (7,920)  $ (4,000)    $ 4,002,954
                           ===========   ======  ==========  ============  ============   ==========  =========    ===========


 The accompanying notes are an integral part of these consolidated
financial statements. 

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MICROFRAME, INC. AND SUBSIDIARY                                                 

Notes to Consolidated Financial Statements (Continued)                          
For the Years Ended March 31, 1998 and 1997                                     

MICROFRAME, INC. AND SUBSIDIARY                                                 

Notes to Consolidated Financial Statements                                      
For the Years Ended March 31, 1998 and 1997                                     

1.       Organization:                                                          

The Company                                                   

         MicroFrame,  Inc.,  founded in 1982,  designs,  develops  and markets a
         broad range of  security,  network  management  and remote  maintenance
         products for voice and data communications networks. By incorporating a
         variety of hardware and software options for user authentication, these
         products  can deter  unauthorized  dial-in  access to both  devices and
         systems  (such as  computers,  local area  networks and Private  Branch
         Exchange  telephone  switches),  while  allowing  authorized  personnel
         access to perform needed administration and maintenance of host devices
         and networks  from remote  locations.  The products  also provide alarm
         monitoring  and  reporting  capabilities,  a basis for  remote  network
management and maintenance.                                   

2.       Summary of Significant Accounting Policies:                            

Principles of Consolidation                                   

         The accompanying consolidated financial statements include the accounts
         of MicroFrame,  Inc. and its subsidiary (collectively,  the "Company").
       All material intercompany accounts and balances have been eliminated.

Cash and Cash Equivalents                                     

         The Company  considers all highly liquid  investments  with an original
         maturity  of three  months or less at the time of  purchase  to be cash
equivalents.                                                  

Inventory                                                     

         Inventory  is  stated  at the lower of cost  (first-in,  first-out)  or
         market,  and consists of hardware and software  components  designed to
interface with network communications environments.           

         The markets for the  Company's  products are  characterized  by rapidly
         changing  technology and the  consequential  obsolescence of relatively
         new  products.  The Company has  recorded  certain  estimated  reserves
 against inventories related to such technological obsolescence.

Property and Equipment                                        

         Property and  equipment  are stated at cost.  Depreciation  is provided
         using the  straight-line  method over the estimated useful lives of the
         assets,  which are  generally  three to five  years.  Expenditures  for
         maintenance  and repairs,  which do not extend the economic useful life
         of the related assets, are charged to operations as incurred.  Gains or
         losses on disposal of  property  and  equipment  are  reflected  in the
statements of operations in the period of disposal.           

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MICROFRAME, INC. AND SUBSIDIARY                                                 

Notes to Consolidated Financial Statements (Continued)                          
For the Years Ended March 31, 1998 and 1997                                     

2.       Summary of Significant Accounting Policies (Continued)                 

Capitalized Software                                          

         The  Company  capitalizes   computer  software   development  costs  in
         accordance  with the  provisions  of Statement of Financial  Accounting
         Standards No. 86,  "Accounting for the Costs of Computer Software to be
         Sold, Leased or Otherwise  Marketed" ("SFAS 86"). SFAS 86 requires that
         the Company  capitalize  computer  software  development costs upon the
         establishment  of the  technological  feasibility of a product,  to the
         extent that such costs are  expected  to be  recovered  through  future
sales of the product.                                         

         The Company capitalized  $323,353 and $212,174 of software  development
         costs for fiscal 1998 and 1997, respectively. These costs are amortized
         by the greater of the amount  computed using (i) the ratio that current
         gross  revenues from the sales of software bear to the total of current
         and anticipated  future gross revenues from sales of that software,  or
         (ii) the  straight-line  method over the  estimated  useful life of the
         product  (generally three years). It is reasonably  possible that those
         estimates of anticipated future gross revenues, the remaining estimated
         economic life of the product, or both will be reduced  significantly in
         the near term (due to competitive pressures). As a result, the carrying
         amount of the capitalized  software costs may be reduced  materially in
         the near term.  Amortization  expense totaled $242,570 and $162,925 for
fiscal 1998 and fiscal 1997, respectively.                    

Goodwill                                                      

         Goodwill,  which  represents  the excess of cost over the net assets of
         acquired  companies,  is being amortized on a straight-line  basis over
ten years.                                                    

Research and Development Costs                                

         The Company  charges all costs incurred to establish the  technological
         feasibility  of a product or  enhancement  to research and  development
expense.                                                      

Revenue Recognition Policy                                    

         The Company  records  revenue from product  sales upon  shipment to the
         customer if no significant  vendor obligations exist and collectibility
         is probable.  Maintenance contracts are sold separately and maintenance
         revenue  is  recognized  on a  straight-line  basis over the period the
         service is provided,  generally  one year.  At March 31, 1998 and 1997,
         the Company has deferred  income  related to  maintenance  contracts of
$181,573 and $268,518 respectively.                           

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MICROFRAME, INC. AND SUBSIDIARY                                                 

Notes to Consolidated Financial Statements (Continued)                          
For the Years Ended March 31, 1998 and 1997                                     

2.       Summary of Significant Accounting Policies (Continued)                 

Warranty Costs                                                

         Warranty  costs  associated  with the sale of hardware and software are
         accrued at the time of sale. The warranty  reserve as of March 31, 1998
         and 1997 included in other current  liabilities  amounts to $45,000 and
$35,000, respectively.                                        

Use of Estimates                                              

         The  preparation of financial  statements in conformity  with generally
         accepted  accounting  principles  requires management to make estimates
         and  assumptions  that  affect  the  reported  amounts  of  assets  and
         liabilities and disclosure of contingent  assets and liabilities at the
         date of the financial  statements and the reported  amounts of revenues
         and expenses  during the year.  Actual  results could differ from those
         estimates. The significant estimates include the allowance for doubtful
         accounts,  allowance  for  inventory  obsolescence,  deferred tax asset
valuation allowance and depreciation and amortization lives.  

Fair Value of Financial Instruments                           

         The carrying value of cash and cash equivalents,  accounts  receivable,
         accounts  payable,  accrued payroll and related  liabilities,  deferred
         income, and other current  liabilities  approximates fair value because
         of the relatively  short maturity of these  instruments.  The Company's
         line of credit has a variable  interest rate which adjusts with changes
         in market  interest  rates and the book value of such  indebtedness  is
deemed to approximate fair value.                             

Long-Lived Assets                                             

         Statement of Financial  Accounting  Standards No. 121,  "Accounting for
         the  Impairment  of  Long-Lived  Assets  and  Long-Lived  Assets  to be
         Disposed Of" ("SFAS 121"),  requires that long-lived assets be reviewed
         for impairment  whenever  events or changes in  circumstances  indicate
         that  the  carrying  amount  of  the  asset  in  question  may  not  be
         recoverable.  The Company adopted SFAS 121 during fiscal 1997 and there
         was no material impact on the Company's  financial  position or results
of operations.                                                

Per Share Data                                                

         Earnings per share has been  calculated in accordance with Statement of
         Financial  Accounting Standards ("SFAS") No. 128, "Earnings Per Share."
         The weighted  average number of common shares  outstanding  during 1998
         and 1997  were  used to  compute  basic  earnings  per  share.  Diluted
         earnings  per share is computed  using the weighted  average  number of
         common shares  outstanding  plus the dilutive  potential  common shares
         outstanding.  Dilutive  potential  common shares are additional  common
         shares assumed to be exercised,  which approximated 355,000 and 238,000
in 1998 and 1997, respectively.                               

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MICROFRAME, INC. AND SUBSIDIARY                                                 

Notes to Consolidated Financial Statements (Continued)                          
For the Years Ended March 31, 1998 and 1997                                     

2.       Summary of Significant Accounting Policies (Continued)                 

Foreign Currency Translation                                  

         The  financial  statements of the foreign  subsidiary  were prepared in
         local  currency and translated  into U.S.  dollars based on the current
         exchange  rate at the end of the  period  for the  balance  sheet and a
         weighted-average  rate for the period on the  statement of  operations.
         Translation  adjustments are reflected as foreign currency  translation
         adjustments in stockholders' equity and, accordingly, have no effect on
         net income.  Transaction  adjustments  for the foreign  subsidiary  are
included in income.                                           

Income Taxes                                                  

         The Company accounts for income taxes in accordance with the provisions
         of Statement of Financial Accounting Standards No. 109, "Accounting for
         Income Taxes" ("SFAS 109").  SFAS 109 requires  recognition of deferred
         tax liabilities and assets for the expected future tax  consequences of
         events  that have been  included  in the  financial  statements  or tax
         return.  Under this  method,  deferred tax  liabilities  and assets are
         determined based on the difference between the financial  statement and
         tax basis of assets and  liabilities  ("temporary  differences")  using
         enacted tax rates in effect for the year in which the  differences  are
         expected to reverse.  Recognition of a deferred tax asset is allowed if
         it is more  likely  than not that the  asset  will be  realized  in the
future.                                                       

Reclassification                                              

         The Company has reclassified certain prior year amounts to conform with
the 1998 presentation.                                        

3.       Inventory:                                                             

         Inventory,  net of reserve for obsolescence of $185,000 and $200,000 at
   March 31, 1998 and 1997, respectively, consists of the following:

                                1998                  1997
                                  ------------------   ---------------------

      Raw materials               $          818,132     $           625,583
      Work-in-process                        525,918                 374,802
      Finished goods                          81,301                  29,958
                                  ------------------   ---------------------

                                  $        1,425,351     $         1,030,343
                                  ==================   =====================

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MICROFRAME, INC. AND SUBSIDIARY                                                 

Notes to Consolidated Financial Statements (Continued)                          
For the Years Ended March 31, 1998 and 1997                                     

4.       Property And Equipment At Cost, Net:                                   

         At March 31,  1998 and 1997  property  and  equipment  consists  of the
following:                                                                      

                                               1998               1997
                                               --------------      -------------

      Demonstration and service equipment    $   1,125,987       $   832,478
      Furniture and fixtures                       195,767           180,940
      Leasehold improvements                        71,850            68,340
                                               -------------      --------------

                                                 1,393,604         1,081,758

       Less:  Accumulated depreciation             (971,903)         (738,635)
                                               -------------     ---------------

      Total                                  $     421,701      $    343,123
                                               =============      ==============

         Depreciation  expense for  property and  equipment  for the years ended
         March  31,  1998  and  1997   amounted  to   $233,268   and   $186,874,
respectively.                                                 

5.       Bank Borrowings:                                                       

         The Company has an available  line of credit  through July 30, 1998, in
         the amount of  $1,000,000.  At March 31, 1998,  $300,000 had been drawn
         down under this line of credit.  All  amounts  were unused at March 31,
         1997. The line is collateralized by all business assets of the Company.
         Any  advances  under the bank line are  payable at  maturity,  and bear
         interest  at the Wall Street  prime rate (8.5% at March 31,  1998) plus
         0.5%.  At March 31,  1996,  $500,000  was  outstanding  under a line of
         credit.  The final  installment on this  outstanding line of credit was
   made on September 5, 1996 at which time the bank line was closed.

