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Exhibit 10.19

        ASSET PURCHASE AGREEMENT

BY
AND
AMONG

DEPARTMENT 56, INC.,

AXIS HOLDINGS CORPORATION,

AXIS CORPORATION,

ALL THE SHAREHOLDERS OF AXIS CORPORATION

AND

KIRK WILLEY IN THE CAPACITY OF SHAREHOLDERS' REPRESENTATIVE

DATED AS OF

AUGUST 14, 2001

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ASSET PURCHASE AGREEMENT

        THIS ASSET PURCHASE AGREEMENT, dated as of August 14, 2001, is by and
among Department 56, Inc., a Delaware corporation ("Parent"), Axis Holdings
Corporation, a Delaware corporation and wholly-owned subsidiary of Parent (the
"Purchaser"), Axis Corporation, a Utah corporation (the "Seller"), all of the
shareholders of Seller (the "Shareholders") and Kirk Willey in the capacity of
Shareholders' Representative (as defined below).

        A.    The parties hereto wish to provide for the terms and conditions
upon which the Purchaser will purchase all of the assets of Seller's business
(the "Business").

        B.    The parties hereto wish to make certain representations,
warranties, covenants and agreements in connection with the purchase of the
assets and the Business.

        Accordingly, and in consideration of the representations, warranties,
covenants and agreements herein contained, the parties hereto agree as follows:

1.    PURCHASE OF ASSETS.

        1.1.    Assets to be Purchased.    

        (a)  Upon the terms and subject to the conditions of this Agreement,
Seller will sell, transfer, convey, assign and deliver to the Purchaser, and the
Purchaser will purchase, from Seller, at the Closing, all of Seller's right,
title and interest in and to the businesses, assets, properties, goodwill and
rights of Seller used in or arising out of the operation of the Business, of
every nature, kind and description, tangible and intangible, real, personal or
mixed, wheresoever located and whether or not carried or reflected on the books
and records of Seller (collectively, the "Assets"). The Assets include, but are
not limited to, all of Seller's right, title and interest in and to the
following:

          (i)  personal property that is now owned or leased by Seller and used
in the Business;

        (ii)  franchises relating to the Business;

        (iii)  Seller's corporate or entity names used in the Business and all
derivatives or combinations thereof, including, without limitation, the
"Geppeddo" trade name;

        (iv)  logos, trademarks, trademark registrations and trademark
applications or registrations thereof used in or relating to the Business,
including the goodwill associated therewith, and the goodwill of the Business;

        (v)  copyrights, copyright applications and copyright registrations,
patents and patent applications used in or relating to the Business;

        (vi)  rights under or pursuant to licenses by or to Seller used in or
relating to the Business;

      (vii)  development and prototype hardware, software, processes, formula,
trade secrets, inventories and royalties, including all rights to sue for past
infringements used in or relating to the Business;

      (viii)  inventory (raw materials, work in process, finished goods,
accumulated costs of jobs and supplies) used in the Business;

        (ix)  equipment, machinery, furniture, fixtures, motor vehicles and
supplies used in or relating to the Business;

        (x)  prepaid expenses relating to the Business;

        (xi)  contracts and purchase orders relating to the Business;

      (xii)  lists of customers of the Business, including those customers
identified on Exhibit 1.1(a)(xii) attached hereto;

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      (xiii)  lists of suppliers and all favorable business relationships,
causes of action, judgments, claims and demands of whatever nature relating to
the Business;

      (xiv)  telephone, telefax and telex numbers and all listings in all
telephone books and directories relating to the Business;

      (xv)  all credit balances of or inuring to Seller under any state
unemployment compensation plan or fund related to employees of the Business;

      (xvi)  employment contracts, including all confidentiality, assignment of
invention and non-competition agreements relating to the employees and
consultants of the Business, except for those employment contracts specifically
excluded herein;

    (xvii)  obligations of the present and former officers and employees of the
Business and of individuals and corporations of the Business;

    (xviii)  rights under joint venture agreements or arrangements relating to
the Business;

      (xix)  files, papers and records relating to the Business and assets used
in the Business;

      (xx)  all web sites, URLs and domain names of Seller used in and relating
to the Business, including without limitation the web sites listed in Disclosure
Schedule 2.12;

      (xxi)  the assets as reflected on the balance sheet of Seller dated as of
June 30, 2001, attached hereto as Exhibit 1.1(a)(xxi) (the "Latest Balance
Sheet"), with only such dispositions of such assets reflected on the Latest
Balance Sheet as will have occurred in the ordinary course of business between
the date thereof and the Closing and which are permitted by the terms hereof;

    (xxii)  cash, money and deposits with financial institutions and others,
certificates of deposit, commercial paper, notes, evidences of indebtedness,
stocks, bonds and other investments of the Business;

    (xxiii)  accounts receivables of the Business; and

    (xxiv)  all of Seller's rights under that certain letter dated July 11, 2001
from Harvey C. Gordon (General Counsel, Ashton-Drake Galleries) to Michael E.
Mangelson (it agreed and understood that neither Parent nor Purchaser assumes
any Liability arising out of Ashton-Drake's underlying infringement and other
claims against the Seller or any of its customers arising out of the same).

        (b)  Notwithstanding the foregoing, Seller will not sell, transfer,
convey, assign or deliver to the Purchaser, and the Purchaser will not purchase
from Seller, the following assets:

          (i)  the consideration delivered to Seller pursuant to this Agreement
for the Assets;

        (ii)  the minute books (and any documents related to Seller's
organization, corporate affairs or foreign qualification contained in such
minute books), corporate seal and stock records of Seller;

        (iii)  shares of the capital stock of Seller, including shares held by
Seller as treasury shares;

        (iv)  all documentation pertaining to any liability of Seller not
assumed by the Purchaser;

        (v)  all employment or severance agreements of management not hired by
Parent or Purchaser; and

        (vi)  the assets specifically described on Exhibit 1.1(b) hereto.

        1.2.    Liabilities Assumed.    

        At the Closing, the Purchaser will assume the liabilities of the
Business (the "Assumed Liabilities") set forth on Exhibit 1.2 (the "Liabilities
Undertaking"). Each of Seller and the Shareholders expressly understands and
agrees that, except for the Assumed Liabilities, the Purchaser and Parent have
not

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agreed to pay, will not be required to assume and will have no liability or
obligation, direct or indirect, absolute or contingent, for, the liabilities of
the Business, Seller, the Shareholders or any of their respective affiliates or
associates or any other person, which liabilities will, as between Seller and
Shareholders, on the one hand, and the Purchaser and Parent, on the other hand,
remain the sole responsibility of, and will be satisfied by, Seller or the
Shareholders, as applicable, pursuant to the terms of this Agreement (the
"Retained Liabilities"). The Retained Liabilities include, but are not limited
to, the following:

        (a)  any debt, liability or obligation of the Business or Seller, or any
of their respective affiliates or associates, direct or indirect, known or
unknown, fixed, contingent or otherwise, that (i) is unrelated to the Assets or
the Business; or (ii) relates to the Assets or the Business and is based upon or
arises from any act, omission, transaction, circumstance, sale of goods or
services, state of facts or other condition occurring or existing on or before
the Closing Date, whether or not then known, due or payable, except to the
extent that the same constitutes an Assumed Liability;

        (b)  any obligation for Taxes related to any of the Assets for any Tax
period or portion thereof ending on or before the Closing Date (including any
tax liability relating to or arising from the transfer of Assets) and any
obligation for other Taxes of Seller;

        (c)  any debt, liability or obligation, direct or indirect, known or
unknown, fixed, contingent or otherwise, based upon or arising from any act,
omission, transaction, circumstance, state of facts or other condition occurring
or existing on or before the Closing Date and relating to any collective
bargaining agreement or any employee benefit plan, policy, practice or agreement
to which Seller is a party or under which any of Seller's employees or former
employees, or their spouses, dependents, family members, domestic partners or
beneficiaries is covered, including without limitation any obligation to
contribute to, or any obligation or liability for any withdrawal liability
arising in connection with, any "multiemployer plan" within the meaning of
Section 4001(a)(3) of the Employment Retirement Income Security Act of 1974, as
amended ("ERISA"), attributable to participation therein by current or former
employees of Seller as a result of this Agreement and the transactions
contemplated hereby or otherwise;

        (d)  (i) any liability arising out of or related to the events,
circumstances or conditions described in Section 2.21 of the Disclosure
Schedule; (ii) any liability arising out of or related to the management of
wastes, byproducts or spent materials generated by the Seller or any of its
subsidiaries, former subsidiaries or affiliates; or any liability arising out of
or related to any pollution or threat to human health or the environment or
violation of any Environmental and Occupational Safety and Health Law that is
related in any way to any of Seller's management, use, control, ownership or
operation of the Assets, any property or the business of Seller, any of its
subsidiaries, former subsidiaries or affiliates, including without limitation
any on-site or off-site activities involving Environmentally Regulated
Materials, and that occurred, existed, arises out of conditions or circumstances
that occurred or existed, or was caused, in whole or in part, on or before the
Closing Date, whether or not the pollution or threat to human health or the
environment or violation of any Environmental and Occupational Safety and Health
Law is described in the Disclosure Schedule; and (iii) any Environmental Claim
against any person or entity whose liability for such Environmental Claim of the
Seller has or may have assumed or retained either contractually or by operation
of law;

        (e)  any debt, liability or obligation, direct or indirect, known or
unknown, fixed, contingent or otherwise owing by Seller to any of its
affiliates, officers, directors or stockholders;

        (f)    any debt, liability or obligation, direct or indirect, known or
unknown, fixed, contingent or otherwise owing by Seller or any Shareholder to
any attorney, accountant, investment banker or other Person, to the extent
relating to or incurred in connection with this Agreement or the transactions
contemplated hereby;

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        (g)  any debt, liability or obligation, direct or indirect, known or
unknown, fixed, contingent or otherwise, relating to the claims or matters
described in Disclosure Schedules 2.13, 2.18, Item 1of 2.26, or 2.27.

        At the Closing, Seller will convey, transfer, assign and delegate, and
the Purchaser will accept and assume, those contracts, agreements and
commitments listed on Exhibit A to the Liabilities Undertaking (the "Assumed
Contracts").

        1.3.    Purchase Price.    

        (a)  The total consideration to be paid by the Purchaser to Seller for
the Assets (the "Purchase Price") will be an amount equal to:

          (i)  seven million nine hundred thirty-eight thousand five hundred
twenty-one dollars ($7,938,521), plus or minus the aggregate amount of any
Initial Purchase Price Adjustment as defined below in Section 1.3(a)(iv) (such
amount, after giving effect to any Initial Purchase Price Adjustment, the
"Initial Cash Consideration"); plus

        (ii)  a contingent right to receive up to an additional twelve million
dollars ($12,000,000) (the "Contingent Consideration"), as determined under and
more fully described below in this Section 1.3(a)(ii);

        (1)  Definitions. Capitalized terms used but not defined in this
section 1.3(a)(ii) have the meanings given elsewhere in this Agreement, and for
the purposes of this section 1.3(a)(ii) the following additional terms have the
respective meanings indicated.

        (A)  "Fiscal 2000" means the twelve month period ending February 28,
2001; "Fiscal 2001" means the twelve month period ending February 28, 2002;
"Fiscal 2002" means the twelve month period ending February 28, 2003; and
"Fiscal 2003" means the twelve month period ending February 29, 2004.

        (B)  "Operating Income" means income of the Purchaser from continuing
operations in the referenced period in the ordinary course of business per
audited financial statements prepared in accordance with generally accepted
accounting principles consistently applied ("GAAP") (it being understood that
income from continuing operations is exclusive of interest income, rental
income, gains on fixed asset sales and similar non-operating income, interest
expense and provisions for federal, state and local income taxes).

        (C)  "Operating Income Margin" means Operating Income in a given fiscal
year divided by Revenue in the same fiscal year.

        (D)  "Period" means the three year period from and including Fiscal 2001
through and including Fiscal 2003.

        (E)  "Revenue" means net sales in the referenced period in the ordinary
course of business per audited financial statements prepared in accordance with
GAAP, adjusted for bad debt expense per audited financial statements prepared in
accordance with GAAP (it being understood that net sales is net of returns,
allowances and discounts and exclusive of sales taxes, interest income, rental
income, gains on fixed asset sales and similar non-operating income) and
"Revenue in Fiscal 2000" means $14,532,097.

        (F)  "Revenue Base", for purposes of subsection (4) below, has the
meaning determined in accordance with subsections (3)(A)(ii), (3)(B)(ii),
(3)(C)(ii) or 3(D)(ii), as the case may be, and for purposes of subsection
(5) below, has the meaning determined in accordance with subsections (4)(A)(ii),
(4)(B)(ii), (4)(C)(ii) or (4)(D)(ii), as the case may be.

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        (2)  Procedures for Determining Contingent Consideration.

        (A)  Delivery of Contingent Consideration Statement by Purchaser. Within
seventy (70) days after the close of each fiscal year during the Period,
Purchaser will deliver to the Shareholders' Representative a statement setting
forth in reasonable detail Purchaser's calculation of the Contingent
Consideration due for such fiscal year (each such statement, a "Contingent
Consideration Statement"). The Contingent Consideration Statements for Fiscal
2001, Fiscal 2002 and Fiscal 2003 shall be prepared in accordance with
subsections 3, 4 and 5 below, respectively, and each Contingent Consideration
Statement shall be prepared in accordance with subsections 6 and 7 below.

        (B)  Review of Contingent Consideration Statement by Shareholders'
Representative. Within sixty (60) days after the receipt by the Shareholders'
Representative of a Contingent Consideration Statement, the Shareholders'
Representative will notify Purchaser in writing of any disagreement with respect
to the calculation of the Contingent Consideration due. If such notice of
disagreement is not received by Purchaser within sixty (60) days after the
receipt by the Shareholders' Representative of a Contingent Consideration
Statement (or if the Shareholders' Representative sooner provides written notice
to Purchaser that the Shareholders' Representative has no objection to such
calculations), then the Contingent Consideration Statement sent by Purchaser
will be final and conclusive for all purposes.

        (C)  Disputes Regarding Contingent Consideration Statements.

          (i)  If the Shareholders' Representative timely delivers a notice of
disagreement (the "Disagreement Notice") to the Purchaser as described in the
preceding paragraph (B), then

        (A)  within ten (10) days after the receipt by Purchaser of the
Disagreement Notice, the Purchaser shall wire (pursuant to wire instructions of
the Shareholders' Representative provided at least three (3) days in advance),
readily available funds equal to the amount of the Contingent Consideration
reflected on the Contingent Consideration Statement (the "Undisputed Contingent
Consideration"); and

        (B)  beginning on the date of the receipt by the Purchaser of the
Disagreement Notice, the Shareholders' Representative and Purchaser shall
commence a 30-day period of good faith negotiations to resolve their
disagreement as to the amount of Contingent Consideration that the Shareholders'
Representative claims is due in excess of the Undisputed Contingent
Consideration (such excess, the "Disputed Contingent Consideration").

        (ii)  If the Shareholders' Representative and Purchaser are not able to
resolve their differences regarding the Disputed Contingent Consideration within
the 30-day period described in the preceding paragraph (i), then the Purchaser
and the Shareholders' Representative shall immediately submit the dispute for
mediation as contemplated by Section 9.8 and shall proceed in good faith to
resolve, within 90 days of Purchaser's receipt of the Disagreement Notice, their
disagreement as to the amount of the Disputed Contingent Consideration.

        (iii)  If the Shareholders' Representative and Purchaser are not able to
resolve their differences regarding the Disputed Contingent Consideration within
the 90-day period described in the preceding paragraph (ii), then the Purchaser,
within ten (10) days after Purchaser's receipt of a further written notice from
the Shareholders' Representative, shall deposit the full amount of the Disputed
Contingent

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Consideration with an escrow agent on escrow terms reasonably and mutually
agreeable to the Shareholders' Representative and Purchaser, and such dispute
shall be resolved as promptly as reasonably possible in accordance with the
dispute resolutions set forth in section 9.8 of this Agreement.

        (iv)  If the Purchaser fails to (A) timely wire the Undisputed
Contingent Consideration, (B) timely deposit the Disputed Contingent
Consideration with an escrow agent if the dispute is submitted to arbitration as
described in the preceding paragraph (iii), or (C) pay the Disputed Contingent
Consideration within ten (10) days after receipt of a further written demand
from the Shareholders' Representative following the final decision of
arbitrators in favor of the Shareholders' Representative, then the covenants of
the Seller and the Shareholders set forth in Section 4.12 of this Agreement
shall immediately terminate and be of no further force or effect. If Purchaser
Indemnified Parties are entitled to indemnification pursuant to Article 8 and
elect, to the extent permitted by Section 8.6 of this Agreement, to offset the
amount due pursuant to such claim against Contingent Consideration otherwise
payable, then such offset, and consequent non-payment of Contingent
Consideration, shall not trigger the termination provisions of this paragraph.

        (D)  Payment of Contingent Consideration by Purchaser. Within ten
(10) days after the earliest of: (i) the receipt by Purchaser of written notice
from the Shareholders' Representative that the Shareholders' Representative has
no objection to the calculations, as set forth in a Contingent Consideration
Statement; (ii) the expiration of the sixty-day period for giving notice of
disagreement with such calculation, if no such notice is timely received by
Purchaser; or (iii) the resolution of any dispute pursuant to
Section 1.3(a)(ii)(2)(C) above (including Purchaser's receipt of a further
written demand by the Shareholders' Representative), Purchaser shall wire
(pursuant to wire instructions of the Shareholders' Representative provided at
least three (3) days in advance), readily available funds equal to the
Contingent Consideration due, if any, for the applicable fiscal year (the tenth
day after the earliest of (i), (ii) or (iii) is referred to as the "Payment
Date"). If the Payment Date, or any other date on which any payment is due by
any party under this Agreement, is not a business day, then the Contingent
Consideration due will be due without interest on the first business day
following the Payment Date.

        (E)  Reasonable Audit Rights of Shareholders' Representative. Purchaser
shall keep and maintain records of the information directly related to the
Contingent Consideration (the "Contingent Consideration Documentation"). The
Contingent Consideration Documentation shall be open to inspection at reasonable
times (but no more than twice in any fiscal year during the Period) by the
Shareholders' Representative and a certified public accountant chosen by the
Shareholders' Representative and acceptable to Purchaser, which approval
Purchaser will not unreasonably withhold. Such inspection shall be made at the
Shareholders' Representative's expense (but may be charged back to the
Shareholders pursuant to any agreement between the Shareholders' Representative
and the Shareholders). The Shareholders' Representative agrees to hold the
Contingent Consideration Documentation confidential; provided, however, that the
Shareholders' Representative may permit the Shareholders, the Seller and their
respective counsel, accountants and other advisors to review, use and copy the
Contingent Consideration Documentation, subject to the foregoing confidentiality
obligation. The Contingent Consideration Documentation shall be maintained by
the Purchaser and available for inspection in accordance with this Agreement for
a period of one (1) year following the end of the Period.

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        (3)  Fiscal 2001. In preparing the Contingent Consideration Statement
with respect to Fiscal 2001 pursuant to the procedures set forth in subsection 2
above, the following shall apply.

        (A)  Revenue Growth and OIM Surplus. If (X) Revenue in Fiscal 2001
exceeds Revenue in Fiscal 2000 and (Y) Operating Income Margin in Fiscal 2001
exceeds 12.5%, then

          (i)  A dollar amount shall be arrived at pursuant to the following
steps. STEP 1: divide (X) the difference between Revenue in Fiscal 2001 minus
Revenue in Fiscal 2000 by (Y) Revenue in Fiscal 2000. STEP 2: multiply the
result from Step 1 by 100. STEP 3: Multiply the result from Step 2 by $67,000.
STEP 4: divide (X) Operating Income in Fiscal 2001 by (Y) Revenue in Fiscal
2001. STEP 5A: multiply the result from Step 4 by 100. STEP 5B: subtract 12.5
from the result from Step 5A. STEP 6: multiply the result from Step 5 by
$200,000. STEP 7: combine the result from Step 3 and the result from Step 6. The
result of STEP 7 shall be the Contingent Consideration due with respect to
Fiscal 2001.

        (ii)  The term "Revenue Base" in subsection (4) below shall mean the
Revenue in Fiscal 2001.

        (B)  Revenue Growth and OIM Shortfall. If (X) Revenue in Fiscal 2001
exceeds Revenue in Fiscal 2000 and (Y) Operating Income Margin in Fiscal 2001 is
less than 12.5%, then

          (i)  A dollar amount shall be arrived at pursuant to the following
steps. STEP 1: divide (X) the difference between Revenue in Fiscal 2001 minus
Revenue in Fiscal 2000 by (Y) Revenue in Fiscal 2000. STEP 2: multiply the
result from Step 1 by 100. STEP 3: Multiply the result from Step 2 by $67,000.
STEP 4: divide (X) Operating Income in Fiscal 2001 by (Y) Revenue in Fiscal
2001. STEP 5A: multiply the result from Step 4 by 100. STEP 5B: subtract 12.5
from the result from Step 5A. STEP 6: multiply the result from Step 5 by
$200,000. STEP 7: combine the result from Step 3 and the result from Step 6. If
the result of Step 7 is greater than zero ($0), then such amount shall be the
Contingent Consideration due with respect to Fiscal 2001; if the result of Step
7 is less than zero ($0), then no Contingent Consideration shall be due for
Fiscal 2001.

        (ii)  The term "Revenue Base" in subsection (4) below shall mean the
Revenue in Fiscal 2001.

        (C)  Revenue Shortfall and OIM Surplus. If (X) Revenue in Fiscal 2001 is
less than Revenue in Fiscal 2000 and (Y) Operating Income Margin in Fiscal 2001
exceeds 12.5%, then

          (i)  A dollar amount shall be arrived at pursuant to the following
steps. STEP 1: divide (X) the difference between Revenue in Fiscal 2001 minus
Revenue in Fiscal 2000 by (Y) Revenue in Fiscal 2001. STEP 2: multiply the
result from Step 1 by 100. STEP 3: Multiply the result from Step 2 by $67,000.
STEP 4: divide (X) Operating Income in Fiscal 2001 by (Y) Revenue in Fiscal
2001. STEP 5A: multiply the result from Step 4 by 100. STEP 5B: subtract 12.5
from the result from Step 5A. STEP 6: multiply the result from Step 5 by
$200,000. STEP 7: combine the result from Step 3 and the result from Step 6. If
the result of Step 7 is greater than zero ($0), then such amount shall be the
Contingent Consideration due with respect to Fiscal 2001; if the result of Step
7 is less than zero ($0), then no Contingent Consideration shall be due for
Fiscal 2001.

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        (ii)  (X) If the result of Step 7 is greater than zero ($0), then the
term "Revenue Base" in subsection (4) below shall mean Revenue in Fiscal 2001;
and (Y) if the result of Step 7 is less than zero ($0), then the term "Revenue
Base" in subsection (4) below shall mean the result arrived at pursuant to the
following additional steps. STEP Q: divide the result from Step 6 by $67,000.
STEP R: divide the result from Step Q by 100. STEP S: add 1.00 to the result
from Step R. STEP T: divide Revenue in Fiscal 2000 by the result from Step S.

        (D)  Revenue Shortfall and OIM Shortfall. If (X) Revenue in Fiscal 2001
is less than Revenue in Fiscal 2000 and (Y) Operating Income Margin in Fiscal
2001 is less than 12.5%, then

          (i)  No Contingent Consideration shall be due for Fiscal 2001.

        (ii)  The term "Revenue Base" in subsection (4) below shall mean Revenue
in Fiscal 2000.

        (4)  Fiscal 2002. In preparing the Contingent Consideration Statement
with respect to Fiscal 2002 pursuant to the procedures set forth in subsection 2
above, the following shall apply.

        (A)  Revenue Growth and OIM Surplus. If (X) Revenue in Fiscal 2002
exceeds Revenue Base and (Y) Operating Income Margin in Fiscal 2002 exceeds
15.0%, then

          (i)  A dollar amount shall be arrived at pursuant to the following
steps. STEP 1: divide (X) the difference between Revenue in Fiscal 2002 minus
Revenue Base by (Y) Revenue Base. STEP 2: multiply the result from Step 1 by
100. STEP 3: Multiply the result from Step 2 by $67,000. STEP 4: divide
(X) Operating Income in Fiscal 2002 by (Y) Revenue in Fiscal 2002. STEP 5A:
multiply the result from Step 4 by 100. STEP 5B: subtract 15.0 from the result
from Step 5A. STEP 6: multiply the result from Step 5 by $200,000. STEP 7:
combine the result from Step 3 and the result from Step 6. The result of STEP 7
shall be the Contingent Consideration due with respect to Fiscal 2002.

        (ii)  The term "Revenue Base" in subsection (5) below shall mean the
Revenue in Fiscal 2002.

        (B)  Revenue Growth and OIM Shortfall. If (X) Revenue in Fiscal 2002
exceeds Revenue Base and (Y) Operating Income Margin in Fiscal 2002 is less than
15.0%, then

          (i)  A dollar amount shall be arrived at pursuant to the following
steps. STEP 1: divide (X) the difference between Revenue in Fiscal 2002 minus
Revenue Base by (Y) Revenue Base. STEP 2: multiply the result from Step 1 by
100. STEP 3: Multiply the result from Step 2 by $67,000. STEP 4: divide
(X) Operating Income in Fiscal 2002 by (Y) Revenue in Fiscal 2002. STEP 5A:
multiply the result from Step 4 by 100. STEP 5B: subtract 15.0 from the result
from Step 5A. STEP 6: multiply the result from Step 5 by $200,000. STEP 7:
combine the result from Step 3 and the result from Step 6. If the result of Step
7 is greater than zero ($0), then such amount shall be the Contingent
Consideration due with respect to Fiscal 2002; if the result of Step 7 is less
than zero ($0), then no Contingent Consideration shall be due for Fiscal 2002.

        (ii)  The term "Revenue Base" in subsection (5) below shall mean the
Revenue in Fiscal 2002.

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        (C)  Revenue Shortfall and OIM Surplus. If (X) Revenue in Fiscal 2002 is
less than Revenue Base and (Y) Operating Income Margin in Fiscal 2002 exceeds
15.0%, then

          (i)  A dollar amount shall be arrived at pursuant to the following
steps. STEP 1: divide (X) the difference between Revenue in Fiscal 2002 minus
Revenue Base by (Y) Revenue in Fiscal 2002. STEP 2: multiply the result from
Step 1 by 100. STEP 3: Multiply the result from Step 2 by $67,000. STEP 4:
divide (X) Operating Income in Fiscal 2002 by (Y) Revenue in Fiscal 2002. STEP
5A: multiply the result from Step 4 by 100. STEP 5B: subtract 15.0 from the
result from Step 5A. STEP 6: multiply the result from Step 5 by $200,000. STEP
7: combine the result from Step 3 and the result from Step 6. If the result of
Step 7 is greater than zero ($0), then such amount shall be the Contingent
Consideration due with respect to Fiscal 2002; if the result of Step 7 is less
than zero ($0), then no Contingent Consideration shall be due for Fiscal 2002.

        (ii)  (X) If the result of Step 7 is greater than zero ($0), then the
term "Revenue Base" in subsection (5) below shall mean Revenue in Fiscal 2002;
and (Y) if the result of Step 7 is less than zero ($0), then the term "Revenue
Base" in subsection (5) below shall mean the result arrived at pursuant to the
following additional steps. STEP Q: divide the result from Step 6 by $67,000.
STEP R: divide the result from Step Q by 100. STEP S: add 1.00 to the result
from Step R. STEP T: divide Revenue Base by the result from Step S.

        (D)  Revenue Shortfall and OIM Shortfall. If (X) Revenue in Fiscal 2002
is less than Revenue Base and (Y) Operating Income Margin in Fiscal 2002 is less
than 15.0%, then

          (i)  No Contingent Consideration shall be due for Fiscal 2002.

        (ii)  The term "Revenue Base" in subsection (5) below shall not change
and shall have the same meaning as in this subsection (4).

        (5)  Fiscal 2003. In preparing the Contingent Consideration Statement
with respect to Fiscal 2003 pursuant to the procedures set forth in subsection 2
above, the following shall apply.

        (A)  Revenue Growth and OIM Surplus. If (i) Revenue in Fiscal 2003
exceeds Revenue Base and (ii) Operating Income Margin in Fiscal 2003 exceeds
17.5%, then a dollar amount shall be arrived at pursuant to the following steps.
STEP 1: divide (X) the difference between Revenue in Fiscal 2003 minus Revenue
Base by (Y) Revenue Base. STEP 2: multiply the result from Step 1 by 100. STEP
3: Multiply the result from Step 2 by $67,000. STEP 4: divide (X) Operating
Income in Fiscal 2003 by (Y) Revenue in Fiscal 2003. STEP 5A: multiply the
result from Step 4 by 100. STEP 5B: subtract 17.5 from the result from Step 5A.
STEP 6: multiply the result from Step 5 by $200,000. STEP 7: combine the result
from Step 3 and the result from Step 6. The result of STEP 7 shall be the
Contingent Consideration due with respect to Fiscal 2003.

        (B)  Revenue Growth and OIM Shortfall. If (i) Revenue in Fiscal 2003
exceeds Revenue Base and (ii) Operating Income Margin in Fiscal 2003 is less
than 17.5%, then a dollar amount shall be arrived at pursuant to the following
steps. STEP 1: divide (X) the difference between Revenue in Fiscal 2003 minus
Revenue Base by (Y) Revenue Base. STEP 2: multiply the result from Step 1 by
100. STEP 3: Multiply the result from Step 2 by $67,000. STEP 4: divide
(X) Operating Income in Fiscal 2003 by (Y) Revenue in Fiscal 2003. STEP 5A:
multiply the result from Step 4 by 100. STEP 5B: subtract 17.5 from the result
from Step 5A. STEP 6: multiply the result from Step 5 by $200,000. STEP 7:
combine the result from Step 3 and the result from Step 6. If the result of Step
7 is

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greater than zero ($0), then such amount shall be the Contingent Consideration
due with respect to Fiscal 2003; if the result of Step 7 is less than zero ($0),
then no Contingent Consideration shall be due for Fiscal 2003.

        (C)  Revenue Shortfall and OIM Surplus. If (i) Revenue in Fiscal 2003 is
less than Revenue Base and (ii) Operating Income Margin in Fiscal 2003 exceeds
17.5%, then a dollar amount shall be arrived at pursuant to the following steps.
STEP 1: divide (X) the difference between Revenue in Fiscal 2003 minus Revenue
Base by (Y) Revenue in Fiscal 2003. STEP 2: multiply the result from Step 1 by
100. STEP 3: Multiply the result from Step 2 by $67,000. STEP 4: divide
(X) Operating Income in Fiscal 2003 by (Y) Revenue in Fiscal 2003. STEP 5A:
multiply the result from Step 4 by 100. STEP 5B: subtract 17.5 from the result
from Step 5A. STEP 6: multiply the result from Step 5 by $200,000. STEP 7:
combine the result from Step 3 and the result from Step 6. If the result of Step
7 is greater than zero ($0), then such amount shall be the Contingent
Consideration due with respect to Fiscal 2003; if the result of Step 7 is less
than zero ($0), then no Contingent Consideration shall be due for Fiscal 2003.

        (D)  Revenue Shortfall and OIM Shortfall. If (i) Revenue in Fiscal 2003
is less than Revenue Base and (ii) Operating Income Margin in Fiscal 2003 is
less than 17.5%, then no Contingent Consideration shall be due for Fiscal 2003.

        (6)  Fiscal and Period Ceilings. In preparing the Contingent
Consideration Statements pursuant to the procedures set forth in subsection 2
above, and notwithstanding any provision of this Agreement, the parties
acknowledge and agree as follows.

        (A)  In no case shall the Purchaser be required to pay Contingent
Consideration of more than six million dollars ($6,000,000) with respect to any
one fiscal year during the Period.

        (B)  The total Contingent Consideration payable pursuant to this
Agreement shall not exceed twelve million dollars ($12,000,000).

        (7)  Certain Capital Expenditures and Other Matters. The parties further
acknowledge and agree as follows.

        (A)  Certain post-Closing capital expenditures of the Purchaser,
including capital expenditures and other operating costs, may be advantageous to
development of the Business subsequent to the Closing Date. Accordingly, upon
the mutual written agreement of the Shareholders' Representative and the Parent,
certain post-Closing expenditures shall be excluded from the relevant
calculations in preparing the Contingent Consideration Statements. However,
absent fraud, Parent's refusal to agree to such exclusions shall be unfettered
and not subject to challenge pursuant to the dispute resolution provisions of
this Agreement or otherwise.

        (B)  Notwithstanding Section 7(A), the parties agree that interest
charged on advances or other indebtedness owed by Purchaser to Parent, whether
pursuant to the Management Agreement or otherwise, shall be excluded entirely
from the relevant calculations in preparing the Contingent Consideration
Statements.