         In  addition,  the Company had an  outstanding  facility of $150,000 to
         support 80% of its capital  expansion.  In November 1995,  $124,000 was
         borrowed  against  the  facility  with a term of three  years,  payable
         monthly, at an interest rate of 8.55%. Upon expiration of this facility
         at July 31, 1996,  the bank agreed to honor the existing  terms of this
         credit facility. At March 31, 1998 and 1997, respectively,  $30,009 and
         $72,664 was outstanding.  Future  principal  repayments under this loan
are $30,009 for the year ending March 31, 1999.               

         The bank line of credit contains a covenant which restricts the payment
of a dividend without the prior approval of the bank.         

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MICROFRAME, INC. AND SUBSIDIARY                                                 

Notes to Consolidated Financial Statements (Continued)                          
For the Years Ended March 31, 1998 and 1997                                     

6.       Income Taxes:                                                          

         As of March 31, 1998, the Company has available federal and foreign net
         operating loss  carryforwards of  approximately  $896,000 and $914,000,
         respectively,   to  offset  future  taxable  income.  The  federal  net
         operating loss carryforwards expire during the years 2001 through 2011.
         In  addition,  the  Company  has  investment  credit and  research  and
         development credit carryforwards  aggregating  approximately  $136,098,
         which may provide future tax benefits, expiring from 1999 through 2002.

         The  components of the income tax benefit for the years ended March 31,
1998 and 1997 are as follows:                                 

                                  1998              1997
                                  ---------------   ----------------

Current:                                                      
Federal                    $        16,000           -
State                               34,000           -
                                  ---------------   ----------------

                                    50,000           -
                                  ---------------   ----------------

Deferred:                                                     
        Federal                    $      (301,442)  $       (119,990)
        State                              (53,219)           (21,175)
                                  ---------------   ----------------

                                          (354,661)          (141,165)
                                  ---------------   ----------------

                                   $      (304,661)  $       (141,165)
                                  ===============   ================

         The reasons for the difference between the Company's effective tax rate
and the United States federal statutory rate are as follows:  

                                                   March 31,
                                                 -----------------------------
                                              1998              1997
                                                 -----------     -------------

Effective tax rate reconciliation:                            
      Statutory federal tax rate                         34%           34%
      State taxes, net of federal benefit                 6%            6%
      Effect of reversal of valuation allowance        (76)%         (70)%
      Foreign loss with no benefit                       29%           53%
      Utilization of NOL's                             (70)%         (93)%
Other                                               2%       -
                                                  ----------    ----------
                                                       (75)%         (70)%
                                                  ==========    ==========

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MICROFRAME, INC. AND SUBSIDIARY                                                 

Notes to Consolidated Financial Statements (Continued)                          
For the Years Ended March 31, 1998 and 1997                                     

6.       Income Taxes (Continued)                                               

         The tax effect of temporary  differences  which make up the significant
         components  of the net  deferred  tax asset and  liability at March 31,
1998 and 1997 are as follows:                                 

                                              1998              1997
                                                 -------------   ---------------

Current deferred tax assets:                                  
           Inventory                           $     214,000   $     192,000
           Accrued expenses                           83,737          82,242
           Allowance for doubtful accounts            68,400          40,000
                                               -------------   -------------

       Total current deferred tax assets       $     366,137   $     314,242
                                               =============   =============

Noncurrent deferred tax assets:                               
           Net operating loss carryforwards    $     715,669   $     834,324
           Research and development credit           136,098         131,046
Alternative minimum tax credit             21,572     
                                               -------------   -------------

       Total noncurrent deferred tax assets          873,339         965,370

        Valuation allowance                          (547,256)       (965,370)
                                               -------------   -------------

       Net noncurrent deferred tax assets      $     326,083   $           -
                                               =============   =============

Deferred tax liabilities:                                     
            Depreciation                        $     (37,854)  $     (46,849)
            Capitalized software                     (158,540)       (126,228)
                                               -------------   -------------

        Total deferred tax liabilities          $    (196,394)  $    (173,077)
                                               =============   =============

         The Company has recorded a valuation  allowance against the foreign net
         operating loss carryforwards and the research and development credit as
         it is more likely than not that such assets will not be  realized.  The
         change  in the  valuation  allowance  is due  to  the  reversal  of the
         valuation   allowance   recorded  against  the  remaining  federal  net
         operating loss carry forwards,  as management believes these assets are
         more likely than not to be utilized based on existing temporary taxable
         differences and expected  levels of future taxable  income,  as well as
         the  utilization of federal and state net operating loss  carryforwards
         offset  partially  by  the  increase  in  foreign  net  operating  loss
carryfowards during the year ended March 31, 1998.            

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MICROFRAME, INC. AND SUBSIDIARY                                                 

Notes to Consolidated Financial Statements (Continued)                          
For the Years Ended March 31, 1998 and 1997                                     

7.       Stockholders' Equity:                                                  

         During the year ended March 31, 1998, the Company  entered into a stock
         subscription  agreement  with one of its  directors,  under  which  the
         director agreed to acquire 50,000 shares of the Company's Common Stock.

         During the years ended March 31, 1998 and 1997,  respectively,  options
         to purchase 500 and 9,500  shares of common  stock under the  Company's
         stock option plans were exercised,  for an aggregate  consideration  of
         $625 and $15,755. In addition,  9,828 and 10,161 shares of common stock
         were  issued as part of the stock earn out as  stipulated  in the Share
         Purchase  Agreement  (see Note 12).  The  aggregate  fair value of this
consideration was $13,070 and $15,877.                        

         During the year ended March 31, 1996,  options to purchase 5,877 shares
         of common stock under the Company's  stock option plans were exercised,
         for an aggregate consideration of $9,425. In addition, 25,000 shares of
         common stock were issued as part of the  consideration for the purchase
         of European Business  Associates BVBA (see Note 12). The aggregate fair
         market  value of  consideration  of $78,124 was recorded as part of the
total consideration paid for this acquisition.                

         In April,  1996,  the Company  sold  860,000  shares of common stock to
         unrelated  investors,  at $1.25 per share and  received net proceeds of
         approximately  $1,023,559.  In conjunction with this sale,  warrants to
         purchase 860,000 shares of common stock with an exercise price of $1.50
         and warrants to purchase an additional  860,000  shares of common stock
         with an exercise price of $2.00 were issued.  These warrants  expire in
April, 2000.                                                  

         In addition,  the Company  sold 241,467  shares of common stock to four
         current  shareholders  of  record  who  held the  contractual  right to
         maintain their share of ownership. The Company received net proceeds of
         $301,834.  In conjunction with this sale,  warrants to purchase 241,467
         shares of common stock with an exercise  price of $1.50 and warrants to
         purchase an additional  241,467 shares of common stock with an exercise
price of $2.00 were issued.                                   
These warrants expire in April, 2000.                         

Warrants                                                      

         During October 1995, in connection  with services being  performed by a
         consultant,  the Company issued  250,000  warrants to the consultant to
         purchase  shares of the Company's  common  stock.  Warrants to purchase
         50,000  shares of common stock at $3.25 per share  vested  immediately.
         Warrants to purchase each  additional  block of 50,000 shares of common
         stock are  exercisable  at  $3.75,  $4.25,  $4.75 and $5.25 per  share,
         respectively,  and shall vest on each three  month  anniversary  of the
   agreement. The warrants expire five years from the date of grant.

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MICROFRAME, INC. AND SUBSIDIARY                                                 

Notes to Consolidated Financial Statements (Continued)                          
For the Years Ended March 31, 1998 and 1997                                     

7.       Stockholders' Equity (Continued)                                       

Stock Option Plans                          

         In August  1994,  the Company  adopted its 1994 Stock  Option Plan (the
         "1994 Plan"). The 1994 Plan, as amended, increased the number of shares
         of common  stock for  which  options  may be  granted  to a maximum  of
         1,250,000  shares.  The aggregate fair market value  (determined at the
         time the option is granted) of shares which are exercisable  during any
         calendar year by any one individual may not exceed  $100,000.  The term
         of these  non-transferable  stock options may not exceed ten years. The
         exercise  price of these stock  options may not be less than 100% (110%
         if the person  granted  such  options owns more than ten percent of the
         outstanding  common stock) of the fair market value of one common stock
         on the date of grant. During the year ended March 31, 1997, the Company
         granted  options to purchase  657,629  shares of its common stock under
         the 1994 Plan.  At March 31, 1997,  298,693  options  were  outstanding
 under the 1994 Plan, of which 270,483 options were exercisable.

         Of the  options  granted  in  1998,  455,645  were  granted  under  the
         Company's Time Accelerated Restricted Stock Award Plan ("TARSAP").  The
         options vest after seven years,  however,  under the TARSAP the vesting
         is  accelerated  to the  last  day of the  current  fiscal  year if the
         Company meets certain  predetermined sales and net income targets.  The
         Company  met the targets  for 1998 and,  as such,  all options  granted
under the TARSAP in 1998 vested as of March 31, 1998.         