        (C)  Notwithstanding Section 1.3(a)(ii)(B) above, the parties agree
that, for purposes of determining the amount of Contingent Consideration payable
to the Seller, the amount of any rental income received by or for the benefit of
the Purchaser during the Period shall be credited against, and shall reduce the
amount of, lease expense attributed to the Purchaser (it being the intention of
the parties that the receipt by or for the benefit of Purchaser of any rental
income shall have the effect of increasing the amount of

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Operating Income for the fiscal year in which the rental income is received,
insofar as such rental income is not already reflected in the Operating Income
as reflected in the audited financial statements for such fiscal year.)

        (iii)  the assumption by the Purchaser of the Assumed Liabilities as of
the Closing Date pursuant to the Liabilities Undertaking referred to in
Section 1.2 hereof;

        (iv)  minus the amount, if any, by which the difference between
(A) total assets (as determined in accordance with GAAP) of the Business as of
the Closing Date minus (B) total liabilities (as determined in accordance with
GAAP) of the Business as of the Closing Date is less than two hundred forty-two
thousand dollars ($242,000) (the "Net Assets Adjustment"). In addition, up to
$100,000 of reasonable business expenses incurred by the Seller in the ordinary
course after June 30, 2001 shall be excluded from the total liabilities
component of the preceding calculation in this paragraph (iv).

For the purposes of determining the amount of the Purchase Price to be paid at
the Closing, the amount of the Net Assets Adjustment (the "Purchase Price
Adjustment") will be based on the amounts shown on the Latest Balance Sheet,
unless a more recent balance sheet is available, in which case the more recent
balance sheet will be used to determine such amounts. The Purchase Price
Adjustment so determined will be referred to herein as the "Initial Purchase
Price Adjustment." After the Closing, final Purchase Price Adjustment will be
determined in accordance with Section 1.3(c) below.

        (b)  At the Closing, the Purchaser will:

          (i)  pay Seller, by wire transfer, immediately available funds equal
to 95% of the Initial Cash Consideration to a bank account of Seller pursuant to
written instructions of Seller given to the Purchaser at least 48 hours prior to
the Closing; provided, however, that the parties acknowledge Purchaser's tender
to Seller, prior to or concurrent with the execution of this Agreement, of an
aggregate of $25,000 at the signing of the letter of intent relating to this
Agreement (the "Earnest Deposit"), and such Earnest Deposit will be applied
toward the amount due at Closing under this paragraph;

        (ii)  Deposit, on behalf of Seller, an amount equal to 5% of the Initial
Cash Consideration (the "Escrow Deposit") with U.S. Bank, N.A. or another escrow
agent mutually acceptable to Seller and the Purchaser (the "Escrow Agent") under
the escrow agreement (the "Escrow Agreement"), a copy of which is attached as
Exhibit 1.3(b)(ii) hereto, which Escrow Deposit will be retained and disbursed
by the Escrow Agent under the terms of the Escrow Agreement; and

        (iii)  execute and deliver to Seller, the Liabilities Undertaking.

        (c)  After the Closing Date, the Purchase Price Adjustment will be
determined as follows:

          (i)  Seller will prepare and deliver to the Purchaser within 30 days
following the Closing Date (or as soon thereafter as practicable) a balance
sheet for the Business as of the opening of business on the Closing Date (the
"Closing Balance Sheet"). The Closing Balance Sheet will be used to determine
the Purchase Price Adjustment for purposes of determining the Purchase Price for
the Assets (the "Final Basic Purchase Price").

        (ii)  The Closing Balance Sheet will be prepared in accordance with
GAAP, applied consistently with the principles, practices and procedures used in
the preparation of the Latest Balance Sheet. Seller and the Purchaser will
provide each other with full cooperation in connection with the preparation of
the Closing Balance Sheet, and each will have the right to review the supporting
work papers in connection with the preparation of the Closing Balance Sheet.

        (iii)  Within 30 days after the parties' receipt of the Closing Balance
Sheet, the Purchaser will notify Seller as to whether it disagrees with any of
the amounts included in the Closing Balance

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Sheet. If such notice is not given, the Closing Balance Sheet will be final and
conclusive for all purposes. If the parties are unable to resolve their
differences within 60 days of their receipt of the Closing Balance Sheet, the
Purchaser and Seller agree to retain the accounting firm of
PricewaterhouseCoopers to arbitrate the dispute and render a decision within
30 days of such retention, which decision will be final and binding for all
purposes. Any award pursuant to this Section 1.3(c)(iii) may be entered in and
enforced by any court having jurisdiction over the matter, as described in
Section 9.8(a). The Purchaser, on the one hand, and Seller, on the other hand,
will each pay one-half of the actual and reasonable costs of services rendered
by said accounting firm.

        (iv)  Within five days after the expiration of the 30-day period for
giving notice of disagreement with the accountants' finding, if no such notice
is given, or within five days after the resolution of disputes, if any, pursuant
to Section 1.3(c)(iii) above, the Purchase Price Adjustment will be determined
using the Closing Balance Sheet and the formulas set forth in
Section 1.3(a)(iv)—(vi) (the "Final Purchase Price Adjustment") and the Purchase
Price will be determined using the Final Purchase Price Adjustment. The
Purchaser or Seller, as appropriate, will by wire transfer in immediately
available funds make payment to the other of any appropriate amounts, such that
after such payments, and taking into account amounts previously received by
Seller pursuant to Section 1.3(b) hereof, the Purchaser will have paid Seller
the Purchase Price (other than the Contingent Consideration, if any is earned).

        1.4.    Allocation of Purchase Price.    

        The Purchase Price will be allocated among the Assets in the manner
required by Section 1060 of the Internal Revenue Code of 1986, as amended (the
"Code"). The parties recognize that due to the potential adjustment to the
Purchase Price referenced in Section 1.3(c) of this Agreement, the allocations
set forth in Exhibit 1.4 hereto are an estimate. Accordingly, in making the
final, actual allocation, the estimated allocations set forth in Exhibit 1.4
attached hereto will be binding and apply; provided, however, that during the
90-day period following Closing, and in connection with finalization of the
Purchase Price pursuant to Section 1.3(c) of this Agreement, the Purchaser and
Seller will negotiate in good faith to refine Exhibit 1.4 to reflect the actual
values of the Assets and the resulting modified and final allocation of the
Purchase Price among the various Assets. Such final determination (or the
estimate in Exhibit 1.4 if the parties cannot in good faith agree to any
modification) will be binding on the Purchaser only for the purposes of U.S.
federal, state and local taxation. The Purchaser and Seller will file all Tax
Returns and tax reports (including IRS Form 8594) in accordance with and based
upon such final allocation (or the estimate in Exhibit 1.4 if the parties cannot
in good faith agree to any modification) and will take no position in any Tax
Return, tax proceeding or tax audit which is inconsistent with such allocation.

        1.5.    Closing.    

        Concurrently with execution of this Agreement, a closing (the "Closing")
will be held at such time and place as the parties may agree upon (the "Closing
Date"). At the Closing, the documents and instruments necessary or appropriate
to effect the transactions contemplated herein will be exchanged by the parties.

        1.6.    Instruments of Transfer to Purchaser.    

        (a)  At the Closing, Seller will deliver to the Purchaser such bills of
sale, endorsements, assignments, deeds and other good and sufficient instruments
of conveyance and transfer, in form and substance reasonably satisfactory to the
Purchaser and its counsel, as will be required to vest in the Purchaser title to
the Assets, including without limitation:

          (i)  bills of sale executed by Seller vesting in the Purchaser good
and marketable title to all of the personal property of Seller included in the
Assets, substantially in the form attached as Exhibit 1.6(a)(i) hereof;

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        (ii)  appropriate endorsements and assignments of the contracts,
licenses, agreements, permits, plans, commitments and other binding arrangements
included in the Assets;

        (iii)  all written and electronic data relating to the Assets, property
and goodwill included in the Business; and

        (iv)  to the extent owned or used by Seller all copies of the source
code and object code and all documentation relating thereto for all computer
software programs included in the Assets.

        (b)  Seller will take all other actions necessary to put the Purchaser
in actual possession and operating control of the Assets.

        (c)  At the Closing, Purchaser and Parent will deliver to Seller such
assumption agreements and similar documents, in form and substance reasonably
satisfactory to Seller, as will be required to effect Purchaser's assumption of
all of the Assumed Contracts and other Assumed Liabilities on and as of the
Closing Date and to fulfill the other obligations of Purchaser and Parent
contemplated by this Agreement, including, but not limited to:

          (i)  the Liabilities Undertaking; and

        (ii)  a Security Agreement, substantially in the form of
Exhibit 1.6(c)(ii).

        2.    REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE
SHAREHOLDERS    Seller and the Shareholders, jointly and severally, hereby
represent and warrant to the Purchaser and Parent as of the date hereof as
follows (provided, however, that the representations and warranties made by and
with respect to any individual Shareholder in Sections 2.3, 2.4, 2.5, 2.8, 2.13,
2.24 or 2.26 are made solely by such Shareholder):

        2.1.    Disclosure Schedule.    

        The disclosure schedule attached as Exhibit 2 hereto (the "Disclosure
Schedule") is divided into sections which correspond to the sections of this
Article 2. The Disclosure Schedule is accurate and complete. Nothing in the
Disclosure Schedule will be deemed adequate to disclose an exception to a
representation or warranty made herein, unless the Disclosure Schedule
identifies the exception with reasonable particularity and describes the
relevant facts in reasonable detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other item
will not be deemed adequate to disclose an exception to a representation or
warranty made herein (unless the representation or warranty has to do with the
existence of the document or other item itself).

        2.2.    Corporate Organization.    

        Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Utah with requisite corporate power and
corporate authority to carry on the Business as it is now being conducted by
Seller and to own, operate and lease its properties and assets used in the
conduct of the Business. Seller is duly qualified or licensed to do business as
a foreign corporation in good standing in every other jurisdiction in which the
character or location of the properties and assets owned, leased or operated by
it in the conduct of the Business or the conduct of the Business, itself,
requires such qualification or licensing, except those jurisdictions in which
the failure to be qualified or licensed would not have a Material Adverse Effect
on the Business. The Disclosure Schedule contains a list of all jurisdictions in
which Seller is qualified or licensed to do business as a result of the
Business.

        2.3.    Authorization.    

        Seller has full corporate power and corporate authority to enter into
this Agreement and to carry out the transactions contemplated herein. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein have been duly and validly authorized by the
board of directors of Seller and the Shareholders, and no other corporate
proceedings on the part of Seller are necessary therefor. Seller has taken all
action required by law, its articles of incorporation and its bylaws, and
otherwise to authorize the execution, delivery and performance of this Agreement

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and the consummation of the transactions contemplated herein. This Agreement has
been duly and validly executed and delivered by Seller and the Shareholders and
is the valid and binding legal obligation of Seller and the Shareholders,
enforceable against them in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other similar laws of applicability
relating to or affecting creditors' rights and general principles of equity. The
Shareholders, and each of them, have the legal capacity to enter into this
Agreement and to carry out the transactions contemplated by this Agreement,
including without limitation the legal capacity to execute, deliver and perform
the agreements or contracts, if any, required to be executed and delivered by
any of them in connection with the Closing.

        2.4.    Non-Contravention.    

        Except as set forth in the Disclosure Schedule, neither the execution,
delivery and performance of this Agreement nor the consummation of the
transactions contemplated herein will: (i) violate or be in conflict with any
provision of the articles of incorporation or bylaws of Seller; (ii) be in
conflict with, or constitute a default, however defined (or an event which, with
the giving of due notice or lapse of time, or both, would constitute such a
default), under, or cause or permit the acceleration of the maturity of, or give
rise to any right of termination, cancellation, imposition of material fees or
penalties under any of the following if (A) listed or required to be listed in
the Disclosure Schedule or (B) otherwise material to the Business: any debt,
note, bond, lease, mortgage, indenture, license, obligation, contract,
commitment, franchise, permit, instrument or other agreement or obligation to
which Seller or the Shareholders is a party or by which Seller or the
Shareholders, or any of their properties or assets is or may be bound;
(iii) result in the creation or imposition of any mortgage, pledge, lien,
security interest, conditional or installment sales agreement, encumbrance,
claim, easement, right of way, tenancy, covenant, encroachment, restriction or
charge of any kind of nature (whether or not of record) (a "Lien"), other than
(A) mechanics', carriers', workers' or other like liens arising in the ordinary
course of business; (B) minor imperfections of title which do not individually
or in the aggregate, impair the continued use and operation of the real property
assets and fixtures to which they relate in the operation of the Business as
currently conducted; and (C) liens for current taxes not yet due and payable
("Permitted Liens"), upon the Assets, under any Assumed Contract or any debt,
obligation, contract, agreement or commitment to which Seller is a party or by
which Seller or any of the Assets is or may be bound; or (iv) violate any
statute, treaty, law, judgment, writ, injunction, decision, decree, order,
regulation, ordinance or other similar authoritative matters (referred to herein
individually as a "Law" and collectively as "Laws") of any foreign, federal,
state or local governmental or quasi- governmental, administrative, regulatory
or judicial court, department, commission, agency, board, bureau,
instrumentality or other authority (referred to herein individually as an
"Authority" and collectively as "Authorities").

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        2.5.    Consents and Approvals.    

        Except as set forth in the Disclosure Schedule, with respect to Seller
and the Shareholders, no consent, approval, order or authorization of or from,
or registration, notification, declaration or filing (referred to herein
individually as a "Consent" and collectively as "Consents") with any individual
or entity, including without limitation any Authority, is required in connection
with the execution, delivery or performance of this Agreement by Seller or the
Shareholders, or the consummation by Seller or the Shareholders of the
transactions contemplated herein.

        2.6.    Financial Statements.    

        The Disclosure Schedule contains true and complete copies of an audited
balance sheet of the Business as of February 28, 2001 and the related statements
of earnings, changes in stockholders' equity, and cash flows, for the fiscal
year then ended, and the unaudited balance sheet of the Business as of June 30,
2001, and its related statements of operations (or income or loss) for the
Business for the fiscal year to date period and month then ended. Except as
disclosed therein, the foregoing financial statements (i) are in accordance with
the books and records of Seller; and (ii) fairly present, in all material
respects, the financial position of the Business as of the respective dates
thereof, and its results of operations (or income or loss) for the periods then
ended.

        2.7.    Absence of Undisclosed Liabilities.    

        Except as and to the extent (i) reflected on or reserved for in the
Latest Balance Sheet, (ii) set forth on the Disclosure Schedule or
(iii) incurred in the ordinary course of business after the date of the Latest
Balance Sheet and not material in amount (none of which results from, arises out
of, relates to, is in the nature of, or was caused by any breach of contract,
breach of warranty, tort, infringement or violation of Law), either individually
or in the aggregate, neither Seller nor any Shareholder has any debt, liability
or obligation of any kind whatsoever relating to the Business, whether known or
unknown, secured or unsecured, accrued or unaccrued, fixed or contingent,
matured or unmatured, direct or indirect, absolute, contingent, unasserted or
otherwise, and whether due or to become due (referred to herein as a "Liability"
and collectively as "Liabilities").

        2.8.    Absence of Certain Changes.    

        Except as set forth in the Disclosure Schedule, since the date of the
Latest Balance Sheet, Seller has owned or operated the Assets in the ordinary
course of business and consistent with past practice. Without limiting the
generality of the foregoing, subject to the foregoing exceptions neither Seller
nor any Shareholder has, since the date of the Latest Balance Sheet:

        (a)  experienced any change which has had a Material Adverse Effect on
the Business or experienced any event or failed to take any action which
reasonably could be expected to result in a Material Adverse Effect on the
Business;

        (b)  suffered, in connection with or related to the Business, any
material loss, damage, destruction of property used in the conduct of the
Business or other casualty to property used in the conduct of the Business
(whether or not covered by insurance);

        (c)  suffered any loss of officers, directors, partners, employees,
dealers, distributors, independent contractors, customers or suppliers which had
or may reasonably be expected to result in a Material Adverse Effect on the
Business;

        (d)  (i) increased in any manner the compensation of any of the
officers, employees, consultants and others who provide services to the
Business; (ii) paid or agreed to pay any pension, retirement allowance or other
employee benefit not required or permitted by any existing plan, agreement or
arrangement to any such officer, employee, consultant or other person, whether
past or present of the Business; (iii) except in connection with any written
arrangement approved by the Purchaser, committed the Business to any additional
pension, profit-sharing, bonus, incentive, deferred

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compensation, group insurance, severance pay, retirement or other employee
benefit plan, agreement or arrangement, or to any employment agreement or
consulting agreement (arising out of prior employment) with or for the benefit
of any person providing services to the Business; (iv) terminated, entered into,
adopted, instituted or otherwise become subject to or amend any collective
bargaining agreement; or (v) amended any of such plans or any of such agreements
in existence on the date of this Agreement;

        (e)  incurred, assumed, suffered or become subject to, whether directly
or by way of guarantee or otherwise, any Liabilities which, individually or in
the aggregate, have or would have a Material Adverse Effect on the financial
conditions of the Business or the condition of the Assets;

        (f)    paid, discharged or satisfied any Liabilities of the Business
other than the payment, discharge or satisfaction in the ordinary course of the
Business and consistent with past practice;

        (g)  sold, transferred, or otherwise disposed of any material Assets,
other than inventory in the ordinary course of the Business and consistent with
past practice;

        (h)  permitted or allowed any of the Assets to be subjected to any Lien,
except for Permitted Liens;

        (i)    written down the value of any Inventory (including write-downs by
reason of shrinkage or mark-down), except for immaterial write-downs in the
ordinary course of the Business and consistent with past practice;

        (j)    canceled or amended any debts, waived any claims or rights or
sold, transferred or disposed of any of the Assets, other than Inventory in the
ordinary course of the Business;

        (k)  licensed, sold, transferred, pledged, modified, disclosed, disposed
of or permitted to lapse any rights to the use of any of the Intellectual
Property Rights (except as necessary in the conduct of the Business);

        (l)    made or entered into any commitment for capital expenditures for
additions to property, plant, equipment or intangible capital assets of the
Business in excess of $25,000;

        (m)  paid, lent or advanced any amount to, or sold, transferred,
disposed of or leased any of the properties or assets (real, personal or mixed,
tangible or intangible) used in connection with the Business to, or entered into
any agreement or arrangement with, any officer, director, employee or any other
person providing services to the Business;

        (n)  terminated, entered into or amended in any material respect any
contract, agreement, lease, license or commitment identified in the Disclosure
Schedule, or taken any action or omitted to take any action which will cause a
breach, violation or default (however defined) under any such items, except in
the ordinary course of the Business and consistent with past practice;

        (o)  acquired for the Business any material business or assets of any
other person or entity;

        (p)  permitted any of current insurance (or reinsurance) policies
relating to the Business to be canceled or terminated or any of the coverage
thereunder to lapse, unless simultaneously with such termination, cancellation
or lapse, replacement policies providing coverage equal to or greater than
coverage remaining under those canceled, terminated or lapsed are in full force
and effect;

        (q)  suffered any adverse change in the Business' relationship with any
customer, including the loss of any such customer;

        (r)  entered into other agreements, commitments or contracts not in the
ordinary course of the Business or in excess of current requirements;

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        (s)  modified, amended or terminated any Assumed Contract, or waived,
released relinquished or assigned any Assumed Contract or other right or claim;

        (t)    settled or compromised any material suit, claim or dispute or
threatened material suit, claim or dispute;

        (u)  made any change in the accounting methods, principles or practices
used in connection with the Business except as required or permitted by GAAP,
including revenue recognition methodologies; or

        (v)  agreed in writing or otherwise to take any of the foregoing actions
or any action which would make any representation or warranty in this Agreement
untrue or incorrect in any material respect.

        2.9.    Assets.    

        (a)  Except as set forth in the Disclosure Schedule, Seller has good and
marketable title to all of the Assets owned by Seller and a valid leasehold
interest in all of the Assets leased by Seller, in each case free and clear of
any Lien, other than Permitted Liens.

        (b)  Seller has full right and power to, and at the Closing will, convey
to the Purchaser good title to (or the valid right to use) all of the Assets,
free and clear of any Lien, other than Permitted Liens.

        (c)  The machinery, equipment, vehicles and other personal property used
by Seller in the Business are in good operating condition and repair, normal
wear and tear excepted, and fit for the intended purposes thereof. Such
machinery, vehicles and other personal property has been maintained in
accordance with Seller's standard maintenance procedures and no material
maintenance, replacement or repair has been deferred or neglected.

        (d)  Except as set forth in the Disclosure Schedule, all real properties
included in the Latest Balance Sheet or acquired after the date thereof by
Seller, and all real properties leased by Seller (collectively, the "Real
Property"), are free from any structural defects, in good operating condition
and repair, with no material maintenance, repair or replacement having been
deferred or neglected, suitable for the intended use, and free from other
material defects, normal wear and tear accepted. Except as set forth on the
Disclosure Schedule, each such Real Property and its present use conform in all
respects to all occupational, safety or health, zoning, planning, subdivision,
platting and similar Laws. Except as set forth on the Disclosure Schedule, all
public utilities necessary for the use and operation of any facilities on the
Real Property are available for use or access at such Real Property and there is
no legal or physical impairment to free ingress or egress from any of such
facilities or Real Property. With respect to the leased Real Property, the
Disclosure Schedule includes termination/renewal provisions of such leasehold
interest, and the amount of rent and/or royalty to be paid under the terms of
such leases. All such leasehold interests are valid and in full force and effect
and enforceable in accordance with their terms, subject to the effect of
applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent
conveyance, and other laws affecting the rights of creditors generally or the
availability of specific performance, injunctive relief and other equitable
remedies. There does not exist any violation, breach or default, of or under
such leasehold interest. Except as set forth in the Disclosure Schedule, no such
leasehold interest contains any provision that would be triggered or cause a
breach or a right to terminate such leasehold interests upon a change in control
(or change in ownership) of the lessee. Except as set forth in the Disclosure
Schedule, the lease by and between the Seller and 613S, LLC for the real
property located at 643 South 400 West, Salt Lake City, Utah is freely
assignable by the Seller to the Purchaser without the consent of the landlord or
any other person. Upon such assignment to, and assumption by, the Purchaser, the
Purchaser will be entitled to all of the benefits of such lease and the terms of
such lease will be binding upon the landlord.

        (e)  The Assets constitute all of the material property and assets,
real, personal and mixed, tangible and intangible, presently used to carry on
the Business of Seller, and the Assets are adequate to carry on the Business of
Seller as presently conducted.

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        (f)    Neither Seller nor any Shareholder is a foreign person or is
controlled by a foreign person, as the term foreign person is defined in
Section 1445(f)(3) of the Code.

        2.10.    Inventories.    

        Except as set forth in the Disclosure Schedule, all inventory used in
the Business (the "Inventory") are of a quality and quantity usable in the
ordinary course of the Business, and the present quantities of Inventory used in
the Business are reasonable.

        2.11.    Receivables and Payables

        (a)  The Disclosure Schedule contains a listing of all of the
receivables, if any, of Seller relating to the Business as of July 31, 2001.
Except as set forth on the Disclosure Schedule, (i) Seller has good right, title
and interest in and to all of its trade accounts receivable and notes receivable
relating to the Business; (ii) none of such trade accounts receivable and notes
receivable is subject to any Lien, other than Permitted Liens; (iii) all of the
trade accounts receivable and notes receivable owing to Seller constitute valid
and enforceable claims arising from bona fide transactions in the ordinary
course of business, and there are no known claims, refusals to pay or other
rights of set-off against any thereof; (iv) no account or note debtor is
delinquent in payment by more than 30 days; (v) the aging schedule of the trade
accounts receivable and notes receivable accounts of Seller attached to the
Disclosure Schedule is complete and accurate; and (vi) the reserve established
by Seller on the Latest Balance Sheet is adequate to cover any doubtful
accounts.

        (b)  The Disclosure Schedule contains a listing of all trade accounts
payable and notes payable of Seller relating to the Business as of the date
first set forth above in this Agreement. All such trade accounts payable and
notes payable arose from bona fide transactions in the ordinary course of the
Business and, except as set forth on the Disclosure Schedule, no such account
payable or note payable is delinquent by more than 30 days in its payment.

        2.12.    Intellectual Property Rights.    

        (a)  The Disclosure Schedule contains a listing of all (i) patents,
patent applications (collectively the "Patents"), (ii) copyrights, copyright
applications (the "Copyrights"), (iii) tradenames, registered and common law
trademarks, trademark applications (the "Trademarks"), (iv) service marks,
service mark applications (the "Service Marks"), and (v) computer programs and
other computer software, trade secrets, plans and specifications, inventions,
know-how, technology, proprietary processes and formulae (the "Trade Secrets")
necessary or used in connection with the Assets and for the conduct of the
Business (the Patents, Copyrights, Trademarks, Service Marks and Trade Secrets
are collectively referred to as "Intellectual Property Rights"). All issued
Patents and registered Copyrights, Trademarks and Service Marks are collectively
referred to as the "Registered Intellectual Property Rights." The Intellectual
Property Rights are sufficient to conduct the Business as presently conducted
and as proposed to be conducted.

        (b)  Except as set forth in the Disclosure Schedule, Seller owns, has
the unrestricted right to use and has sole and exclusive possession of and has
good and valid title to, or sufficient license or other rights to, all of the
Intellectual Property Rights, free and clear of all Liens.

        (c)  All Registered Intellectual Property Rights owned by Seller are in
compliance with formal legal requirements (including the payment of filing,
examination and maintenance fees and proofs of working or use), are valid and
enforceable and, except as set forth on the Disclosure Schedule, are not subject
to any maintenance fees or taxes or actions falling due within 90 days after the
Closing Date. All Patents issued to Seller are valid and enforceable and no
Patents have been or are now involved in any interference, reissue,
reexamination, opposition, declaratory judgment or other invalidating
proceeding, nor, to the Knowledge of Seller is any such action threatened with
respect to any of the Patents. To the Knowledge of Seller, no application for a
potentially infringing patent has been filed and no potentially infringing
patent has been issued. To the Knowledge of Seller, no Trademarks have

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been or are involved in any opposition, invalidation or cancellation proceeding
and, there is no basis for the commencement of any such proceeding. The
Trademarks owned by Seller are valid and enforceable and no person holds any
infringing or potentially infringing trademark and, to the Knowledge of Seller,
no application for any infringing or potentially infringing trademark has been
made.

        (d)  Copies of all material documentation relating to the Trade Secrets
have been furnished to the Purchaser. Such documentation is current, accurate,
complete in all material respects. To the Knowledge of Seller, no Trade Secrets
owned by Seller are part of the public domain or literature or have been used,
divulged or appropriated for the benefit of any person or entity other than
Seller or to the detriment of Seller. Seller has taken reasonable measures and
precautions to protect the secrecy, confidentiality and value of the Trade
Secrets owned by Seller.

        (e)  Except as set forth on Section 2.12(C) of the Disclosure Schedule,
the use of all Intellectual Property Rights necessary or required for the
conduct of the Business as presently conducted and as proposed to be conducted
does not and will not infringe or violate any trade secrets, plans and
specifications, patents, copyrights, tradenames, registered and common law
trademarks, trademark applications, service marks, service mark applications,
computer programs and other computer software, inventions, know-how, technology,
proprietary processes and formulae or other intellectual property rights of any
other person or entity (the "Third Party Intellectual Property Rights"). Neither
Seller nor any Shareholder nor any of their respective employees, contractors,
consultants or agents is using any confidential information or trade secrets of
others in the conduct of the Business.

        (f)    All agreements relating to licenses of Intellectual Property
Rights granted by or to Seller or any of their respective subsidiaries,
officers, directors and stockholders and relating to the Business are set forth
on the Disclosure Schedule. Except as set forth on the Disclosure Schedule, all
such licenses set forth on the Disclosure Schedule are in good standing, valid
and effective in accordance with their respective terms and there is not, under
any of such licenses, any existing default or event of default (or event which
with notice or lapse of time, or both, would constitute a default, or would
constitute a basis for a claim of force majeure or other claim of excusable
delay or non-performance), in each case by Seller or by any other party thereto.
There are no outstanding and, to the Knowledge of Seller, no threatened disputes
or disagreements with respect to any such agreement.

        (g)  Except as set forth on the Disclosure Schedule, neither Seller nor
any Shareholder is obligated or under any Liability whatsoever to make any
payments by way of royalties, fees or otherwise to any owner of, licensor of, or
other claimant to, any Intellectual Property Rights or Third Party Intellectual
Property Rights.

        (h)  Except as set forth on the Disclosure Schedule, all employees,
contractors and consultants of Seller involved in the technical or scientific
aspects of the Business have executed written agreements with Seller which
assign to Seller, as the case may be, all rights to any inventions,
improvements, discoveries or information which relate to the Business. No
employee, contractor or consultant of Seller has entered into any agreement
which restricts or limits in any way the scope or type of work in which such
employee, contractor or consultant may be engaged or requires such employee,
contractor or consultant to transfer, assign or disclose information concerning
such employee's, contractor's or consultant's work to anyone other than Seller.

        (i)    Except as set forth in the Disclosure Schedule, the software,
hardware, and firmware used by Seller in the Business are Year 2000 Compliant
and are sufficient for operation of the Business. The term "Year 2000 Compliant"
as used in the preceding sentence, means that no operational, financial, data
transmission, communication or process has been or will be materially affected
or materially

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interrupted by dates prior to, during or after the Year 2000, and in particular,
without prejudice to the generality of the foregoing that:

          (i)  no value for current date has caused or will cause any
interruption in operation;

        (ii)  all manipulation of time related data has been produced and will
continue to produce the required results for all valid date values prior to,
during and after the Year 2000;

        (iii)  if the date elements in interfaces and data storage specify the
century, they have permitted and will continue to permit specifying the correct
century either explicitly or by unambiguous algorithms or inferencing rules; and
where any date element is represented without a century, the correct century has
been unambiguous and will continue to be unambiguous for all manipulations
involving that element; and

        (iv)  Year 2000 has been and will continue to be recognized as a leap
year.

        2.13.    Litigation.    

        Except as set forth in the Disclosure Schedule, there is no legal,
administrative, arbitration, or other proceeding, suit, claim or action of any
nature or investigation, review or audit of any kind (including without
limitation a proceeding, suit, claim or action, or an investigation, review or
audit, involving any environmental Law or matter), judgment, decree, decision,
injunction, writ or order pending, or, to the Knowledge of Seller, noticed,
scheduled, threatened or contemplated (a) by or against or involving Seller, any
Shareholder, the Assets or Seller's officers, directors, agents or employees
(but only in their capacity as such), whether at law or in equity, before or by
any person or entity or Authority relating to the Business, or (b) which
questions or challenges the validity of this Agreement or any action taken or to
be taken by the parties hereto pursuant to this Agreement or in connection with
the transactions contemplated herein.

        2.14.    Tax Matters.    

        (a)  Seller has properly completed and duly filed on a timely basis (or
a valid extension has been obtained and the extension period has not expired)
and in form and substance that is, in all material respects, correct, all Tax
Returns required to be filed on or prior to the date hereof with respect to
Taxes of Seller (or relating to the Business). As of the time of filing, the
foregoing Tax Returns correctly reflected, in all material respects, the facts
regarding the income, business, assets, operations, activities, status or other
matters of Seller or any other information required to be shown thereon. There
is no material omission, deficiency, error, misstatement or misrepresentation,
whether innocent, intentional or fraudulent, in any Tax Return filed by Seller
for any period. Any Tax Returns filed by or on behalf of Seller or any
Shareholder after the date hereof, but including periods through the Closing
Date, will conform with the provisions of this Section 2.14.

        (b)  With respect to all amounts of Taxes imposed upon Seller, or for
which Seller is or could be liable, whether to taxing Authorities (as, for
example, under Law) or to other persons or entities (as, for example, under tax
allocation agreements), with respect to all taxable periods or portions of
periods ending on or before or including the Closing Date, all applicable Tax
Laws and agreements have been or will be complied with, and all such amounts of
Taxes required to be paid by Seller to taxing Authorities or others on or before
the date hereof have been duly paid or will be paid on or before the Closing
Date. There are no Liens affecting any of the Assets arising out of, connected
with, or related to Taxes other than Liens arising under Law for Taxes not yet
due and payable. Seller has withheld and remitted all amounts required to be
withheld and remitted by them in respect of Taxes.

        (c)  Except as set forth in the Disclosure Schedule, neither the federal
Tax Returns of the Seller nor any state, local or foreign Tax Return of Seller
has been examined by the Internal Revenue Service or any similar state, local or
foreign Authority, and, except to the extent shown therein, all deficiencies
asserted as a result of such examinations have been paid or finally settled and
no issue has been raised

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by the Internal Revenue Service or any similar state, local or foreign Authority
in any such examination which, by application of similar principles, reasonably
could be expected to result in a proposed deficiency for any other period not so
examined. Except as set forth in the Disclosure Schedule, all deficiencies and
assessments of Taxes of Seller resulting from an examination of any Tax Returns
by any Authority have been paid and there are no pending examinations currently
being made by any Authority nor has there been any written or oral notification
to Seller of any intention to make an examination of any Taxes by any Authority.
Except as set forth in the Disclosure Schedule, there are no outstanding
agreements or waivers extending the statutory period of limitations applicable
to any Tax Return for any period.