Other Options                                                 

         During the year ended March 31, 1998, the Company issued 30,000 options
         to a  consultant,  of which 15,000 were  immediately  vested and 15,000
         were to vest  contingent on an extension of the  consulting  agreement.
         This agreement and the unvested options were  subsequently  terminated.
         Compensation  expense of $15,150 was recorded  relative to the grant of
the original 15,000 options during 1998.                      

         During  September 1996, the Company issued options to certain  officers
         and directors to purchase 620,000 shares of the Company's common stock,
         of which 420,000  vested  immediately  and 100,000 vest each April 1 of
         1998 and 1999.  Options  expire ten years  from the date of grant.  The
         exercise  price of the  options  is equal  to the  market  value of the
Company's stock on the date of grant.                         

         The Company also has outstanding  options to purchase 130,000 shares of
         the Company's stock. Options expire in terms ranging from 5 to 10 years
         from the date of grant.  The exercise  price of the options is equal to
the market value of the Company's stock on the date of grant. 

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MICROFRAME, INC. AND SUBSIDIARY                                                 

Notes to Consolidated Financial Statements (Continued)                          
For the Years Ended March 31, 1998 and 1997                                     

7.       Stockholders' Equity (Continued)                                       

Accounting for Stock-Based Compensation                       

         The Company continues to apply Accounting  Principles Board Opinion No.
         25,   "Accounting   for  Stock   Issued  to   Employees"   and  related
         Interpretations  in  accounting  for  its  options.   Accordingly,   no
         compensation  cost has been recognized for its fixed stock option plans
in its results of operations.                                 

         The Company has adopted the disclosure-only  provisions of Statement of
         Financial  Accounting  Standards No. 123,  "Accounting  for Stock-Based
         Compensation"  ("SFAS  123").  If the Company had elected to  recognize
         compensation  costs  based on the fair  value at the date of grant  for
         awards in fiscal 1998 and 1997,  consistent with the provisions of SFAS
         No. 123, the  Company's  net income and basic  earnings per share would
         have  been  reduced  by  $426,614  and  $.09  and  $462,088  and  $.10,
respectively.                                                 

         The  proforma  effect on net income for fiscal 1998 and 1997 may not be
         representative  of the pro forma  effect on net income of future  years
         because  the  SFAS  No.  123  method  of   accounting   for  pro  forma
         compensation  expense has not been applied to options  granted prior to
April 1, 1995.                                                

         The  weighted-average  fair values at date of grant for options granted
         during fiscal 1998 and 1997 were $1.00 and $.96, respectively. The fair
         value of each option grant for the Company's  common stock is estimated
         on the date of the grant using the Black Scholes  option pricing model,
         with the  following  weighted  average  assumptions  used for grants in
fiscal 1998 and 1997:                                         

                              1998          1997
                                 -----------------------------------

Expected volatility                     77%           77%       
Risk-free interest rate                6.34%         6.56%      
Expected option lives               5.54 years    6.34 years    

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MICROFRAME, INC. AND SUBSIDIARY                                                 

Notes to Consolidated Financial Statements (Continued)                          
For the Years Ended March 31, 1998 and 1997                                     

7.       Stockholders' Equity (Continued)                                       

Accounting for Stock-Based Compensation (Continued)           

Details of options granted are as follows:                    

                                                        [Enlarge/Download Table]


                                                               Weighted                          
                                                                Average                          
                                                               Exercise           Option Price   
                                            Shares               Price            Per Share ($)  
                                        --------------   ---------------------  -----------------
                                                                                                 
Options outstanding at March 31, 1996          435,998           2.11           1.25 to 3.13     
Granted                                      1,277,629           1.31           1.16 to 2.00     
Canceled                                      (636,634)          1.55           1.25 to 3.13     
Exercised                                       (9,500)          1.66           1.25 to 1.83     
                                        --------------                          -----------------

Options outstanding at March 31, 1997        1,067,493           1.49           1.16 to 2.87     

Granted                                        807,740           1.78           1.34 to 3.13     
Canceled                                       (79,937)          1.85           1.25 to 2.87     
Exercised                                         (500)          1.25                 1.25       
                                        --------------                          -----------------

Options outstanding at March 31, 1998        1,794,796           1.60           1.16 to 3.13     

 Options exercisable at March 31, 1998       1,425,932           1.65           1.16 to 3.13     

                                                        [Enlarge/Download Table]


                                           Options Outstanding                          Options Exercisable        
                        -------------------------------------------------------  ----------------------------------
                                                  Weighted                                                         
                                                  Average                                                          
                                                 Remaining         Weighted                                        
                                                  Years of          Average                                        
Range of                     Number             Contractual        Exercise                                        
Exercise Prices           Outstanding               Life             Price         Exercisable    Weighted         
----------------------  ----------------      ----------------  ---------------  ---------------  -----------      

                                                                                                                   
$1.16 - $1.72                    876,422         5.02               $  1.25          615,422        $ 1.26         
$1.83 - $2.14                    817,542         4.81               $  1.83          709,922        $ 1.81         
$2.25 - $3.13                    100,832         3.12               $  2.86          100,588        $ 2.86         


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MICROFRAME, INC. AND SUBSIDIARY                                                 

Notes to Consolidated Financial Statements (Continued)                          
For the Years Ended March 31, 1998 and 1997                                     

8.       Commitments:                                                           

Operating Leases                                              

         In  June  1993,   the   Company   amended  its  lease  for  office  and
         manufacturing facilities.  Such amendment extends the term of the lease
         until June 30, 1999. In July 1995,  the Company  executed an additional
         building   lease  for  the   purpose  of   expanding   its  office  and
         manufacturing  facilities.  The terms of the new lease  provide  for an
         expiration date concurrent with that of the existing building lease. In
         August  1996,  the Company  executed a building  lease for its European
  operation in Antwerp, Belgium. The lease expires in August 1999.

         The fixed minimum payments under operating leases for future periods is
as follows:                                                   

Year ending March 31,                           
1999                       $          150,800 
2000                                   44,500 
2001                                        0 
2002                                        0 
2003                                        0 
Thereafter                                  0 
                          ------------------

Total minimum lease payments $         195,300  
                           =================

         Rent  expense,  in addition to allocated  occupancy  expenses,  for the
         years ended March 31, 1998 and 1997 approximated $153,954 and $145,700,
respectively.                                                 

Consulting Contract                                           

         The Company  entered into a consulting  agreement with an officer which
         became   effective  upon  the  expiration  (or  mutually   agreed  upon
         termination) of his employment  agreement on May 2, 1995. The agreement
         provides  that the officer  will not receive less than $40,000 per year
         nor more than  $220,000  per year,  the amount of which is dependent on
         the level of  services  provided.  The costs  incurred  related  to the
         consulting  agreement  are $33,000 and $40,000,  respectively,  for the
years ended March 31, 1998 and 1997.                          

         In connection with the acquisition of European Business Associates BVBA
         of  Brussels,  Belgium from Marc  Kegelaers  (see Note 12), the Company
         entered into a consulting  agreement  with Mr.  Kegelaers for a term of
         five years. The consulting  agreement provides for an annual consulting
         fee of $75,000 with 5% annual  increments,  as well as reimbursement of
certain expenses.                                             

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MICROFRAME, INC. AND SUBSIDIARY                                                 

Notes to Consolidated Financial Statements (Continued)                          
For the Years Ended March 31, 1998 and 1997                                     

9.       Contingent Liabilities:                                                

         From time to time the  Company  and its  subsidiary  may be involved in
         legal  proceedings,  claims and  assessments  arising  in the  ordinary
         course of business.  In the opinion of management,  the outcome of such
         current  legal  proceedings,  claims and  assessments  would not have a
         material effect on the Company's reported financial  position,  results
         of  operations  or cash flows as of and for the years  ended  March 31,
1998 and 1997.                                                

10.      Employee Benefit Plans:                                                

         Effective  April 1, 1993,  the Company  adopted a defined  contribution
         savings  plan.  The terms of the plan  provide for  eligible  employees
         ("participants")  who have met certain age and service  requirements to
         participate  by electing to  contribute up to 15% of their gross salary
         to  the  plan,  as  defined,   with  the  Company  matching  30%  of  a
         participant's  contribution  in cash  up to a  maximum  of 6% of  gross
         salary, as defined.  Company  contributions  vest at the rate of 25% of
         the  balance  at each  employee's  second,  third,  fourth,  and  fifth
         anniversary of employment. The employees' contributions are immediately
         vested.  The Company's  contribution  to the savings plan for the years
      ended March 31, 1998 and 1997 was $28,222 and $27,641, respectively.

         The Company has a plan in effect under which its employees earn a bonus
         if the Company meets a  predetermined  revenue target for the year. The
         Company met the target for 1998 and has accrued approximately  $117,000
for payment of bonuses under the plan.                        

11.      Sales:                                                                 

         Sales by  geographic  area for the years  ended March 31, 1998 and 1997
are as follows:                                               

                                     1998               1997
                                        ------------------  --------------------

                United States          $        7,435,586  $         5,813,584
                Europe                          2,677,193            1,047,980
                Pacific Rim                        23,611              349,732
                Other                              81,521              132,328
                                       ------------------   ------------------
                                       $       10,217,911   $        7,343,624
                                        -=================   ===================

         The  Company  sold a  substantial  portion  of  its  products  to  four
         customers.  Sales to these customers amounted to $6,232,390 (61% of net
         sales) in 1998 and $2,547,894 in 1997 (35% of net sales), respectively.
         At March 31, 1998 and 1997,  amounts due from these customers  included
         in accounts receivable,  were $1,279,486 and $1,022,787,  respectively.
         The loss of any of these customers would have a material adverse effect
on the Company's financial position and results of operations.

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MICROFRAME, INC. AND SUBSIDIARY                                                 

Notes to Consolidated Financial Statements (Continued)                          
For the Years Ended March 31, 1998 and 1997                                     

12.      Concentration of Credit Risk:                                          

         The Company  maintains  deposits in a  financial  institution  which is
         insured by the Federal  Deposit  Insurance  Corporation  ("FDIC") up to
         $100,000.  At March 31,  1998 and  periodically  throughout  1998,  the
         Company had  deposits in this  financial  institution  in excess of the
amount insured by the FDIC.                                   

13.      Impact of The Future Adoption of Recently Issued Accounting Standards: 

         Effective  with the first  quarter of fiscal year 1999 the Company will
         adopt  SFAS  No.  130,  "Reporting   Comprehensive  Income".  SFAS  130
         establishes  the standards for reporting and  displaying  comprehensive
         income and its  components  (revenues,  expenses,  gains and losses) as
         part of a full set of financial  statements.  This  statement  requires
         that all  elements of  comprehensive  income be reported in a financial
         statement that is displayed with the same prominence as other financial
         statements.  Since this standards  applies only to the  presentation of
         comprehensive  income,  it will not have any  impact  on the  Company's
results of operations, financial position or cash flows.      

         In June 1997, the Financial Accounting Standards Board issued SFAS 131,
         "Disclosure  about Segments of an Enterprise  and Related  Information"
         which becomes effective for financial  statements for periods beginning
         after December 15, 1997. This Statement  establishes  standards for the
         way that public business enterprises report information about operating
         segments  in  annual   financial   reports  and  requires   that  those
         enterprises  report selected  information  about operating  segments in
         interim financial  reports issued to shareholders.  It also establishes
         standards  for  related   disclosures   about  products  and  services,
         geographic   areas,  and  major  customers.   Management  is  currently
evaluating the impact of SFAS 131 on the financial statements.

         In February 1998, the Financial  Accounting Standards Board issued SFAS
         132,  "Employers'  Disclosures about Pensions and Other  Postretirement
         Benefits"   which  becomes   effective  for  the  Company's   financial
         statements  for the year ended March 31,  1999.  SFAS No. 132  requires
         revised  disclosures  about pension and other  postretirement  benefits
         plans and is not  expected to have a material  impact on the  Company's
financial statements.                                         

         In June 1998, The Financial Accounting Standards Board issued SFAS 133,
         "Accounting for Derivative  Instruments and Hedging  Activities"  which
         becomes  effective  for all fiscal  quarters of fiscal years  beginning
         after  June  15,  1999.  This  Statement  establishes   accounting  and
         reporting  standards  for  derivative  instruments,  including  certain
         derivative  instruments  embedded in other  contracts,  and for hedging
         activities.  The  adoption of this  standard is not  expected to have a
material impact on the Company's financial statements.        

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MICROFRAME, INC. AND SUBSIDIARY                                                 

Notes to Consolidated Financial Statements (Continued)                          
For the Years Ended March 31, 1998 and 1997                                     

14.      Subsequent Events:                                                     

         On June 23,  1998,  the Company  entered  into an  agreement to acquire
         Solcom  Systems,  Ltd.  ("Solcom"),  a developer  of remote  monitoring
         technology,  for  approximately  5.6  million  shares  and  options  to
         purchase  shares of the Company's  common  stock.  The  acquisition  is
expected to be completed in the second quarter of 1999.       

         The  acquisition  of Solcom will be  accounted  for under the  purchase
         method,  whereby the purchase price will be allocated to the underlying
assets and liabilities based upon their estimated fair values.

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APPENDIX G

MICROFRAME, INC. FORM 10-QSB
FOR THE PERIOD ENDED DECEMBER 31, 1998

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 U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 FORM 10-QSB

[X]     QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 
ACT OF 1934                                                   

For the quarterly period ended December 31, 1998              

OR
[ ]     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934                                                   

For the transition period from ____________ to ____________   

Commission File No.: 0-13117
                     -------

MICROFRAME, INC.
----------------- 
(Exact Name of Small Business Issuer in Its Charter)

New Jersey                                     22-2413505   
-------------------------------             ------------------------------------
(State or Other Jurisdiction of             (IRS Employer Identification Number)
Incorporation or Organization)                                                  

21 Meridian Road, Edison, New Jersey 08820
------------------------------------------
(Address of Principal Executive Offices)

(732) 494-4440
 ---------------
(Issuer's telephone number, including area code)

Check whether the issuer:  (1) filed all reports required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.                       

Yes      X         No                                                           
---           ---                                               

There were 5,586,367 shares of Common Stock outstanding as of February 16, 1999.

Transitional Small Business Disclosure Format:                                  

Yes                No  X                                                        
---           ---                                               

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 MICROFRAME, INC. AND SUBSIDIARY

 FORM 10-QSB

 FOR THE QUARTER ENDED DECEMBER 31, 1998

                                                        [Enlarge/Download Table]


PART I.  FINANCIAL INFORMATION                                                   Page 
                                                                                      

Item 1.  Condensed Consolidated Financial Information                              1  

         Condensed Consolidated Balance Sheets as of December 31, 1998                
               and March 31, 1998 (Unaudited)                                      2  

         Condensed Consolidated Statements of Operations for the Three and Nine       
               Months Ended December 31, 1998 and 1997 (Unaudited)                 3  

         Condensed Consolidated Statements of Cash Flows for the Nine                 
               Months Ended December 31, 1998 and 1997 (Unaudited)                 4  

         Notes to Condensed Consolidated Financial Statements (Unaudited)         5-7 

Item 2.  Management's Discussion and Analysis                                     8-12

PART II. OTHER INFORMATION                                                            

Item 6.  Exhibits and Reports on Form 8-K                                          12 


SIGNATURES                                                                      

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 PART I. FINANCIAL INFORMATION

Item 1.       Condensed Consolidated Financial Information.                     
--------------------------------------------        

         The condensed  consolidated  financial  statements included herein have
been  prepared  by the  registrant  without  audit  pursuant  to the  rules  and
regulations of the Securities and Exchange  Commission.  Although the registrant
believes that the disclosures are adequate to make the information presented not
misleading,  certain information and footnote  disclosures  normally included in
financial  statements  prepared in accordance with generally accepted accounting
principles   have  been  condensed  or  omitted   pursuant  to  such  rules  and
regulations.  It is suggested that these condensed financial  statements be read
in  conjunction  with the audited  financial  statements  and the notes  thereto
included  in the  registrant's  Annual  Report on Form 10-KSB for the year ended
March 31, 1998.                                                                 

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MicroFrame, Inc. and Subsidiary                                                 
Condensed Consolidated Balance Sheets                                           
--------------------------------------------------------------------------------
(unaudited)                                                                     

                                                        [Enlarge/Download Table]


                                                                  December 31,         March 31,
                              ASSETS                                 1998                1998   
Current assets                                                                                  
                                                                                                

    Cash and cash equivalents                                  $     345,892    $      507,726  
    Accounts receivable, less allowance for doubtful                                            
       accounts of $95,249 and $126,000                            2,823,565         2,667,319  
    Inventory, net                                                 2,036,567         1,425,351  
    Deferred tax asset                                               337,512           366,137  
    Prepaid expenses and other current assets                        461,557           153,568  
                                                                  ----------       -----------  
           Total current assets                                    6,005,093         5,120,101  
    Property and equipment at cost, net of Accumulated                                          
       Depreciation and Amortization of $585,015 and $971,903        693,423           421,701  
    Capitalized software, less accumulated amortization                                         
       of $1,309,856 and $1,054,827                                1,426,567           396,351  
   Noncurrent deferred tax assets                                          0           326,083  
   Goodwill, less accumulated amortization of $33,555                                           
        and $26,130                                                   68,055            75,480  
   Security deposits                                                  39,798            35,716  
   Other assets                                                    1,026,064                    
                                                                  ----------       -----------  
           Total assets                                        $   9,259,000    $    6,375,432  
                                                                  ==========       ===========  

                                                        [Enlarge/Download Table]


               LIABILITIES AND STOCKHOLDERS' EQUITY                                                
Current liabilities                                                                                
                                                                                                   

    Current portion of long-term debt                            $    1,100,428   $       330,009  
    Accounts payable                                                  1,694,260           910,842  
    Accrued payroll and related liabilities                             212,348           348,397  
   Deferred income                                                       95,673           181,573  
   Other current liabilities                                            337,697           405,263  
                                                                     ----------      ------------  
           Total current liabilities                                  3,440,406         2,176,084  
Deferred tax liabilities, net                                            48,888           196,394  
Long-term debt                                                          500,000                 0  
Commitments and contingencies                                                                      
Stockholders' equity                                                                               
   Common stock - par value $.001 per share; authorized                                            
       50,000,000 shares, issued 5,558,428 shares and                                              
       outstanding 5,496,397 shares at December 31, 1998;                                          
       issued 4,849,531 shares and outstanding 4,849,131 shares                                    
       and subscribed 50,000 shares at March 31, 1998                     6,652             4,899  
   Preferred stock - par value $10 per share;                                                      
       authorized 200,000 shares, none issued                                                      
   Additional paid-in capital                                         7,366,221         6,345,613  
    Stock subscription receivable                                                        (104,000) 
    Accumulated deficit                                              (1,886,534)       (2,231,638) 
   Cumulative translation adjustment                                     (9,434)           (7,920) 
                                                                    ------------    ---------------
                                                                      5,476,905         4,006,954  
   Less - Treasury stock, 62,031 shares, at cost                       (207,199)           (4,000) 
                                                                     ----------     ---------------
           Total stockholders' equity                                 5,269,706         4,002,954  
                                                                     ----------     ---------------
           Total liabilities and stockholders' equity            $    9,259,000   $     6,375,432  
                                                                     ==========     ===============

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MicroFrame, Inc. and Subsidiary                                                 
Condensed Consolidated Statements of Operations                                 
--------------------------------------------------------------------------------
(unaudited)                                                                     

                                                        [Enlarge/Download Table]


                                               Three Months Ended                         Nine Months Ended      
                                                  December 31,                               December 31,        
                                                  ------------                               ------------        
                                          1998                   1997                1998                  1997  
                                                                                                                 