        (d)  For purposes of computing Taxes and the filing of Tax Returns,
neither Seller nor any Shareholder has failed to treat as "employees" any
individual providing services to the Business who would be classified as an
"employee" under the applicable rules or regulations of any Authority with
respect to such classification.

        2.15.    Benefit Plans.    

        (a)  Section 2.15 of the Disclosure Schedule lists each pension,
welfare, incentive, deferred compensation, equity-based compensation,
perquisite, paid time off, severance or other benefit plan, policy or practice
covering current or former employees of the Business or their spouses,
dependents, family members, domestic partners or beneficiaries (a "Benefit
Plan"). With respect to each Benefit Plan, Seller has made available to
Purchaser the current Plan document or a complete and accurate description of
the Plan.

        (b)  Seller does not and could not have any liability arising directly
or indirectly under Section 412 of the Internal Revenue Code of 1986, as amended
(the "Code") or Section 302 or Title IV of ERISA.

        (c)  Seller does not and could not have any liability arising directly
or indirectly to or with respect to any "multiemployer plan" within the meaning
of Section 4001(a)(3) of ERISA.

        (d)  Seller does not and could not have any liability arising directly
or indirectly in connection with any failure of Seller or any affiliate of
Seller to comply with Section 4980B of the Code or Part 6 of Subtitle B of Title
I of ERISA.

        (e)  Nothing has occurred or failed to occur with respect to any Benefit
Plan which could result in any liability to Purchaser or any affiliate of
Purchaser other than a liability expressly assumed pursuant to this Agreement.

        (f)    Except as set forth in Section 2.15(f) of the Disclosure
Schedule, there are no facts or circumstances which could, directly or
indirectly, subject Parent, the Purchaser or any of their respective affiliates
to any liability of any nature with respect to any pension, welfare, incentive,
deferred compensation, perquisite, paid time off, severance or other benefit
plan, policy, practice or agreement sponsored, maintained or contributed to by
the Seller or any affiliate, to which the Seller or any affiliate is a party or
with respect to which the Seller or any affiliate could have any liability (a
"Seller Plan").

        2.16.    Powers of Attorney.    

        There are no persons or entities holding general or special powers of
attorney from Seller relating to the Business.

        2.17.    Contracts and Commitments; No Default.    

        (a)  The Disclosure Schedule contains an accurate and complete list of:

          (i)  All real property in which Seller has a leasehold or other
interest and which is included in the Assets or which is used by Seller in
connection with the operation of the Business, together with a list identifying
each lease, sublease, license, or any other instrument under which Seller

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claims or holds such leasehold or other interest or right to the use thereof or
pursuant to which Seller has assigned, sublet or granted any rights therein,
identifying the parties thereto, the rental or other payment terms, expiration
date and cancellation and renewal terms thereof, has been delivered to the
Purchaser.

        (ii)  All machinery, tools, equipment, motor vehicles and other tangible
personal property (other than inventory and supplies), owned, leased or used by
Seller in the conduct of the Business and included in the Assets, except for
items having a cost of less than $5,000. Seller has provided the Purchaser with
either a copy of or a summary description of all leases and Liens relating
thereto, identifying the parties thereto, the rental or other payment terms,
expiration date and cancellation and renewal terms thereof.

        (iii)  All contracts, agreements and commitments not fully performed, in
respect of the issuance, sale or transfer of capital stock, bonds, or other
securities of Seller or pursuant to which Seller has acquired any Asset material
to the Business, regardless of cost.

        (iv)  All contracts, agreements, commitments or understandings that
restrict Seller from carrying on the Business or any part thereof anywhere in
the world or from competing in any line of business with any person or entity.

        (v)  All purchase or sale contracts or agreements that call for
aggregate purchases or sales in excess over the course of such contract or
agreement of $25,000 or which continues for a period of more than 12 months
(including without limitation periods covered by any option to renew or extend
by either party) which is not terminable on 60 days' or less notice without cost
or other Liability at or any time after the Closing.

        (vi)  Any contract, commitment, agreement or arrangement with any
"disqualified individual" (as defined in Section 280G(c) of the Code) which
contains any severance or termination pay liabilities which would result in a
disallowance of the deduction for any "excess parachute payment" (as defined in
Section 280G(b)(1) of the Code) under Section 280G of the Code.

      (vii)  All Assumed Contracts.

      (viii)  The names and current annual salary rates of all employees of and
consultants to the Business, showing separately for each such person the amounts
paid or payable as salary, bonus payments and any indirect compensation for the
fiscal year ended February 28, 2001, as well as the vacation time, holiday time
and sick pay due each such employee and consultant as of the date of this
Agreement.

        (ix)  All collective bargaining agreements, employment and consulting
agreements, executive compensation plans, bonus plans, deferred compensation
agreements, employee option or purchase plans, other employee arrangements or
commitments, whether or not legally binding, including without limitation,
holiday, vacation, paid time-off, Christmas and other bonus practices, to which
Seller is a party or is bound and which relates to employees or consultants of
the Business or the operation of the Business.

        (x)  All imaging, scanning, coding, pricing agreements, schedules and
other contracts or agreements with customers for services provided in the
Business.

        (b)  The Assumed Contracts and all other contracts, agreements, leases,
licenses and commitments required to be listed on the Disclosure Schedule (other
than those which have been fully performed), are valid and binding, enforceable
in accordance with their respective terms in all material respects, except as
enforcement might be limited by bankruptcy and other laws related to creditors'
rights and principles of equity, and are in full force and effect. Except as
otherwise specified in the Disclosure Schedule, the Assumed Contracts are
validly assignable to the Purchaser without the consent of any other party so
that, after the assignment thereof to the Purchaser pursuant hereto, the
Purchaser will

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be entitled to the full benefits thereof (subject to the performance thereof by
Purchaser). Except as disclosed in the Disclosure Schedule, none of the payments
required to be made under any Assumed Contract has been prepaid more than
30 days prior to the due date of such payment thereunder. Except as set forth in
the Disclosure Schedule, neither Seller nor any Shareholder is in material
breach, violation or default, however defined, in the performance of any of
their obligations under any Assumed Contract or any other contract, agreement,
lease, license or commitment required to be listed on the Disclosure Schedule,
and no facts and circumstances exist which, whether with the giving of due
notice, lapse of time, or both, would constitute such a material breach,
violation or default thereunder or thereof. None of the Assumed Contracts is,
either when considered singly or in the aggregate with others, materially
adverse, unduly burdensome, or onerous to the Business or likely, either before
or after the Closing, to result in any material loss or liability to the
Business. Except as set forth in the Disclosure Schedule, none of the Assumed
Contracts is subject to renegotiation with any government body. True and
complete copies of all of the Assumed Contracts (together with any and all
amendments thereto) have been delivered to the Purchaser.

        2.18.    Orders, Commitments and Returns.    

        Except as set forth in the Disclosure Schedule, all accepted and
unfulfilled orders for the sale of products and the performance of services
entered into by Seller relating to the Business and all outstanding material
contracts or material commitments for the purchase of supplies, materials and
services were made in bona fide transactions in the ordinary course of the
Business. Except as set forth in the Disclosure Schedule, Seller has not
received any claims against Seller to return products of the Business by reason
of alleged over-shipments, defective products or otherwise, or of products in
the hands of customers, retailers or distributors under an understanding that
such products would be returnable. To the Knowledge of Seller, neither Seller
nor any Shareholder is subject to any outstanding sales or purchase contracts,
commitments or proposals relating to the Business which is anticipated to result
in a loss upon completion or performance thereof.

        2.19.    Labor Matters.    

        Except as set forth in the Disclosure Schedule, in connection with the
Business:

        (a)  Seller is and has been in compliance in all material respects with
all applicable Laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including without limitation any
such Laws respecting employment discrimination and occupational safety and
health requirements, and has not and is not engaged in any unfair labor
practice;

        (b)  there is no unfair labor practice complaint against Seller pending
or to the Knowledge of Seller, threatened before the National Labor Relations
Board or any other comparable Authority;

        (c)  there is no labor strike, dispute, slowdown or stoppage actually
pending or to the Knowledge of Seller, threatened against or directly affecting
Seller and the Business;

        (d)  no labor representation question exists respecting the employees of
the Business and there is not pending or to the Knowledge of Seller, threatened
any activity intended or likely to result in a labor representation vote
respecting the employees of the Business;

        (e)  to the Knowledge of Seller during the last 12 months, there has
been no attempt by either employees of the Business, any labor organization, or
others to organize the employees of the Business into a labor union or to
provide for other labor representation;

        (f)    no grievance or any arbitration proceeding arising out of or
under collective bargaining agreements is pending and no claims therefor exist
or, to the Knowledge of Seller, have been threatened;

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        (g)  no collective bargaining agreement is binding and in force against
Seller or currently being negotiated by Seller relating to the Business;

        (h)  Seller has not experienced any significant work stoppage or other
significant labor difficulty relating to the Business;

        (i)    Seller is not delinquent in payments to any persons performing
services for the Business for any wages, salaries, commissions, bonuses or other
direct or indirect compensation for any services performed by them or amounts
required to be reimbursed to such persons, including without limitation any
amounts due under any Seller Plan, including any Benefit Plan;

        (j)    upon termination of the employment of any person, neither Seller,
any Shareholder the Purchaser, nor any affiliate of the Purchaser will, by
reason of anything done at or prior to or as of the Closing Date, be liable to
any of such persons for so-called "severance pay" or any other payments; and

        (k)  within the twelve-month period prior to the date of the Agreement,
there has not been any expression of intention to Seller by any officer or key
employee (including but not limited to area and district managers) of the
Business to terminate such employment.

        2.20.    Compliance with Law; Permits and Other Operating Rights.    

        Except as set forth in the Disclosure Schedule, and without limiting the
scope of any other representations or warranties contained in this Agreement,
but without intending to duplicate the scope of such other representations and
warranties, the assets, properties, business and operations of the Business, are
and have been in compliance with all Laws applicable to the assets, properties,
business and operations of the Business. Except as set forth in the Disclosure
Schedule, neither Seller nor any Shareholder requires the Consent of any
Authority to permit the Business to operate in the manner in which it is
presently being operated. Seller possesses all material permits, licenses and
other authorizations from all Authorities necessary to permit Seller to operate
the Business in the manner in which Seller presently conducts it, and the
consummation of the transactions contemplated by this Agreement will not prevent
the Purchaser from being able to continue to use such permits and operating
rights.

        2.21.    Environmental and Safety Matters.    

        Except as set forth on the Disclosure Schedule:

        (a)  Neither Seller, any Shareholder any subsidiary or former subsidiary
of Seller, nor, to the Knowledge of Seller, any previous owner, tenant, occupant
or user of any property owned or leased by or to Seller and used in connection
with the Business, or by or to any subsidiary or former subsidiary (the
"Properties") engaged in or permitted, direct or indirect operations or
activities upon, or any use or occupancy of the Properties, or any portion
thereof, for the purpose of or in any way involving the handling, manufacture,
treatment, storage, use, generation, emission, release, discharge, refining,
dumping or disposal of any Environmentally Regulated Materials (whether legal or
illegal, accidental or intentional, direct or indirect) on, under, in or about
the Properties, or transported any Environmentally Regulated Materials to, from
or across the Properties, nor are any Environmentally Regulated Materials
presently constructed, deposited, stored, placed or otherwise located on, under,
in or about the Properties. The Properties do not contain any: (i) underground
or aboveground storage tanks; (ii) asbestos; (iii) equipment using PCBs;
(iv) underground injection wells; or (v) septic tanks in which process waste
water or any Environmentally Regulated Materials have been disposed.

        (b)  

          (i)  No violation or noncompliance with Environmental and Occupational
Safety and Health Laws has occurred with respect to the Properties or operations
conducted thereon during the period in which Seller operated such Properties and
conducted such operations; Seller has

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obtained all permits, licenses and authorizations required by, and Seller, the
Seller and the Properties are in compliance with, all Environmental and
Occupational Safety and Health Laws including, without limitation, all
applicable restrictions, conditions, standards, limitations, prohibitions,
requirements, obligations, schedules and timetables contained in the
Environmental and Occupational Safety and Health Laws or contained in any
regulation, code, plan, order, decree, judgment, injection, notice or demand
letter issued, entered, promulgated or approved thereunder;

        (ii)  no enforcement, investigation, cleanup, removal, remediation or
response or other governmental or regulatory actions have been, or could have
been at any time in the past, asserted or threatened (A) with respect to
operations conducted by Seller on the Properties or, (B) against Seller or any
of its subsidiaries or former subsidiaries with respect to or in any way
regarding the Properties pursuant to any Environmental and Occupational Safety
and Health Laws; and

        (iii)  no claims or settlements relating to or arising out of
Environmental and Occupational Safety and Health Laws or Environmentally
Regulated Materials, have been made or, to the Knowledge of Seller, been
threatened by any third party, including any Authority, nor, to the Knowledge of
Seller, does there exist any basis for any such claim (any such enforcement,
investigation, cleanup, removal, remediation or response, other governmental or
regulatory action, claim or settlement is herein referred to as an
"Environmental Claim") against Seller, the Seller or any of their respective
subsidiaries or former subsidiaries with respect to the Properties or operations
conducted thereon, or with respect to the Properties or the operations thereon.

        (c)  With regard to Seller, there are no past or present events,
conditions, circumstances, activities, practices, incidents, actions or plans
which may interfere with or prevent compliance or continued compliance with
Environmental and Occupational Health and Safety Laws, as in effect on the
Closing Date.

        2.22.    Insurance.    

        The Disclosure Schedule contains a listing of all policies of fire and
other casualty, general liability, theft, life, workers' compensation, health,
directors and officers, business interruption and other forms of insurance owned
or held by Seller and relating to the Business, identifying the insurer, the
policy number, the risk insured against, the term of the coverage, the limits of
coverage, the deductible amount (if any), the premium rate, the date through
which coverage will continue by virtue of premiums already paid and, in the case
of any "claims made" coverage, the same information as to predecessor policies
for the previous five years. All present policies are in full force and effect
and all premiums with respect thereto have been paid. Seller has not been denied
any form of insurance and no policy of insurance has been revoked or rescinded
during the past five years, except as described on the Disclosure Schedule.

        2.23.    Brokers.    

        Except as set forth in Schedule 2.23 of the Disclosure Schedule, neither
Seller, the Shareholders nor any of Seller's or any Shareholder's directors,
officers, shareholders, agents or employees has employed any broker, finder, or
financial advisor or incurred any liability for any brokerage fee or commission,
finder's fee or financial advisory fee, in connection with the transactions
contemplated hereby, nor is there any basis for any such fee or commission to be
claimed by any person or entity.

        2.24.    Absence of Certain Business Practices.    

        Neither Seller, any Shareholder nor any director, officer, partner,
employee or agent of Seller, nor any other person acting on their behalf, has,
directly or indirectly, within the past five years given or agreed to give any
gift or similar benefit to any customer, supplier, governmental employee or
other person who is or may be in a position to help or hinder Seller (or assist
Seller in connection with any

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actual or proposed transaction) which: (i) might subject Seller, any Shareholder
the Purchaser, Parent or the Purchaser's or Parent's affiliates to any damage or
penalty in any civil, criminal or governmental litigation proceeding; (ii) if
not given in the past, might have had a Material Adverse Effect on the Business;
or (iii) if not continued in the future, might materially adversely affect the
Business or which might subject Seller, any Shareholder the Purchaser, Parent or
the Purchaser's or Parent's affiliates to suit or penalty in any private or
governmental litigation or proceeding.

        2.25.    Business Generally.    

        Except as set forth in the Disclosure Schedule, there has been no event,
transaction or information which has come to the attention of Seller which
would, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Business. Without limiting the generality of the
foregoing, except as set forth in the Disclosure Schedule, there has not been in
the 12-month period prior to the date hereof any change in the business
relationship of Seller with any customer, dealer or supplier to the Business
which may reasonably be expected to have a Material Adverse Effect on the
Business.

        2.26.    Transactions with Certain Persons.    

        Except as set forth in the Disclosure Schedule, during the past three
years, neither Seller nor any Shareholder has, directly or indirectly,
purchased, leased or otherwise acquired any property or obtained any services
from, or sold, leased or otherwise disposed of any property or furnished any
services to in connection with the Business, or otherwise dealt with, in the
ordinary course of the Business or otherwise in connection with the Business,
any affiliate or associate of Seller or any member, shareholder, or partner of
any affiliate or associate of Seller (except with respect to compensation in the
ordinary course of the Business for services rendered as a director, officer,
employee or consultant of Seller). Neither Seller nor any Shareholder owes any
amount to, or has any agreement or contract with or commitment to, any of its
partners, directors, officers, employees or consultants or any affiliate or
associate thereof (other than compensation for current services not yet due and
payable and reimbursement of expenses arising in the ordinary course of
business), and none of such persons owes any amount to Seller.