Net sales                           $   3,273,701        $    3,051,537       $   9,451,604       $    7,069,810 
Cost of sales                           1,372,154             1,366,641           3,436,590            3,153,739 
                                      -----------           -----------         -----------          ----------- 
Gross Margin                            1,901,547             1,684,896           6,015,014            3,916,071 
   Research and development                                                                                      
      expenses                            232,702               254,796           1,285,809              722,144 
   Selling, general and                                                                                          
      administrative expenses           1,488,556             1,213,739           4,125,665            3,075,161 
                                      -------------          -----------         -----------          -----------
Income from operations                    180,289               216,361             603,540              118,766 
Interest income                                 0                 5,448               5,139               14,652 
Interest expense                          (25,445)                 (980)            (55,725)               3,617 
                                      -------------          -----------         -----------          -----------
Income before income tax provision                                                                               
   (benefit)                              154,844               220,829             552,954              129,801 
Income tax provision (benefit)             59,259              (144,690)            207,850             (152,410)
                                      -------------         --------------      --------------       ----------- 
Net income                          $      95,585        $     365,519      $       345,104       $      282,211 
                                      =============         ==============      ==============       ============
Per share data                                                                                                   
   Basic                                                                                                         
                                    $        0.02        $        0.08      $          0.06       $         0.06 
                                       ===========           ===========         ==============       ===========
   Diluted                          $        0.02        $        0.07      $          0.05       $         0.06 
                                       ===========           ===========         ==============       ===========


The  accompanying  notes are an integral  part of these  condensed  consolidated
financial statements.                                                           
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MicroFrame, Inc. and Subsidiary                                                 
Condensed Consolidated Statements of Cash Flows                                 
--------------------------------------------------------------------------------
(unaudited)                                                                     

                                                        [Enlarge/Download Table]

                                                                       Nine Months Ended       
                                                                           December 31,        
                                                                    1998                1997   
                                                                                               

Cash flows from operating activities                                                           
Net income (loss)                                             $   345,104          $   282,211 
Adjustments to reconcile net income to net cash                                                
   provided by operating activities                                                            
      Depreciation and amortization                               454,418              314,626 
      Provision for bad debts                                     (30,751)             (44,374)
      Deferred tax provision                                      207,850             (152,410)
      Increase (decrease) in                                                                   
         Accounts receivable                                     (125,495)            (910,449)
         Inventory                                               (611,216)            (237,029)
         Prepaid expenses and other current assets               (307,989)             (24,502)
         Security deposits                                         (4,082)              (2,436)
      (Increase) decrease in                                                                   
         Accounts payable                                         783,418              620,417 
         Accrued payroll and related liabilities                 (136,049)            (166,316)
         Deferred income                                          (85,900)             246,964 
         Other current liabilities                                (67,566)             127,746 
                                                          ---------------           -----------
         Net cash provided by operating activities                421,742               54,448 
                                                          ---------------           -----------
Cash flows from investing activities                                                           
   Capital expenditures                                          (383,582)            (126,217)
   Capitalized software                                        (1,285,245)            (179,917)
   Other assets                                                (1,026,064)                     
                                                           ---------------          -----------
         Net cash used in investing activities                 (2,694,891)            (306,134)
                                                           --------------           -----------
Cash flows from financing activities                                                           
   Repayments of debt                                             (30,009)             (31,609)
   Proceeds of short-term borrowings                            1,300,428                      
   Issuance of common stock                                       840,896                  624 
                                                              -------------         -----------
         Net cash provided by (used in) financing activities    2,111,315              (30,985)
                                                              -------------         -----------
Net decrease in cash and cash equivalents                        (161,834)            (282,671)
Cash and cash equivalents - beginning of period                   507,726              539,214 
                                                              -------------         -----------
Cash and cash equivalents - end of period                    $    345,892         $    256,543 
                                                              =============         ===========


The  accompanying  notes are an integral  part of these  condensed  consolidated
financial statements.                                                           
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MicroFrame, Inc. and Subsidiary                                                 
Notes to Condensed Consolidated                                                 
Financial Statements                                                            
December 31, 1998                                                               
--------------------------------------------------------------------------------
(Unaudited)                                                                     

Note 1 - Condensed Consolidated Financial Statements:                           
----------------------------------------------------                            

The condensed  consolidated balance sheets as of December 31, 1998 and March 31,
1998, the condensed consolidated statements of operations for the three and nine
month  periods ended  December 31, 1998 and 1997 and the condensed  consolidated
statements  of cash  flows  for the nine  month  periods  then  ended  have been
prepared  by the  Company  without  audit.  In the  opinion of  management,  all
adjustments (which include only normal recurring  adjustments) necessary for the
fair presentation of the Company's financial position, results of operations and
cash flows at December 31, 1998 and 1997 have been made.                        

Certain  information  and footnote  disclosures  normally  included in financial
statements prepared in accordance with generally accepted accounting  principles
have been condensed or omitted.  It is suggested that these condensed  financial
statements be read in  conjunction  with the audited  financial  statements  and
notes  thereto  included in the annual  report on Form 10-KSB for the year ended
March 31, 1998.                                                                 

Note 2 - Inventory:                                                             
------------------                                                              

Inventory consists of the following:                                            

                                  December 31,           March 31,
                                   1998                   1998

Raw materials                            $ 1,455,619          $ 1,003,132       
Work in process                              682,981              525,918       
Finished goods                                82,967               81,301       
                                  -----------          -----------
                                    2,221,567            1,610,351
Less, allowance for obsolescence            (185,000)            (185,000)      
                                  -----------          -----------
Total                             $ 2,036,567          $ 1,425,351
                                  ===========          ===========

Note 3 - Earnings Per Share:                                                    
---------------------------                                                     

The Company has adopted the  provisions  of the Financial  Accounting  Standards
Board's  Statement of Financial  Accounting  Standards  No. 128,  "Earnings  Per
Share"  ("SFAS 128") in the quarter ended  December 31, 1997.  All prior periods
presented have been restated to account for this change.                        
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MicroFrame, Inc. and Subsidiary                                                 
Notes to Condensed Consolidated                                                 
Financial Statements                                                            
December 31, 1998                                                               
--------------------------------------------------------------------------------
(Unaudited)                                                                     

The  computation  of Basic  Earnings Per Share is based on the weighted  average
number of common shares  outstanding for the period.  Diluted Earnings Per Share
is based on the weighted  average  number of common shares  outstanding  for the
period  plus the  dilutive  effect of common  stock  equivalents,  comprised  of
outstanding stock options and warrants.                                         

The following is a reconciliation  of the denominator used in the calculation of
basic and diluted earnings per share:                                           

                                                                [Download Table]


                               Three Months  Three Months  Nine Months   Nine Months
                                   Ended         Ended        Ended         Ended   
                                 12/31/98      12/31/97     12/31/98      12/31/97  
                                 --------      --------     --------      --------  
                                                                                    

Weighted Average # of Shares                                                        
  Outstanding                   5,465,331      4,839,303    5,490,922     4,697,257 
Incremental Shares for Common                                                       
  Equivalents                     727,023        207,368      964,476       288,652 
                                ---------      ---------    ---------   ----------- 
Diluted shares outstanding      6,192,354      5,046,671    6,455,398     4,985,909 
                                =========      =========    =========   =========== 


Note 4 - Comprehensive Income:                                                  
-----------------------------                                                   

The Company adopted  Statement of Financial  Accounting  Standards  ("SFAS") No.
130, "Reporting Comprehensive Income".                                          

The  following  table  reflects  the  reconciliation  between net income per the
financial statements and comprehensive income:                                  

                                                        [Enlarge/Download Table]


                                        Three Months  Three Months  Nine Months  Nine Months
                                           Ended          Ended        Ended        Ended   
                                          12/31/98      12/31/97     12/31/98     12/31/97  
                                          --------      --------     --------     --------  
                                                                                            

Net income                                $95,585      $ 365,519    $ 345,104    $ 282,211  
Effect of foreign currency translation    (11,755)          -          (1,514)        -     
                                          --------      --------                            
Comprehensive income                      $83,830      $ 365,519    $ 343,590    $ 282,211  
                                          ========      ========     ========     ========= 

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MicroFrame, Inc. and Subsidiary                                                 
Notes to Condensed Consolidated                                                 
Financial Statements                                                            
December 31, 1998                                                               
--------------------------------------------------------------------------------
(Unaudited)                                                                     

Note 5 - Long Term Debt and Bank Borrowings:                                    
-------------------------------------------                                     

In October 1998, the Company  successfully  negotiated with United National Bank
to provide  the Company  with a  $2,000,000  line of credit and a $500,000  term
loan,  collateralized by the Company's accounts receivable.  The borrowings bear
interest at the prime rate (8.25% at December 31, 1998) plus 25 basis points.   

Note 6 - Recent Pronouncements:                                                 
------------------------------                                                  

In June 1997, the Financial  Accounting  Standards Board (FASB) issued SFAS 131,
"Disclosure  about  Segments of an  Enterprise  and Related  Information"  which
becomes effective for financial  statements for periods beginning after December
31, 1997. This Statement  establishes standards for the way that public business
enterprises  report  information  about operating  segments in annual  financial
reports and requires that those  enterprises  report selected  information about
operating segments in interim financial reports issued to shareholders.  It also
establishes  standards  for related  disclosures  about  products and  services,
geographic  areas,  and major  customers.  The adoption of this  standard is not
expected to have a material impact on the Company's financial statements.       

In February 1998,  the FASB issued SFAS No. 132,  "Employers'  Disclosure  about
Pensions  and  Other  Postretirement   Benefits."  Among  other  provisions,  it
standardizes   certain   disclosure   requirements   for   pension   and   other
postretirement  benefits,  requires  additional  information  on  changes in the
benefit obligations and fair values of plan assets, and eliminates certain other
disclosures. The standard is effective for fiscal years beginning after December
15, 1997.  Since the standard  applies only to the  presentation  of pension and
other postretirement benefit information and MicroFrame does not currently offer
such plans,  the statement does not have any impact on  MicroFrame's  results of
operations, financial position or cash flows.                                   

In March 1998, the American  Institute of Certified  Public  Accountants  issued
Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software
Developed  or  Obtained  for  Internal  Use." Among  other  provisions,  the SOP
requires that  entities  capitalize  certain  internal-use  software  costs once
certain  criteria are met. The SOP is effective  for  financial  statements  for
fiscal  years  beginning  after  December 15, 1998,  through  early  adoption is
encouraged.  Management  is  currently  assessing  the  impact  on  MicroFrame's
consolidated financial statements.                                              

In June  1998,  the  FASB  issued  SFAS  No.  133,  "Accounting  for  Derivative
Instruments and Hedging  Activities."  Among other provisions,  it requires that
entities recognize all derivatives as either assets                             

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or  liabilities  in the  statement  of  financial  position  and  measure  those
instruments at fair value.  Gains and losses  resulting from changes in the fair
values of those  derivatives  would be accounted for depending on the use of the
derivative  and whether it  qualifies  for hedge  accounting.  This  standard is
effective  for fiscal  years  beginning  after  June 15,  1999,  though  earlier
adoption is encouraged and  retroactive  application  is prohibited.  Management
does not expect  the  adoption  of this  standard  to have a material  impact on
MicroFrame's results of operations, financial position or cash flows.           

Item 2.      Management's Discussion and Analysis                               
------------------------------------                  

         A number of  statements  contained  in this report are  forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 that involve  risks and  uncertainties  that could cause actual  results to
differ materially from those expressed or implied in the applicable  statements.
These  risks and  uncertainties  include,  but are not  limited  to,  the recent
introduction of, and the costs  associated with, a new product line;  dependence
on the acceptance of this new family of products; risks related to technological
factors;  potential manufacturing  difficulties;  dependence on third parties; a
limited customer base; and liability risks.                                     

Results of  Operations-Three  Months ended December 31, 1998 verses Three Months
ended December 31, 1997                                                         

         Revenues for the quarter  ended  December 31, 1998 were  $3,273,701  as
compared with revenues of $3,051,537 for the quarter ended December 31, 1997, an
increase of  approximately  7.3%.  The increase was  primarily  due to increased
shipments of the Company's  Sentinel 2000 product line. The Company continued to
see  interest  in other  members of the family of SNS  products,  including  the
Manager 2000 and Segasys 2000. The Company's revenues continued to be positively
impacted as a result of shipments  to both the  European  and domestic  markets,
including  shipments under its contracts with PTT Holland,  MCI, AT&T and Lucent
Technologies.                                                                   

         The Company's  cost of goods sold  increased  from  $1,366,641  for the
quarter ended December 31, 1997 to $1,372,154 for the quarter ended December 31,
1998. The Company's  cost of goods sold as a percentage of sales  decreased from
45% for the previous  comparable  fiscal  period to 42% for this fiscal  period.
This is due to the fact that the  Company  continues  to focus on  lowering  the
costs  related  to the  manufacture  of  products  and has seen an  increase  in
software related sales that generate a higher margin.                           

         Research  and  development   expenses,   net  of  capitalized  software
development,  decreased to $232,702 from $254,796 in the quarter ended  December
31, 1997. As a result of increased  capitalization of  technologically  feasible
projects,  research  and  development  expenses  as  a  percentage  of  revenues
decreased  from  8.3% to 7.1%.  Selling,  general  and  administrative  expenses
increased  approximately  22.6% from $1,213,739 for the prior year's  comparable
quarter to $1,488,556 for the quarter ended December 31, 1998.                  

         The Company's income from operations  increased 13% to $180,289 for the
three months ended  December 31, 1998 compared to $216,361 for the same period a
year ago. Primarily due to                                                      
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the fact that  during  the  period  ended  December  31,  1997,  there was a tax
benefit, as compared to a tax expense for the period ended December 31,1998, the
net income for the period ended December 31, 1998 decreased approximately 74% to
$95,585  compared to net income of $365,519 for the quarter  ended  December 31,
1997.                                                                           

First Nine Months of Fiscal 1999 Versus First Nine Months Fiscal 1998           

         Revenues for the nine months ended December 31, 1998 were $9,451,604 as
compared with revenues of $7,069,810 for the  comparable  period of the previous
fiscal year, an increase of  approximately  34%. This  improvement is due to the
success of the Company's Sentinel 2000 family of products,  continued  shipments
into the European market, sales of Segasys 2000 and increased software sales and
continued  shipments into the expanding  domestic  market for Business  Oriented
Network  Management.  The Company's  revenues for the nine months ended December
31, 1998  continued  to be  positively  impacted as a result of shipments to the
European market,  including shipments under its contract with PTT Holland and in
the US, market  shipments to MCI, AT&T and Lucent  Technologies.  The Company is
continuing to aggressively pursue customers in the global market place.         

         The Company's  cost of goods sold  increased to $3,436,590 for the nine
months ended  December 31, 1998 compared to $3,153,739 for the nine months ended
December 31, 1997 as a result of increased  shipment levels.  Cost of goods sold
as a percentage of sales decreased from 45% for the previous  comparable  fiscal
period  to 36% for  this  fiscal  period.  This is  primarily  a  result  of the
increased  sales  volume of the  Company's  product  lines and the fact that the
Company  continues to focus on lowering the costs related to the  manufacture of
products and has increased software related sales that generate a higher margin.
The Company expects continued manufacturing  efficiencies as the products mature
and through improvement of purchasing and materials management systems.         

         Research  and  development   expenses,   net  of  capitalized  software
development,  increased from $722,144 in the nine months ended December 31, 1997
to  $1,285,809  during the nine months ended  December 31, 1998,  an increase of
78%,  primarily as a result of the increase in development and engineering staff
under  the  Company's  growth  plan  and  payments  to  SolCom  Systems  Limited
("SolCom") under certain  technology  agreements.  The Company paid $150,000 and
$350,000  for the three month and nine month  periods  ended  December 31, 1998,
respectively,   to  SolCom  under  such  technology  agreements.   Research  and
development  expenses as a percentage of revenues increased to 13.4% compared to
approximately  10%  in the  prior  year.  Selling,  general  and  administrative
expenses  increased 34% from $3,075,161 for the prior year's  comparable  fiscal
period  to  $4,125,665  for the  nine  months  ended  December  31,  1998.  As a
percentage of revenues,  selling,  general and administrative  expenses remained
relatively  constant from the fiscal quarter ended December 31, 1998 as compared
with the fiscal quarter ended December 31, 1997.                                

         Due to the factors  outlined  above,  the Company had income before net
interest  expense and taxes of $603,540 for the nine months  ended  December 31,
1998 compared to $118,766 for the nine                                          

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months  ended  December  31,  1997,  an  increase of 408%.  The Company  expects
continued  positive  growth as a result of the increase in the sales force and a
resulting  increase  in sales  volumes  and  manufacturing  efficiencies  gained
thereby as its  products  continue to mature.  The net income for the period was
$345,104  compared to a net increase of $282,211 for the same period in 1997, an
increase of 22%.                                                                

Financial Condition and Capital Resources                                       

         During the first nine months of fiscal year 1999, the Company  recorded
net income of approximately $345,000.  Included in this net income were non-cash
charges of approximately $454,000 for depreciation and amortization and $208,000
of deferred taxes.                                                              

         The  Company's  operations  provided  $422,000 of cash  primarily  as a
result  of  an  increase  in  accounts  payable,  accrued  payroll  and  benefit
liabilities  and deferred  income.  These  increases were offset by decreases in
cash due to an inventory buildup of $611,000 as the Company prepares to ship its
backlog going into the fourth quarter.                                          

         The Company utilized  approximately  $2.7 million of cash for investing
activities  during the  nine-month  period ended  December 31, 1998. The bulk of
this use of cash was for increased  capital  spending on plant and equipment and
capitalized  software  projects as well as for merger  related costs  associated
with the Company's  planned  acquisition  of SolCom,  which is expected to close
early in calendar year 1999.                                                    

         Financing  activities  provided  approximately  $2.1  million  of  cash
primarily  from stock  option  and  warrant  exercises  ($841,000)  and  amounts
borrowed  under  the  Company's  line of  credit  ($1,300,000)  to  finance  the
Company's working capital needs and its growth plans. The Company also paid down
$30,000 of debt in the nine months ended December 31, 1998.                     

         In October  1998,  the  Company  successfully  negotiated  with  United
National to provide the Company with a $2,000,000  line of credit and a $500,000
term loan,  collateralized  by accounts  receivable  of the Company,  to finance
future working capital requirements.                                            

           Based on its current cash and working  capital  position,  as well as
its available line of credit,  the Company believes that it will have sufficient
capital to meet its operational needs over the next twelve months.              

         In June 1997, the Financial  Accounting  Standards  Board (FASB) issued
SFAS 131,  "Disclosure about Segments of an Enterprise and Related  Information"
which becomes  effective for financial  statements for periods  beginning  after
December 31, 1997. This Statement  establishes standards for the way that public
business  enterprises  report  information  about  operating  segments in annual
financial   reports  and  requires  that  those   enterprises   report  selected
information  about  operating  segments in interim  financial  reports issued to
shareholders.  It also  establishes  standards  for  related  disclosures  about
products and services,  geographic  areas, and major customers.  The adoption of
this standard is not expected to have a material impact on the                  

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Company's financial statements.                                                 

         In February 1998, the FASB issued SFAS No. 132, "Employers'  Disclosure
about Pensions and Other  Postretirement  Benefits." Among other provisions,  it
standardizes   certain   disclosure   requirements   for   pension   and   other
postretirement  benefits,  requires  additional  information  on  changes in the
benefit obligations and fair values of plan assets, and eliminates certain other
disclosures. The standard is effective for fiscal years beginning after December
15, 1997.  Since the standard  applies only to the  presentation  of pension and
other postretirement  benefit information,  it will not have any material impact
on the Company's results of operations, financial position or cash flows.       