        2.27.    Customers.    

        Except as set forth on the Disclosure Schedule, there has not been in
the 12-month period prior to the date hereof, any dispute with any customer of
the Business, or any set of circumstances, either of which is reasonably
anticipated to have a Material Adverse Effect on the relationship between Seller
and any customer or which may reasonably be expected to have a Material Adverse
Effect on the Business. Except as set forth on the Disclosure Schedule, neither
Seller nor any Shareholder is aware of any circumstances that could materially
and adversely affect the ability of any customer of the Business to continue
doing business with Seller in the manner in which such business has been
conducted in the past or commence doing business with the Purchaser or Parent.

        3.    REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT.    

        The Purchaser and the Parent, jointly and severally, represent and
warrant to Seller as of the date hereof as follows:

        3.1.    Corporate Organization.    

        Each of the Parent and the Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.

        3.2.    Authorization.    

        Each of the Purchaser and the Parent has all the requisite corporate
power and authority to enter into this Agreement and to carry out the
transactions contemplated herein. Each of the boards of

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directors of the Purchaser and the Parent has taken all action required by law,
its articles of incorporation and bylaws or otherwise to authorize the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated herein and no action of the stockholders of the
Purchaser or the Parent is required. This Agreement is a valid and binding legal
obligation of the Purchaser and the Parent enforceable against each of them in
accordance with its terms subject to bankruptcy, insolvency, reorganization,
moratorium and other similar laws of applicability relating to or affecting
creditors' rights and general principals of equity.

        3.3.    Consents and Approvals.    

        No Consent is required by any person or entity, including without
limitation any Authority, in connection with the execution, delivery and
performance by the Purchaser and the Parent of this Agreement, or the
consummation of the transactions contemplated herein, other than any Consent
which, if not made or obtained, will not, individually or in the aggregate, have
a Material Adverse Effect on the business of the Purchaser or the Parent.

        3.4.    Brokers.    

        Except for its agreement with U.S. Bancorp Piper Jaffray, neither the
Purchaser, the Parent nor any of their officers, directors or employees have
employed any broker, finder, or financial advisor or incurred any liability for
any brokerage fee or commission, finder's fee or financial advisory fee, in
connection with the transactions contemplated hereby, nor is there any basis
known to the Purchaser or the Parent for any such fee or commission to be
claimed by any person or entity.

        3.5.    Litigation.    

        Except as disclosed to Seller in writing prior to the execution of this
Agreement, there is no legal, administrative arbitration or other proceeding,
suit, claim or action of any nature or investigation, review or audit of any
kind, judgment, decree, decision, injunction, writ or order pending or, to the
knowledge of Purchaser threatened or contemplated by or against or involving
Purchaser, Parent or their respective officers, directors, agents or employees
(but only in their capacity as such) whether at law or in equity, before or by
any person, entity or Authority, which (a) questions or challenges the validity
of this Agreement or any action taken or to be taken by the parties hereto
pursuant to this Agreement or in connection with the transactions contemplated
herein or (b) is material to the business and operations of Parent and all its
affiliates (including Purchaser) taken as a whole.

        3.6.    Securities Filings.    

        The Parent has filed all reports, registration statements, forms and
other documents that it is required to file with the United States Securities
and Exchange Commission or any exchange on which it is traded or reporting
service through which any of its securities are quoted, including without
limitation all filings required by the Securities Act of 1933, as amended, and
any rules promulgated thereunder (the "Parent SEC Filings"). At the time filed,
none of the Parent SEC Filings included any untrue statement of material fact or
omitted a material fact necessary to make the statements made, in light of the
circumstances under which they were made, not misleading.

        4.    COVENANTS OF THE PARTIES.    

        4.1.    [Intentionally Omitted]    

        4.2.    [Intentionally Omitted]    

        4.3.    [Intentionally Omitted]    

        4.4.    Confidentiality.    

        Each of the parties hereto agrees that it will not use, or permit the
use of, any of the information relating to any other party hereto furnished to
it in connection with the transactions contemplated herein ("Information") in a
manner or for a purpose detrimental to such other party or otherwise than

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in connection with the transaction, and that they will not disclose, divulge,
provide or make accessible (collectively, "Disclose"), or permit the Disclosure
of, any of the Information to any person or entity, other than their respective
directors, officers, governors, managers, employees, investment advisors,
accountants, counsel and other authorized representatives and agents, except as
may be required by judicial or administrative process or, in the opinion of such
party's counsel, by other requirements of Law; provided, however, that prior to
any Disclosure of any Information permitted hereunder, the disclosing party will
first obtain the recipients' undertaking to comply with the provisions of this
subsection with respect to such information. The term "Information" as used
herein will not include any information relating to a party which the recipient
of such information can show: (i) to have been in its possession prior to its
receipt from another party hereto; (ii) to be now or to later become generally
available to the public through no fault of the recipient; (iii) to have been
available to the public at the time of its receipt by the recipient; (iv) to
have been received separately by the recipient in an unrestricted manner from a
person entitled to disclose such information; or (v) to have been developed
independently by the recipient without regard to any information received in
connection with this transaction. Each party hereto also agrees to promptly
return to the party from whom it originally received such information all
original and duplicate copies of materials in any media containing Information
should the transactions contemplated herein not occur. A party hereto will be
deemed to have satisfied its obligations to hold the Information confidential if
it exercises the same care as it takes with respect to its own similar
information.

        4.5.    Filings; Consents; Removal of Objections.    

        Subject to the terms and conditions herein provided, the parties hereto
will use their respective good faith best efforts to take or cause to be taken
all actions and do or cause to be done all things necessary, proper or advisable
under applicable Laws to consummate and make effective, as soon as reasonably
practicable, the transactions contemplated hereby, including without limitation
obtaining all Consents of any person or entity, whether private or governmental,
required in connection with the consummation of the transactions contemplated
herein. In furtherance, and not in limitation of the foregoing, it is the intent
of the parties to consummate the transactions contemplated herein at the
earliest practicable time, and they respectively agree to exert their respective
good faith best efforts to that end, including without limitation: (i) the
removal or satisfaction, if possible, of any objections to the validity or
legality of the transactions contemplated herein; and (ii) the satisfaction of
the conditions to consummation of the transactions contemplated hereby.

        4.6.    Further Assurances; Cooperation; Notification; Management
Agreement.    

        (a)  Each party hereto will, at and after Closing, execute and deliver
such instruments and take such other actions as the other party or parties, as
the case may be, may reasonably require in order to carry out the intent of this
Agreement. Without limiting the generality of the foregoing, at any time after
the Closing, at the reasonable request of the Purchaser and without further
consideration, Seller and the Shareholders will execute and deliver such
instruments of sale, transfer, conveyance, assignment and confirmation and take
such action as the Purchaser may reasonably deem necessary or desirable in order
to more effectively consummate the transactions contemplated hereby and to vest
in the Purchaser good and marketable title to, all of the Assets (to the extent
contemplated by this Agreement), to put the Purchaser in actual possession and
operating control thereof and to assist the Purchaser in exercising all rights
with respect thereto, without unreasonable cost or expense to Seller or the
Shareholders.

        (b)  Seller and the Shareholders will cooperate with the Purchaser to
promptly develop plans for the management of the Business after the Closing,
including without limitation plans relating to productivity, marketing,
operations and improvements, and Seller and the Shareholders will further
cooperate with the Purchaser to provide for the implementation of such plans as
soon as practicable after the Closing. Subject to applicable Law, Seller and the
Shareholders will confer on a regular and

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reasonable basis with one or more representatives of the Purchaser to report on
material operational matters and the general status of ongoing operations.

        (c)  At all times from the date hereof until the Closing, each party
will promptly notify the other in writing of the occurrence of any event which
it reasonably believes will or may result in a failure by such party to satisfy
the conditions specified in Article 5 and Article 6 hereof.

        (d)  Each party hereto will, at and after the Closing, comply with the
terms and provisions of the management agreement for the operation of the
Business and Assets during Fiscal 2001, Fiscal 2002 and Fiscal 2003 attached
hereto as Exhibit 4.6(d) (the "Management Agreement").

        4.7.    [Intentionally Omitted]    

        4.8.    Public Announcements.    

        None of the parties hereto will make any public announcement with
respect to the transactions contemplated herein without the prior written
consent of the other party, which consent will not be unreasonably withheld or
delayed; provided, however, that any of the parties hereto may at any time make
any announcements which are required by applicable Law so long as the party so
required to make an announcement promptly upon learning of such requirement
notifies the other party of such requirement and discusses with the other party
in good faith the exact proposed wording of any such announcement.

        4.9.    Tax Matters.    

        (a)  No new elections with respect to Taxes, or any changes in current
elections with respect to Taxes, affecting the Assets will be made after the
date of this Agreement without the prior written consent of the Parent or the
Purchaser.

        (b)  As a condition precedent to the consummation of the transactions
contemplated by this Agreement, Seller and the Shareholders will provide the
Purchaser with any clearance certificate or similar document(s) which may be
required by any state taxing authority in order to relieve the Purchaser of any
obligation to withhold any portion of the Purchase Price.

        (c)  In addition to and without limiting those representations and
warranties set forth in Section 2.14 of this Agreement, in the event that any
sales or use Tax, or any Tax in the nature of a sales or use tax, or any
transactional Tax is payable or assessed relative to the transactions
contemplated herein, Seller and the Shareholders will pay all such Taxes and
will not collect any part thereof from the Purchaser or the Parent. The parties
hereto will cooperate to make any necessary filings with state and local or
foreign taxing Authorities and to furnish any required supplemental information
with respect to any state and local or foreign Tax liabilities resulting from
the consummation of the transactions contemplated herein.

        (d)  In addition to and without limiting those representations and
warranties set forth in Section 2.14 of this Agreement, Seller and the
Shareholders will pay all Taxes arising from or relating to the transactions
contemplated by this Agreement, including without limitation Tax on any income
or gains arising from the sale of the Assets; but excluding any Taxes attributed
to the income of Parent or Purchaser. Seller and the Shareholders will cause to
be prepared and filed all federal, foreign and state income Tax Returns for the
Business reflecting all activities of the Business through and including the
Closing Date.

        (e)  Seller and the Shareholders, on the one hand, and the Purchaser, on
the other hand, will:

          (i)  each provide the other with such assistance as may reasonably be
requested by any of them in connection with the preparation of any Tax Return,
audit or other examination by any taxing Authority or judicial or administrative
proceedings relating to liability for Taxes,

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        (ii)  each retain and provide the other with any records or other
information which may be relevant to such Tax Return, audit or examination,
proceeding or determination, and

        (iii)  each provide the other with any final determination of such audit
or examination, proceeding or determination that affects any amount required to
be shown on any Tax Return of the other for any period.

        Without limiting the generality of the foregoing, Seller, the
Shareholders and the Purchaser will retain, until the applicable statutes of
limitations (including all extensions) have expired, copies of all Tax Returns,
supporting work schedules and other records or information which may be relevant
to such Tax Returns for all Tax periods or portions thereof ending on or before
the Closing Date and will not destroy or otherwise dispose of any such records
without first providing the other party with a reasonable opportunity to review
and copy the same.

        4.10.    Bulk Transfers.    

        Seller and the Shareholders have requested and the Purchaser has,
subject to its indemnification rights, agreed to waive the requirements of the
Uniform Commercial Code concerning bulk transfers, as in effect in the various
states in which Seller and the Shareholders have assets used in the Business,
including without limitation the requirement of notice to creditors.

        4.11.    Employee Benefits.    

        (a)  On or as soon as administratively practicable after the Closing
Date, the Purchaser will extend offers of immediate employment to employees of
the Business listed on Exhibit 4.11 hereto (the "Selected Employees"). Except as
otherwise expressly provided in this Agreement, the terms and conditions of each
such offer and of any continuing employment will be determined by the Purchaser
in its sole discretion and any resulting employment relationship will be at
will; provided, however, that Purchaser shall, to the fullest extent permitted
under applicable laws, recognize accrued vacation and other employment benefits
of the Selected Employees that are based upon periods of service with Seller and
that constitute Assumed Liabilities. Any employee of the Business who accepts
such an employment offer and reports for work on the date directed by the
Purchaser will be sometimes hereinafter referred to as a "Transferred Employee."
Seller and the Shareholders hereby authorize the Purchaser to enter into
discussions with any of the Selected Employees concerning the future employment
of such individual by the Purchaser; provided, however, that (i) such
discussions will not be commenced prior to the giving of notice by Seller or the
Shareholders to the employees of the Business of the transactions contemplated
by this Agreement; and (ii) all such discussions will be conducted in such a
manner as not to interfere unreasonably with the operations of the Business.

        (b)  [Reserved]

        (c)  [Reserved]

        (d)  The Purchaser will not be obligated under, and hereby specifically
disclaims any assumption or liability with respect to, any collective bargaining
agreement to which Seller is a party or under which Seller's or any
Shareholder's employees or former employees are covered or any Seller Plan,
including any Benefit Plan. Without limiting the generality of the foregoing,
(i) the Purchaser is not assuming any obligation to contribute to, or any
obligation or liability for any withdrawal liability arising in connection with,
any "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA,
attributable to participation therein by current or former employees of Seller
as a result of this Agreement or the transactions contemplated hereby, and
(ii) with respect to each current or former employee of Seller, the Seller or
any affiliate and each other individual who is a "qualified beneficiary" with
respect to such current or former employee in connection with a "group health
plan" maintained by Seller, the Seller or any affiliate (as such terms are
defined in Section 4980B of the Code), as between the Purchaser, on the one
hand, and Seller, on the other hand, Seller are responsible for providing group
health plan continuation coverage in accordance with Section 4980B of the Code
and

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Part 6 of Subtitle B of Title I of ERISA (without regard to whether the
Purchaser is ultimately determined to be responsible to provide such coverage to
any such current or former employee) and will indemnify, defend and hold
harmless the Purchaser and its affiliates from and against any liability,
expense, cost, tax or obligation of any nature with respect to such current or
former employee or other individual arising in connection with group health plan
coverage required under Section 4980B of the Code or Part 6 of Subtitle B of
Title I of ERISA.

        4.12.    Covenant Not to Compete; Non-Solicitation.    

        (a)  In order that the Purchaser and the Parent may have and enjoy the
benefit of the transactions contemplated in this Agreement, each of Seller and
the Shareholders covenants and agrees that, for a period expiring on the earlier
to occur of (i) four (4) years from the Closing Date or (ii) one (1) year after
the entire Contingent Consideration has been earned (as determined pursuant to
Section 1.3(a)(ii)(2) and, if necessary, Section 9.8 (such that, for instance,
if the Shareholders' Representative claims that the Contingent Consideration is
fully earned on February 28, 2003, the Parent contests such claim in an
arbitration resolved favorably to the Shareholders on May 1, 2003, then the
Restricted Period will expire February 28, 2004 rather than May 1, 2004)) (the
"Restricted Period"), neither they nor any of their affiliates will, directly or
indirectly, within any geographical area or territory in the United States, own,
manage, operate or control, or participate in the ownership, management,
operation or control of, or have any interest in, as a stockholder, member,
director, governor, manager, officer, employee, agent, consultant or partner,
any business of the type engaged in or contemplated by the Business; provided,
however, that nothing contained herein will prohibit them from owning less than
4% of any class of securities listed on a national securities exchange or traded
publicly in the over-the-counter market.

        (b)  During the Restricted Period, neither Seller, any Shareholder nor
any of their respective affiliates will call upon, solicit, contact or serve:
(i) any of the clients, customers, vendors or suppliers of the Business existing
as such on or before the last date of the Restricted Period; (ii) any clients,
customers, vendors or suppliers that have had a relationship with Seller or any
Shareholder relating to the Business during the twelve (12) months preceding
expiration of the Restricted Period; or (iii) any potential clients, customers,
vendors or suppliers that were solicited by Seller or any Shareholder in
connection with the Business during the twelve (12) months preceding expiration
of the Restricted Period.

        (c)  During the Restricted Period, neither Seller, any Shareholder nor
any of their respective affiliates will employ or attempt to employ (by
soliciting or assisting anyone else in the solicitation of) any of the Selected
Employees or the Purchaser's or the Parent's then employees on behalf of any
other entity, whether or not such entity competes with Seller, any Shareholder
the Purchaser or the Parent.