         In March 1998, the American  Institute of Certified Public  Accountants
issued  Statement of Position (SOP) 98-1,  "Accounting for the Costs of Computer
Software  Developed or Obtained for Internal Use." Among other  provisions,  the
SOP requires that entities capitalize certain  internal-use  software costs once
certain  criteria are met. The SOP is effective  for  financial  statements  for
fiscal  years  beginning  after  December 15,  1998,  though  early  adoption is
encouraged.  Management  is  currently  assessing  the  impact on the  Company's
consolidated financial statements.                                              

         In June 1998, the FASB issued SFAS No. 133,  "Accounting for Derivative
Instruments and Hedging  Activities."  Among other provisions,  it requires that
entities  recognize  all  derivatives  as either  assets or  liabilities  in the
statement of financial  position and measure  those  instruments  at fair value.
Gains and losses resulting from changes in the fair values of those  derivatives
would be accounted  for  depending on the use of the  derivative  and whether it
qualifies  for hedge  accounting.  This  standard is effective  for fiscal years
beginning  after June 15,  1999,  though  earlier  adoption  is  encouraged  and
retroactive  application is prohibited.  Management does not expect the adoption
of  this  standard  to  have a  material  impact  on the  Company's  results  of
operations, financial position or cash flows.                                   

Year 2000 Disclosures                                                           

         Background.  Some  computers,  software,  and other  equipment  include
programming  code in which calendar year data is abbreviated to only two digits.
As a result of this design decision, some of these systems could fail to operate
or fail to produce correct  results if "00" is interpreted to mean 1900,  rather
than 2000.  These  problems  are widely  expected to increase in  frequency  and
severity  as the year  2000  approaches,  and are  commonly  referred  to as the
"Millennium Bug" or "Year 2000 Problem."                                        

         Assessment.  The  Company  is in  the  process  of  modifying  software
components  that it uses so that such  software will  properly  recognize  dates
beyond  December  31,  1999  ("Year 2000  Compliance").  The Company  expects to
complete the internal  review of its Year 2000 Compliance  status  shortly.  The
cost for such  modifications  and  replacements is not currently  expected to be
material.  If the Company is not successful in  implementing  the necessary Year
2000  changes,  it  expects to then  develop  contingency  plans to address  any
matters not  corrected  in a timely  manner.  The Company has  initiated  formal
communications with its significant vendors and certain of its                  

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customers  to  determine  the extent  that Year 2000  Compliance  issues of such
parties  may  affect  the  Company.   To  the  extent  that  responses  to  such
communications  with the  Company's  vendors  are  unsatisfactory,  the  Company
expects to take steps to ensure that its  vendors'  products  have  demonstrated
Year 2000 Compliance.  The Company has recently compiled information  concerning
the Year 2000  Compliance of certain of its significant  customers'  systems and
expects to contact other  customers.  There can be no guarantee that the systems
of the  Company's  vendors and customers  will be timely  converted or that such
conversion  will be  compatible  with the Company's  systems  without a material
adverse  effect on the  Company's  business,  financial  condition or results of
operation.                                                                      

PART II. OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K                                      
--------------------------------                            

(a)      Exhibits.                                          
--------                                  

27.1   Financial Data Schedule            

(b)      Reports on Form 8-K.                               
-------------------                       

                         No Reports on Form 8-K were filed during the quarter.

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SIGNATURES

         In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.                                                                     

Date:  February 18, 1998                                                        

        MICROFRAME, INC.

           /s/ Stephen B. Gray
                                   ---------------------------------------------
                                    Stephen B. Gray,  President, Chief Executive
                           Officer and Chief Operating Officer

           /s/ John F. McTigue
                                   ---------------------------------------------
                                John F. McTigue, Chief Financial Officer
                                   and Treasurer (Principal Financial Officer)

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MicroFrame, Inc. and Subsidiary                                                 
Exhibit 27.1                                                                    
Financial Data Schedule                                                         

                                                                [Download Table]
                                                                 

List for Article Type 5                                          
Article                                                          
Legend                                                           
Restated                                                         
CIK                                                              
Mane                                                             
Multiplier                                                       
Currency                                                         
Fiscal year end                   31-Mar-99            31-Mar-99 
Period start                       1-Oct-98             1-Apr-98 
Period end                        31-Dec-98            31-Dec-98 
Period type                        Quarter            Nine Months
Exchange rate                                                    
Cash                                345,892                      
Securities                                0                      
Receivables                       2,978,814                      
Allowances                           95,249                      
Inventory                         2,036,567                      
Current assets                    6,005,093                      
PP&E                              1,278,438                      
Depreciation                      (585,015)                      
Total assets                      9,259,000                      
Current liabilities               3,440,406                      
Bonds                                     0                      
Common                                6,652                      
Preferred mandatory                       0                      
Preferred mandatory                       0                      
Other SE                          5,263,054                      
Total liability & equity          8,939,509                      
Sales                             3,273,701            9,451,604 
Total revenues                    3,273,701            9,451,604 
CGS                               1,372,154            3,436,590 
Total costs                       1,721,258            5,441,474 
Other expenses                            0                    0 
Loss provision                            0                    0 
Interest expense                   (25,445)             (55,725) 
Income pre-tax                      154,844              552,954 
Income tax                           59,259              207,850 
Income continuing                    95,585              345,104 
Discontinued                              0                    0 
Extraordinary                             0                    0 
Changes                                   0                    0 
Net income                           95,585              345,104 
EPS Basic                              0.02                 0.06 
EPS Diluted                            0.02                 0.05 

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APPENDIX H

 NEW JERSEY BUSINESS CORPORATION ACT
SECTIONS 14A:11-1 AND 14A:11-2

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         14A:11-1 RIGHT OF  SHAREHOLDERS TO  DISSENT.--(1)  Any shareholder of a
domestic  corporation  shall have the right to dissent from any of the following
corporate actions                                                               
         (a)   Any plan of merger or consolidation to which the corporation is a
party, provided that, unless the certificate of incorporation otherwise provides
         (i)   a  shareholder  shall not have the right to dissent from any plan
of merger or consolidation with respect to shares                               
         (A)   of a class or series  which is listed  on a  national  securities
exchange or is held of record by not less than 1,000  holders on the record date
fixed to determine the shareholders  entitled to vote upon the plan of merger or
consolidation; or                                                               
         (B)   for which,  pursuant to the plan of merger or  consolidation,  he
will receive (x) cash, (y) shares,  obligations, on other securities which, upon
consummation of the merger or consolidation, will either be listed on a national
securities  exchange  or held of record by not less than 1,000  holders,  or (z)
cash and such securities;                                                       
         (ii)  a shareholder of a surviving corporation shall not have the right
to dissent from a plan of merger, if the merger did not require for its approval
the  vote  of  such  shareholders  as  provided  in  section  14A:10-5.1  or  in
subsections 14A:10-3(4), 14A:10-7(2) or 14A:10-7(4); or                         
         (b)   Any  sale,  lease,  exchange  or  other  disposition  of  all  or
substantially  all of the  assets of a  corporation  not in the usual or regular
course of  business  as  conducted  by such  corporation,  other than a transfer
pursuant  to  subsection  (4) of N.J.S.  14A:10-11,  provided  that,  unless the
certificate of incorporation  otherwise provides, the shareholder shall not have
the right to dissent                                                            
         (i)   with respect to shares of a class or series which,  at the record
date fixed to determine the shareholders entitled to vote upon such transaction,
is listed on a  national  securities  exchange  or is held of record by not less
than 1,000 holders; or                                                          
         (ii)  from a  transaction  pursuant  to a plan  of  dissolution  of the
corporation  which provides for  distribution  of  substantially  all of its net
assets to shareholders in accordance with their respective  interests within one
year after the date of such transaction, where such transaction is wholly for   
(A)   cash; or                                                
         (B)   shares,  obligations or other securities which, upon consummation
or the plan of  dissolution  will  either  be listed  on a  national  securities
exchange or held of record by not less than 1,000 holders; or                   
(C)   cash and such securities; or                            
        (iii) from a sale pursuant to an order of a court having jurisdiction.
         (2)   Any shareholder of a domestic corporation shall have the right to
dissent  with  respect  to any  shares  owned by him  which  are to be  acquired
pursuant to section 14A:10-9.                                                   
         (3)   A  shareholder  may not dissent as to less than all of the shares
owned beneficially by him and with respect to which a right of dissent exists. A
nominee or  fiduciary  may not dissent on behalf of any  beneficial  owner as to
less than all of the  shares of such  owner  with  respect to which the right of
dissent exists.                                                                 
         (4)   A corporation may provide in its certificate of corporation  that
holders of all its shares,  or of a particular  class or series  thereof,  shall
have the right to dissent from specified  corporate actions in addition to those
enumerated in subsection 14A:11-1(1), in which case the                         

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exercise of such right of dissent  shall be governed by the  provisions  of this
Chapter. (Last amended by CH. 279, L. '95, eff. 12-15-95.)                      