        (d)  The invalidity or unenforceability of any provision of this
Section 4.12, in whole or by virtue of the following sentence in part, will not
affect the validity or enforceability of any other provision of this
Section 4.12 or of any other provision of this Agreement, all of which will to
the full extent consistent with applicable law continue in full force and
effect. In addition, if any provision of Section 4.12(a) are adjudged to be
excessively broad as to duration, geographical scope, activity or subject, the
parties intend that such provision will be deemed modified to the minimum degree
necessary to make such provision valid and enforceable under applicable law and
that such modified provision will thereafter be enforced to the fullest extent
possible. Each of Seller and the Shareholder acknowledges that any violation of
any of the provisions of Section 4.12(a) is likely to cause irreparable damage
to the Purchaser and the Parent and it is agreed that the Purchaser and the
Parent will be entitled to equitable relief, including injunction and specific
performance, in the event of any violation of such provision.

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        (e)  Notwithstanding the foregoing provisions of this Section 4.12, if
the Purchaser fails to (A) timely wire the Contingent Consideration as
contemplated by Section 1.3(ii)(2)(D)(i) or (ii) above, (B) timely wire the
Undisputed Contingent Consideration, (C) timely deposit the Disputed Contingent
Consideration with an escrow agent as described in
Section 1.3(a)(ii)(2)(C)(iii), or (D) pay the Disputed Contingent Consideration
within ten (10) days after receipt of a further written demand from the
Shareholders' Representative following the final decision of arbitrators in
favor of the Shareholders' Representative, then (i) the covenants of the Seller
and the Shareholders set forth in this Section 4.12 shall immediately terminate
and be of no further force or effect, and (ii) with respect to Purchaser and the
Parent, Seller and each of the Shareholders shall have no further obligation,
covenant, restriction or limitation as to (A) their ownership, management,
operation or control of any business, enterprise or other operation, or (B) any
solicitation, contact, service, or other communication with any client,
customer, vender, supplier or other party having any contact or relationship
with the Business. If Purchaser Indemnified Parties are entitled to
indemnification pursuant to Article 8 and elect, to the extent permitted by
Section 8.6 of this Agreement, to offset the amount due pursuant to such claim
against Contingent Consideration otherwise payable, then such offset, and
consequent non-payment of Contingent Consideration, shall not trigger the
termination provisions of this paragraph.

        4.13.    [Intentionally Omitted]    

        5.    [INTENTIONALLY OMITTED]    

        6.    [INTENTIONALLY OMITTED]    

        7.    [INTENTIONALLY OMITTED]    

        8.    SURVIVAL AND INDEMNIFICATION.    

        8.1.    Survival of Representations, Warranties and Covenants;
Investigation.    

        All representations and warranties of the parties contained in this
Agreement will survive the Closing Date for a period expiring on March 1, 2004
(other than the representations and warranties set forth in Section 2.9(a),
2.12(b), which survive for a period of five (5) years after the date of this
Agreement and the representations and warranties set forth in Sections 2.14,
2.15 and 2.20 which survive until the expiration of the applicable statute of
limitations plus three months). The covenants, agreements and obligations
contained herein and in the exhibits hereto will survive the Closing without
limitation as to time unless the covenant or agreement specifies the term, in
which case such covenant or agreement will survive until the expiration of such
specified term and will thereupon expire. The right to indemnification or any
other remedy based on representations, warranties, covenants and obligations in
this Agreement will not be affected by any investigation conducted with respect
to, or any knowledge acquired (or capable of being acquired) at any time,
whether before or after the execution and delivery of this Agreement or the
Closing Date, with respect to the accuracy or inaccuracy of or compliance with,
any such representation, warranty, covenant or obligation.

        8.2.    Indemnification by the Purchaser and Parent.    

        Subject to the provisions of Section 8.5, the Purchaser and Parent
agree, jointly and severally, to indemnify, defend and hold Seller and the
Shareholders harmless from and against any and all losses, liabilities,
obligations, demands, judgments, settlements, damages (but excluding
consequential damages, lost profits or punitive damages suffered directly by the
Seller or Shareholders as opposed to consequential damages, lost profits or
punitive damages paid by the Seller or any Shareholder to a third party) or
expense (including but not limited to interest, penalties, fees and reasonable
professional fees and expenses) and against all claims in respect thereof
(including, without limitation, amounts paid in settlement and costs of
investigation) or diminution in value, whether or not involving a third-party
claim (collectively as "Seller's Loss" or "Seller's Losses") to which Seller or
the Shareholders may suffer or incur, directly or indirectly, as a result from
or in connection with:

        (a)  any untrue representation of, or breach of warranty by, the
Purchaser or Parent in any part of this Agreement;

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        (b)  the breach of or nonfulfillment of any covenant, agreement or
undertaking of the Purchaser or Parent in this Agreement;

        (c)  the operation of the Assets or the Business after the Closing Date
(including, without limitation, any obligation for Taxes associated with the
Business or the Assets for any period (or portion thereof) subsequent to the
Closing Date and any obligation of Parent or Purchaser for Taxes, regardless of
the period to which they are attributable; and

        (d)  any failure of Purchaser or Parent to pay or perform Assumed
Liabilities or to pay any portion of the Purchase Price, including, but not
limited to, the Contingent Consideration, if and to the extent earned and
payable.

        8.3.    Indemnification by Seller and the Shareholders.    

        Subject to the provisions of Section 8.5, Seller and the Shareholders
agree, jointly and severally (provided that the following indemnity shall be
several with respect to any Purchaser's Loss relating to a breach of a
representation or warranty relating exclusively to a Shareholder under Sections
2.3, 2.4, 2.5, 2.8, 2.13, 2.24 or 2.26), to indemnify the Purchaser and Parent,
their respective subsidiaries and affiliates and each of their respective
shareholders, officers, directors and employees (the "Purchaser Indemnified
Parties") against all losses, liabilities, obligations, demands, judgments,
settlements, damages (but excluding any claims for consequential damages, lost
profits or punitive damages suffered directly by the Purchaser or Parent as
opposed to consequential damages, lost profits or punitive damages paid by the
Purchaser to a third party), Taxes, or expenses (including, but not limited to,
interest, penalties, fees, and reasonable professional fees and expenses) and
against all claims in respect thereof (including, without limitation, amounts
paid in settlement and costs of investigation) or diminution in value, whether
or not involving a third-party claim (herein referred to collectively as
"Purchaser's Losses" or individually as a "Purchaser's Loss") to which the
Purchaser or Parent may become subject to or which it may suffer or incur,
directly or indirectly, as a result from or in connection with:

        (a)  any untrue representation of or breach of warranty, by Seller or
the Shareholders in any part of this Agreement;

        (b)  the breach of or nonfulfillment of any covenant, agreement or
undertaking of Seller or the Shareholders in this Agreement;

        (c)  any debt, liability or obligation, direct or indirect, fixed,
contingent or otherwise not included in the Assumed Liabilities, that relates to
Seller or the Shareholders and is based upon or arises from any act or omission,
transaction, circumstance, state of facts or other condition occurring or
existing on or before the Closing Date, wither or not then known, due or
payable;

        (d)  any obligation for Taxes of Seller or the Shareholders for any
period (or portion thereof) prior to the Closing Date;

        (e)  any Retained Liabilities;

        (f)    the failure of Seller or the Shareholders to comply with the
requirements of the Uniform Commercial Code concerning bulk transfers, as in
effect in the various states in which Seller or any Shareholder has assets,
including, without limitation, the requirement of notice to creditors;

        (g)  the failure of Seller or the Shareholders to obtain any clearance
certificate or similar document required by any taxing Authority in order to
relieve the Purchaser or the Parent of any obligation to withhold any portion of
the Purchase Price or in order to avoid any successor liability for Taxes;

        (h)  any liability, expense, cost, tax or obligation of any nature with
respect to such current or former employee of the Business or other individual
arising in connection with group health plan coverage required under
Section 4980B of the Code or Part 6 of Subtitle B of Title I of ERISA; and

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        (i)    the failure of Seller or the Shareholders to disclose to the
Purchaser or Parent a complete and accurate list of any and all severance
compensation required to be paid in connection with the transactions
contemplated by this Agreement to any employee of Seller who is not a
Transferred Employee.

Seller and the Shareholders acknowledge that if a representation or warranty
that is qualified by materiality (including a Material Adverse Effect) is
breached after giving effect to such materiality qualification then the
Purchaser Losses resulting from such breach will include all Purchaser Losses
resulting from a breach of such representation or warranty and not solely the
portion of such Purchaser Losses in excess of such materiality qualifier.

        8.4.    Claims for Indemnification; Shareholders' Representatives and
Power of Attorney.    

        (a)  General. The parties intend that all indemnification claims be made
as promptly as practicable by the party seeking indemnification (the
"Indemnified Party"). Whenever any claim will arise for indemnification
hereunder the Indemnified Party will promptly notify the party from whom
indemnification is sought (the "Indemnifying Party") of the claim and, when
known, the facts constituting the basis for such claim. The failure so to notify
the Indemnifying Party will not relieve the Indemnifying Party of any liability
that it may have to the Indemnified Party except to the extent the Indemnifying
Party demonstrates that the defense of such action is materially prejudiced
thereby.

        (b)  Claims by Third Parties. With respect to claims made by third
parties, the Indemnifying Party will be entitled to assume control of the
defense of such action or claim with counsel reasonably satisfactory to the
Indemnified Party; provided, however, that:

          (i)  the Indemnified Party will be entitled to participate in the
defense of such claim and to employ counsel at its own expense to assist in the
handling of such claim;

        (ii)  no Indemnifying Party will consent to (A) the entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by each claimant or plaintiff to each Indemnified Party
of a release from all liability in respect of such claim or (B) if, pursuant to
or as a result of such consent or settlement, injunctive or other equitable
relief would be imposed against the Indemnified Party or such judgment or
settlement could materially interfere with the business, operations or assets of
the Indemnified Party; and,

        (iii)  if the Indemnifying Party does not assume control of the defense
of such claim in accordance with the foregoing provisions within ten
(10) business days after receipt of notice of the claim, the Indemnified Party
will have the right to defend such claim in such manner as it may deem
appropriate at the cost and expense of the Indemnifying Party, and the
Indemnifying Party will promptly reimburse the Indemnified Party therefore in
accordance with this Article 8; provided that the Indemnified Party will not be
entitled to consent to the entry of any judgment or enter into any settlement of
such claim that does not include as an unconditional term thereof the giving by
each claimant or plaintiff to each Indemnifying Party of a release from all
liability in respect of such claim without the prior written consent of the
Indemnifying Party if, pursuant to or as a result of such consent or settlement,
injunctive or other equitable relief would be imposed against the Indemnifying
Party or such judgment or settlement could materially interfere with the
business, operations or assets of the Indemnifying Party.

        (c)  Remedies Exclusive. The remedies provided in this Section 8 shall
be the exclusive remedy of any party hereto for any breaches of representations,
warranties, agreements or covenants in Section 2 or Section 3 of this Agreement,
except to the extent any such breaches relate to (i) fraud or (ii) bad faith
action, with respect to which the remedies provided herein will be cumulative
and will not preclude assertion by any party of any rights or the seeking of any
other remedies against any other party.

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        (d)  Shareholders' Representative; Power of Attorney.

          (i)  Upon execution of this Agreement by the Shareholders, and without
further act of any Shareholder, Kirk Willey ("Willey") shall be appointed as
agent and attorney-in-fact (the "Shareholders' Representative") for each
Shareholder, for and on behalf of the Shareholders, to give and receive notices
and communications, to authorize delivery to the Purchaser Indemnified Parties
of funds from the Escrow Deposit or other sources in satisfaction of claims by
such Purchaser Indemnified Parties, to object to such deliveries, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of the
Shareholders' Representative for the accomplishment of the foregoing. Such
agency may be changed by the Shareholders from time to time upon not less than
thirty (30) days prior written notice to Parent; provided that the Shareholders'
Representative may not be changed unless holders of a two-thirds interest of the
Escrow Deposit agree to such change and to the identity of the substituted
agent. If Willey is unable or unwilling to serve as Shareholders'
Representative, Jeff Price shall be automatically appointed as the Shareholders'
Representative to replace Willey. Except as provided in the preceding sentence,
any vacancy in the position of a Shareholders' Representative may be filled by
the holders of a majority in interest of the Escrow Deposit. No bond shall be
required of the Shareholders' Representative, and the Shareholders'
Representative shall not receive compensation for his services. Notices or
communications to or from the Shareholders' Representative shall constitute
notice to or from each of the Shareholders.

        (ii)  The Shareholders' Representative shall not be liable for any act
done or omitted hereunder as Shareholders' Representative, except for gross
negligence or willful misconduct. The Shareholders on whose behalf the Escrow
Deposit was contributed to the Escrow Deposit shall severally, in proportion to
their ownership amounts as set forth in Exhibit 8.5(c), indemnify the
Shareholders' Representative and hold the Shareholders' Representative harmless
against any loss, liability or expense (except for any loss, liability or
expense arising out of the gross negligence or willful misconduct of the
Shareholders' Representative) incurred on the part of the Shareholders'
Representative and arising out of or in connection with the acceptance or
administration of the Shareholders' Representative's duties hereunder, including
the reasonable fees and expenses of any legal counsel retained by the
Shareholders' Representative.

        (iii)  Each decision, act, consent or instruction of the Shareholders'
Representative, including but not limited to an amendment, extension or waiver
of this Agreement, shall constitute a decision of all the Shareholders and shall
be final, binding and conclusive upon each such Shareholder, and the Escrow
Agent and other parties to this Agreement may rely upon any such decision, act,
consent or instruction of the Shareholders' Representative as being the
decision, act, consent or instruction of each and every such Shareholder. The
Escrow Agent and other parties to this Agreement are hereby relieved from any
liability to any person for any acts done by them in accordance with such
decision, act, consent or instruction of the Shareholders' Representative.

        8.5.    Basket and Cap Limitations on Claims for Indemnification.    

        (a)  In the event of any claim for indemnity under Section 8.3, the
Indemnified Party under such representation and warranty claim shall not be
entitled to indemnification therefor unless such Indemnified Party has sustained
Losses in excess of One Hundred Thousand and no/100 Dollars ($100,000.00) in the
aggregate (the "Exception Amount"), in which event the Indemnified Party shall
be entitled to indemnification for the full amount of all Losses suffered or
incurred in excess of Seventy-Five Thousand and no/100 Dollars ($75,000.00) of
Losses; provided, however, that such Exception Amount limitation shall not apply
to (i) any claim by the Purchaser Indemnified Parties with respect to an
intentional breach of or intentional nonfulfillment of any covenant, agreement
or undertaking of Seller or the Shareholders contemplated in Section 8.3(b);
(ii) any claim based on any breach of the representations and warranties
contained in subsections 2.3 (authorization), or 2.23

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(brokers) hereof; or (iii) any claim based on any breach of the representations
and warranties contained in Section 2.14 (tax matters), but only to the extent
such breach relates to payment or non-payment of federal, state or local income
taxes by Seller or the Shareholders, and accordingly, the Indemnified Party
shall be entitled to indemnification for the full amount of all such Losses,
even if they do not exceed the Exception Amount (the "Rep Basket").
Notwithstanding anything herein to the contrary, the Exception Amount and Rep
Basket shall not apply with respect to (A) any fraudulent breach of any
representation or warranty or any claim with respect to fraudulent inducement to
enter into this Agreement or (B) any bad faith action. The parties do not intend
that the Exception Amount be deemed to be a definition of what is "material" for
any purpose in this Agreement.

        (b)  The Indemnifying Party shall not indemnify the Indemnified Parties
to the extent Losses exceed, in the aggregate, the Purchase Price (the
"Limitation Amount"); provided, however, that (a) such limitation shall not
apply to any claim based on,any breach of the representations and warranties
contained in subsections 2.3 (authorization); or 2.23 (brokers) hereof; or
(ii) subsection 2.14 (tax matters), to the extent such breach relates to payment
or non-payment of federal, state or local taxes by Seller or the Shareholders,
for which the Purchaser Indemnified Parties may recover to the full extent of
their Losses, subject only to the Rep Basket, if applicable; and
(b) notwithstanding anything herein to the contrary, the Limitation Amount shall
not apply with respect to (A) any fraudulent breach of any representation or
warranty or any claim with respect to fraudulent inducement to enter into this
Agreement or (B) any bad faith action. The parties do not intend that the
Limitation Amount be deemed to be a definition of what is "material" for any
purpose in this Agreement.