14A:11-2       NOTICE OF DISSENT; DEMAND FOR PAYMENT;         
ENDORSEMENT OF  CERTIFICATES.--(1)  Whenever a vote is to be taken,  either at a
meeting of shareholders or upon written  consents in lieu of a meeting  pursuant
to section 14A:5- 6, upon a proposed  corporate  action from which a shareholder
may dissent under section  14A:11- 1, any  shareholder  electing to dissent from
such action shall file with the corporation before the taking of the vote of the
shareholders  on  such  corporate  action,  or  within  the  time  specified  in
paragraphs 14A:5-6(2)(b) or 14A:5-6(2)(c),  as the case may be, if no meeting of
shareholders  is to be held, a written  notice of such  dissent  stating that he
intends to demand payment for his shares if the action is taken.                
         (2) Within 10 days after the date on which such corporate  action takes
effect,  the  corporation,  or,  in the case of a merger or  consolidation,  the
surviving or new corporation, shall give written notice of the effective date of
such corporate  action,  by certified mail to each shareholder who filed written
notice of dissent pursuant to subsection  14A:11-2(1),  except any who voted for
or consented in writing to the proposed action.                                 
         (3) Within 20 days after the mailing of such notice, any shareholder to
whom the  corporation  was  required  to give  such  notice  and who has filed a
written  notice of dissent  pursuant to this section may make written  demand on
the corporation, or, in the case of a merger or consolidation,  on the surviving
or new corporation, for the payment of the fair value of his shares.            
         (4)  Whenever a  corporation  is to be merged  pursuant  to (1) section
14A:10-5.1 or subsection  14A:10-7(4) and  shareholder  approval is not required
under (2) subsections  14A:10- 5.1(5) and  14A:10-5.1(6),  a shareholder who has
the right to dissent  pursuant to section  14A:11- 1 may, not later than 20 days
after a copy or summary of the plan of such merger and the statement required by
subsection  14A:10-5.1(2) is mailed to such shareholder,  make written demand on
the  corporation  or on the surviving  corporation,  for the payment of the fair
value of his shares.                                                            
         (5)  Whenever  all the shares,  or all the shares of a class or series,
are to be  acquired  by another  corporation  pursuant  to section  14A:10-9,  a
shareholder  of the  corporation  whose shares are to be acquired may, not later
than 20 days after the mailing of notice by the acquiring  corporation  pursuant
to paragraph  14A:10-9(3)(b),  make written demand on the acquiring  corporation
for the payment of the fair value of his shares.                                
         (6) Not later  than 20 days  after  demanding  payment  for his  shares
pursuant to this  section,  the  shareholder  shall  submit the  certificate  or
certificates  representing  his shares to the corporation upon which such demand
has been made for  notation  thereon  that such demand has been made,  whereupon
such certificate or certificates shall be returned to him. If shares represented
by a certificate on which notation has been made shall be transferred,  each new
certificate issued therefor shall bear similar notation,  together with the name
of the  original  dissenting  holder of such shares,  and a  transferee  of such
shares shall  acquire by such transfer no rights in the  corporation  other than
those which the original  dissenting  shareholder  had after making a demand for
payment of the fair value thereof.                                              

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         (7) Every notice or other communication required to be given or made by
a  corporation  to any  shareholder  pursuant to this Chapter  shall inform such
shareholder of all dates prior to which action must be taken by such shareholder
in order to perfect his rights as a dissenting  shareholder  under this Chapter.
(Last amended by Ch. 94, L. '88, eff. 12-1-88.)                                 

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APPENDIX I

AGREEMENT AND PLAN OF MERGER

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AGREEMENT AND PLAN OF MERGER

of

MICROFRAME, INC.

 with and into

ION NETWORKS, INC.
--------------------------------

             AGREEMENT  AND PLAN OF MERGER  dated as of December  15, 1998 (this
"Agreement") by and among MICROFRAME,  INC., a New Jersey  corporation having an
address at 21 Meridian Avenue,  Edison, New Jersey 08820  ("MicroFrame") and ION
NETWORKS,  INC., a Delaware corporation having an address at 21 Meridian Avenue,
Edison,  New Jersey  08820  ("Ion"),  as the  constituent  parties to the merger
contemplated by this Agreement (the "Merger").                                  

 W I T N E S S E T H :
- - - - - - - - - - 

             WHEREAS,  the laws of the States of New Jersey and Delaware  permit
the merger of MicroFrame with and into Ion; and                                 

             WHEREAS,  the Boards of  Directors  of  MicroFrame  and Ion deem it
desirable  and  in the  best  interest  of the  respective  companies  to  merge
MicroFrame with and into Ion, and have approved this Agreement for that purpose.

             NOW, THEREFORE, in consideration of the agreements, representations
and warranties contained in this Agreement,  and in order to prescribe the terms
and conditions of the Merger and the  procedures to effectuate  the Merger,  the
parties hereto agree as follows:                                                

1.      The  Merger;  Name of  Surviving  Company.  MicroFrame  and  Ion  shall,
        pursuant to the provisions of the Delaware General  Corporation Law (the
        "DGCL") and the New Jersey Business  Corporation  Act (the "NJBCA"),  be
        merged with and into a single  corporation,  to wit, Ion, which shall be
        the  surviving  corporation  from  and  after  the  Effective  Date  (as
        hereinafter defined),  and which is sometimes hereinafter referred to as
        the "surviving  corporation",  and which shall continue to exist as said
        surviving  corporation under its present name pursuant to the provisions
        of the DGCL and the NJBCA. The separate  existence of MicroFrame,  which
        is sometimes  hereinafter referred to as the "terminating  corporation",
        shall cease on the Effective  Date in accordance  with the provisions of
the DGCL and the NJBCA.                                         

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2.      Certificate of Incorporation of Surviving  Corporation.  The certificate
        of incorporation of the surviving  corporation  shall be the certificate
        of  incorporation  of  Ion  in  effect  on  the  Effective  Date,  which
        certificate of  incorporation  shall remain  unchanged and unaffected by
the Merger until further amended as provided by law.            

3.      By-Laws.  The  By-Laws of Ion as in effect on the  Effective  Date shall
        continue to be the By-Laws of the  surviving  corporation  following the
        Effective Date unless and until the same shall be amended or repealed in
accordance with the provisions thereof and applicable law.      

4.      Authorized  Capital.  The authorized  capital stock of Ion following the
        Effective  Date shall be 50,000,000  shares of common  stock,  $.001 par
        value per share ("Ion Common  Stock"),  and 200,000  shares of preferred
        stock,  $10.00 par value per  share,  unless and until the same shall be
amended in accordance with the laws of the State of Delaware.   

5.      Effect of the Merger.  On the Effective  Date,  MicroFrame and Ion shall
        become a  single  corporation  and Ion  shall  continue  to exist as the
        surviving  corporation and shall  thereupon and thereafter,  pursuant to
        the  DGCL,  have all the  rights,  privileges,  immunities,  powers  and
        franchises, and be subject to all the duties,  liabilities,  obligations
        and  penalties of each of MicroFrame  and Ion, and all  property,  real,
        personal and mixed,  and all debts due on whatever account and all other
        choses in action,  and all and every other  interest of, or belonging to
        or due to each of  MicroFrame  and Ion shall be  vested  in Ion  without
        further act or deed,  all in the manner and to the full extent  provided
by the DGCL.                                                    

6.      Conversion of Outstanding Securities. On the Effective Date:            

        a.     All of the shares of Ion Common Stock issued to MicroFrame  shall
               be  immediately  canceled  and  shall  be null and void and of no
further force or effect thereafter.               

        b.     Each of the  issued  and  outstanding  shares of common  stock of
               MicroFrame  ("MicroFrame  Common  Stock") shall be converted into
               the right to receive one (1) share of Ion Common  Stock (and each
               such share of  MicroFrame  Common Stock shall be deemed  canceled
               and the  holder  thereof  shall  cease  to have any  rights  with
               respect thereto),  and each certificate  representing such shares
               of MicroFrame Common Stock shall thereafter and until surrendered
               be deemed to represent  for all  corporate  purposes the right to
               receive a like number of shares of Ion Common Stock.  Each issued
share of MicroFrame Common Stock                  

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               which is held in treasury,  if any, on the Effective Date,  shall
be cancelled and shall cease to exist.            

        c.     Each of the outstanding options, warrants and shares reserved for
               issuance  upon  the  conversion  of  outstanding   securities  or
               indebtedness  of  MicroFrame  shall be converted  into an option,
               warrant or share,  as the case may be, to purchase  the number of
               shares of Ion  Common  Stock  which the  holder  would  have been
               entitled to receive following the exercise or conversion  thereof
               prior to the Effective  Date,  with no other changes in the terms
or conditions of such securities.                 

7.      Directors  and  Officers.  The  directors  and  officers  of  Ion on the
        Effective  Date shall continue to serve as directors and officers of Ion
        for the balance of the terms of the  directors  and  officers of Ion and
        until their  successors  are elected  and  qualified  as provided in the
By-Laws of Ion and in accordance with applicable law.           

8.      Abandonment.    Anything   herein   or   elsewhere   to   the   contrary
        notwithstanding,  and notwithstanding  shareholder approval hereof, this
        Plan may be terminated and abandoned by action of the Board of Directors
        of any of the  corporations  party  hereto  at  any  time  prior  to the
Effective Date of this Plan for any reason.                     

9.      Effective  Date. The Merger shall become  effective upon the filing of a
        Certificate  of  Merger  with the  Secretary  of  State of the  State of
        Delaware  and the  Secretary  of State of the State of New  Jersey  (the
"Effective Date").                                              

10.     Miscellaneous.                                                          

        a.     Notices. All notices and other communications  hereunder shall be
               in writing and shall be deemed  given (a) when  delivered by hand
               at the respective addresses  hereinbefore  designated or (b) upon
               confirmed  delivery by a standard  overnight  carrier (or at such
              other address for a party as shall be specified by like notice).

        b.     Governing Law. This Agreement  shall be governed by and construed
               in  accordance  with  the laws of the  State of New York  without
        regard to principles of conflict or choice of law thereof.

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

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        d.     Entire  Agreement.  This  Agreement and the  documents  delivered
               pursuant to this Agreement constitute the entire agreement of the
               parties  with  respect  to  the  subject   matter   hereof,   and
               collectively   supersede  all  other  prior  or   contemporaneous
               negotiations, commitments, agreements and understandings (whether
               written or oral), between the parties with respect to the subject
matter hereof.                                    

        e.     Binding Effect. This Agreement will be binding upon, inure to the
               benefit  of  and  be  enforceable   by,  the  parties  and  their
respective successors and assigns.                

        f.     Severability.   The  provisions  of  this   Agreement   shall  be
               severable,  so that the  enforceability,  validity or legality of
               one provision  shall not affect the  enforceability,  validity or
legality of the remaining provisions hereof.      

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                  IN WITNESS  WHEREOF,  the parties have  executed and delivered
this Agreement as of the date first written above.                              

                                          MICROFRAME, INC.

                                                 By: /s/ Stephen B. Gray
                                                       -------------------------
                                                    Name:  Stephen B. Gray
                                              Title: President

                                            ION NETWORKS, INC.

                                                   By:   /s/ Stephen B. Gray
                                                       -------------------------
                                                    Name:  Stephen B. Gray
                                              Title: President

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