        (c)  The percentage of each total Purchaser's Loss that the Purchaser
Indemnified Parties may recover from any particular Shareholder shall equal such
Shareholder's percentage interest in the Seller immediately prior to the
Closing, as indicated on Exhibit 8.5(c); provided, however, that (i) the maximum
amount that the Purchaser Indemnified Parties may recover from any particular
Shareholder shall not exceed the product of such Shareholder's percentage
interest indicated on Exhibit 8.5(c) multiplied by the aggregate amount of the
Purchase Price actually received (regardless of when received) by Seller, and
(ii) notwithstanding anything herein to the contrary, the limitation described
in this Section 8.5(c) shall not apply with respect to (A) any fraudulent breach
of any representation or warranty or any claim with respect to fraudulent
inducement to enter into this Agreement or (B) bad faith. Accordingly, and
without limiting the foregoing, if a Shareholder owned 10% of the outstanding
capital stock of the Seller immediately prior to Closing, the Purchaser's Loss
for which the Purchaser Indemnified Parties are entitled to indemnification is
one million dollars, and the Seller had actually received, or thereafter
receives, aggregate Purchase Price payment of at least one million dollars, then
the maximum amount the Purchaser Indemnified Parties may recover from such
Shareholder would be one hundred thousand dollars ($100,000), which is 10% of
the total Loss (absent fraud or bad faith, as described in the preceding
sentence) and is not in excess of 10% of the aggregate amount of Purchase Price
received, then or later, by Seller.

        8.6.    Set-Off Right.    

        (a)  Upon not less than thirty (30) days' notice to the Shareholders'
Representative, specifying in reasonable detail the basis therefor, the
Purchaser or Parent may set off any amount to which they may be entitled under
this Article 8 against amounts otherwise payable as Contingent Consideration. If
the Shareholders' Representative disputes the amount set off by Parent or
Purchaser, neither Purchaser nor Parent may exercise such set-off rights until
such dispute is finally resolved pursuant to Section 9.8 of this Agreement.

        (b)  The exercise of such right of set-off by the Purchaser or Parent
will not constitute a breach of this Agreement or any other agreement or
instrument contemplated by this Agreement. Neither the exercise of, nor the
failure to exercise, such right of set-off will constitute an election of
remedies nor limit the Purchaser or Parent in any manner in the enforcement of
any other remedies that may be available to it.

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        8.7.    Effect of Purchaser's Actual Knowledge.    

        If (a) there exists Purchaser's Actual Knowledge of a breach of any
representation or warranty contained in Section 2 of this Agreement, (b) the
effect of such breach constitutes a Material Adverse Effect with respect to the
Seller or the Business, and (c) Purchaser elected to consummate the Closing
notwithstanding such breach, then Purchaser shall be deemed to have waived any
claim against the Seller and Shareholders pursuant to Section 8 of this
Agreement to the extent of Purchaser's Actual Knowledge with respect to such
breach. For purposes of this Section, "Purchaser's Actual Knowledge" means the
actual knowledge of Susan Engel, David Weiser, Lisa Riedesel, Tom Tomlinson and
Tony Ishaug acquired after April 16, 2001. Without limiting the preceding
sentence, Purchaser's Actual Knowledge (i) shall not include any knowledge of
any other individuals employed by (whether or not supervised directly or
indirectly by Susan Engel, David Weiser, Lisa Riedesel, Tom Tomlinson and Tony
Ishaug) or acting as an agent or representative of Purchaser and (ii) shall not
be construed under any circumstance to mean that Susan Engel, David Weiser, Lisa
Riedesel, Tom Tomlinson or Tony Ishaug has conducted any independent
investigation to determine if there is any breach of the Shareholders'
representations and warranties. In addition, the Seller and Shareholders
acknowledge that notwithstanding any provision in this Agreement to the
contrary, in the event there is any dispute as to whether there exists
Purchaser's Actual Knowledge, then the burden of proof shall be on the Seller
and Shareholders to establish Purchaser's Actual Knowledge. It is further
acknowledged and agreed that if there exists Purchaser's Actual Knowledge of a
breach of any representation or warranty contained in Section 2 of this
Agreement and the effect of such breach does not constitute a Material Adverse
Effect with respect to the Seller or the Business, then such breach shall be
treated as a breach of this Agreement and the waiver described above in this
Section shall not apply.

        9.    MISCELLANEOUS PROVISIONS.    

        9.1.    Expenses.    

        Parent and the Purchaser, on the one hand, and Seller and the
Shareholders, on the other hand, will each bear their own costs and expenses
relating to the transactions contemplated hereby, including without limitation,
fees and expenses of legal counsel, accountants, investment bankers, brokers or
finders, printers, copiers, consultants or other representatives for the
services used, hired or connected with the transactions contemplated hereby.

        9.2.    Amendment and Modification.    

        This Agreement may not be amended or modified by the parties hereto
except by means of a writing duly executed by each of the parties hereto.

        9.3.    Waiver of Compliance; Consents.    

        Any failure of a party to comply with any obligation, covenant,
agreement or condition herein may be expressly waived in writing by the party
entitled hereby to such compliance, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement or condition will
not operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. No single or partial exercise of a right or remedy will preclude any
other or further exercise thereof or of any other right or remedy hereunder.
Whenever this Agreement requires or permits the consent by or on behalf of a
party, such consent will be given in writing in the same manner as for waivers
of compliance.

        9.4.    No Third Party Beneficiaries.    

        Nothing in this Agreement will entitle any person or entity (other than
a party hereto and his, her or its respective successors and assigns permitted
hereby) to any claim, cause of action, remedy or right of any kind.

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        9.5.    Notices.    

        All notices, requests, demands and other communications required or
permitted hereunder will be made in writing and will be deemed to have been duly
given and effective: (i) on the date of delivery, if delivered personally;
(ii) on the earlier of the fifth (5th) day after mailing or the date of the
return receipt acknowledgment, if mailed, postage prepaid, by certified or
registered mail, return receipt requested; or (iii) on the date of transmission,
if sent by facsimile, telecopy, telegraph, telex or other similar telegraphic
communications equipment and receipt thereof is confirmed telephonically:

 
   
If to Seller:    
To:
 
Axis Corporation
370 East Harmon Avenue—Suite C-311
Las Vegas, NV 89109     Attn.:    Kirk Willey     Fax:    (801) 366-5025
With copies to:
 
      Stoel Rives LLP
201 South Main Street, Suite 1100
Salt Lake City, UT 84111     Attn:    Brian G. Lloyd     Fax:    (801) 578-6999

or to such other person or address as Seller will furnish to the other parties
hereto in writing in accordance with this subsection.

 
   
If to the Purchaser or the Parent:
To:
 
Department 56, Inc.
One Village Place
6436 City West Parkway
Eden Prairie, MN 55344     Attn.:    Percy C. Tomlinson    
Fax:    (952) 943-4500 With a copy to:    
To:
 
Mark J. Sexton
Oppenheimer Wolff & Donnelly LLP
45 South Seventh Street, Suite 3300
Minneapolis, MN 55402     Fax:    (612) 607-7100

or to such other person or address as Parent or the Purchaser will furnish to
the other parties hereto in writing in accordance with this subsection.

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        9.6.    Assignment.    

        This Agreement and all of the provisions hereof will be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns, but neither this Agreement nor any of the rights, interests
or obligations hereunder will be assigned (whether voluntarily, involuntarily,
by operation of law or otherwise) by any of the parties hereto without the prior
written consent of the other parties, provided, however, that the Purchaser may
assign its rights (but not its obligations) under this Agreement, in whole or in
any part, and from time to time, to a wholly owned, direct or indirect,
subsidiary of Parent.

        9.7.    Governing Law.    

        This Agreement and the legal relations among the parties hereto will be
governed by and construed in accordance with the internal substantive laws of
the State of Delaware (without regard to the laws of conflict that might
otherwise apply) as to all matters, including without limitation matters of
validity, construction, effect, performance and remedies.

        9.8.    Arbitration.    

        (a)  The parties agree that any dispute arising out of or relating to
this Agreement or the formation, breach, termination or validity thereof, except
for injunctive relief contemplated by Section 9.12 (a "Dispute") will be
resolved as follows. If the Dispute cannot be settled through direct
discussions, the parties will first try to settle the Dispute in an amicable
manner by mediation under the Commercial Mediation Rules of the American
Arbitration Association, before resorting to arbitration. Any Dispute that has
not been resolved within 60 days of the initiation of the mediation procedure
(the "Mediation Deadline") will be settled by binding arbitration in
Minneapolis, Minnesota by a panel of three (3) arbitrators, selected in
accordance with subsection (b) below, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association (the "American
Arbitration Rules"). The arbitrators in any such arbitration will have the
discretion to order a pre-hearing exchange of information by the parties,
including, without limitation, production of requested documents, exchange of
summaries of testimony and proposed witnesses, and examination by deposition of
parties. The arbitrators are not empowered to award damages in excess of
compensatory damages, as limited by this Agreement, and each party hereby
irrevocably waives any damages in excess of compensatory damages. Judgment upon
any arbitration award may be entered in any court having jurisdiction thereof
and the parties consent to the jurisdiction of the courts of the State of
Minnesota and the federal district court for the State of Minnesota for this
purpose. The parties agree that service of process and of any notices required
in connection with any arbitration hereunder or any related court proceedings
may be given in the manner provided for the giving of notices under this
Agreement as set forth in Section 9.5.

        (b)  Within twenty (20) days of the Mediation Deadline, the Purchaser
will nominate one arbitrator and the Seller and the Shareholders, together, will
nominate one arbitrator. Within thirty (30) days of the nomination and
appointment of the two arbitrators, the two arbitrators will select a third
arbitrator, and if they fail to do so, a neutral arbitrator will be chosen in
accordance with the American Arbitration Rules.

        9.9.    Counterparts.    

        This Agreement may be executed simultaneously in one or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.

        9.10.    Headings.    

        The table of contents and the headings of the sections and subsections
of this Agreement are inserted for convenience only and will not constitute a
part hereof.

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        9.11.    Entire Agreement.    

        This Agreement, the Disclosure Schedule and the exhibits and other
writings referred to in this Agreement or in the Disclosure Schedule or any such
exhibit or other writing are part of this Agreement, together they embody the
entire agreement and understanding of the parties hereto in respect of the
transactions contemplated by this Agreement and together they are referred to as
this "Agreement" or the "Agreement". There are no restrictions, promises,
warranties, agreements, covenants or undertakings, other than those expressly
set forth or referred to in this Agreement. This Agreement supersedes all prior
agreements and understandings between the parties with respect to the
transaction or transactions contemplated by this Agreement, including, but not
limited to, the letter of intent dated April 16, 2001. Any provision of this
Agreement that becomes invalid or unenforceable under applicable Law will be
stricken to the extent necessary and the remainder of such provisions and the
remainder of this Agreement will continue in full force and effect.

        9.12.    Injunctive Relief.    

        It is expressly agreed among the parties hereto that monetary damages
would be inadequate to compensate a party hereto for any breach by any other
party of its agreements and covenants in Sections 4.4 and 4.12 of this
Agreement. Accordingly, the parties agree and acknowledge that any such
violation or threatened violation will cause irreparable injury to the other and
that, in addition to any other remedies which may be available, such party will
be entitled to injunctive relief against the threatened breach of Sections 4.4
and 4.12 of this Agreement hereof or the continuation of any such breach without
the necessity or proving actual damages and may seek to specifically enforce the
terms thereof.

        9.13.    Certain Definitions.    

        For purposes of this Agreement, the terms:

        (a)  "Environmental and Occupational Safety and Health Law" means any
common law or duty, case law or other Law, that (i) regulates, creates standards
for or imposes liability or standards of conduct concerning any element,
compound, pollutant, contaminant, or toxic or hazardous substance, material or
waste, or any mixture thereof, or relates in any way to emissions or releases
into the environment or ambient environmental conditions, or conduct affecting
such matters, or (ii) is designed to provide safe and healthful working
conditions or reduce occupational safety and health hazards. Such laws will
include, but not be limited to, the National Environmental Policy Act, 42 U.S.C.
§§ 4321 et seq., the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. §§ 9601 et seq., the Resource Conservation and Recovery
Act, 42 U.S.C. §§ 6901 et seq., the Federal Water Pollution Control Act, 33
U.S.C. §§ 1251 et seq., the Federal Clean Air Act, 42 U.S.C. §§ 7401 et seq.,
the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq., the Emergency
Planning and Community Right to Know Act, 42 U.S.C. § 11011, the Hazard
Communication Act, 29 U.S.C. §§ 651 et seq., the Occupational Safety and Health
Act, 29 U.S.C. §§ 651 et seq., the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C. § 136, and any case law interpretations, amendments or
restatements thereof, or similar enactments thereto, as is now or at any time
hereafter may be in effect, as well as their international, state and local
counterparts.

        (b)  "Environmentally Regulated Materials" means any element, compound,
pollutant, contaminant, substance, material or waste, or any mixture thereof,
designated, listed, referenced, regulated or identified pursuant to any
Environmental and Occupational Safety and Health Law.

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        (c)  "Material Adverse Effect" means an individual or cumulative
material adverse change in or material adverse effect on the business,
customers, customer relations, operations, properties, working capital condition
(financial or otherwise), assets, properties or liabilities of the Business,
taken as a whole, or the Purchaser, Parent and their subsidiaries, as the case
may be, or would prevent Seller, on the one hand, or Parent and the Purchaser,
on the other hand, from consummating the transactions contemplated hereby.

        (d)  "Knowledge of Seller" and other terms of similar import means
(i) the actual knowledge or awareness of Seller or any Shareholder, and (ii) the
knowledge or awareness after due inquiry which a prudent business person in the
position of any Shareholder would have obtained in the conduct of such business
person's business.

        (e)  "Taxes" means all federal, state, local, foreign and other net
income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, lease, service, service use, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, real or personal
property, windfall profits, customs, duties or other taxes, fees, assessments,
charges or levies of any kind whatever, together with any interest and any
penalties, add`itions to tax or additional amounts with respect thereto, and the
term "Tax" means any one of the foregoing Taxes.

        (f)    "Tax Returns" means all returns, declarations, reports,
statements and other documents required to be filed with any Authority in
respect of Taxes, and the term "Tax Return" means any one of the foregoing Tax
Returns.

[Remainder of page intentionally left blank]

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        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.

 
 
   
 

DEPARTMENT 56, INC.
 
AXIS CORPORATION
By:
 
 
By:
   

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Percy C. Tomlinson    

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Its: Executive Vice President &
Chief Financial Officer   Its:

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AXIS HOLDINGS CORPORATION
 
SHAREHOLDERS' REPRESENTATIVE
By:
 
 
 
   

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Percy C. Tomlinson  

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Kirk Willey Its: Vice President      
 
 
 
SHAREHOLDERS
 
 
 

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Kirk Willey
 
 
 

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Matt Musgrave
 
 
 

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Jeff Price
 
 
 

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Jeremy Willey
 
 
 

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Lee Willey

42

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LIST OF EXHIBITS

Name of Exhibit

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Number of Exhibit

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List of Customers of the Business Exhibit 1.1(a)(xii)
Latest Balance Sheet
Exhibit 1.1(a)(xxi)
Excluded Assets
Exhibit 1.1(b)
Form of Liabilities Undertaking
Exhibit 1.2
Form of Escrow Agreement
Exhibit 1.3(b)(ii)
Allocation of Purchase Price Among the Assets
Exhibit 1.4
Form of Bill of Sale
Exhibit 1.6(a)(i)
Form of Security Agreement
Exhibit 1.6(c)(ii)
Disclosure Schedule
Exhibit 2
Management Agreement
Exhibit 4.6(d)
Employees to be Hired
Exhibit 4.11
Ownership of Seller Immediately Prior to Closing
Exhibit 8.5(c)

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LIST OF DEFINED TERMS

Term

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  Page

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Net Assets Adjustment   15 Accruals Adjustment   15 Agreement   52 American
Arbitration Rules   51 Assets   1 Assumed Contracts   4 Assumed Liabilities   3
Authorities   19 Authority   19
Benefit Plan
 
28 Business   1
Closing
 
17 Closing Balance Sheet   16 Closing Date   17 Code   17, 28 Consent   20
Consents   20 Contingent Consideration   5 Contingent Consideration
Documentation   9 Contingent Consideration Statement   6 Copyrights   24
Disagreement Notice
 
7 Disclose   37 Disclosure Schedule   18 Dispute   51 Disputed Contingent
Consideration   7 disqualified individual   29
Earnest Deposit
 
15 Environmental and Occupational Safety and Health Law   53 Environmental Claim
  33 Environmentally Regulated Materials   53 ERISA   4 Escrow Agent   15 Escrow
Agreement   15 Escrow Deposit   15 Exception Amount   47 excess parachute
payment   29
Final Basic Purchase Price
 
16 Final Purchase Price Adjustment   16 Fiscal 2000   5 Fiscal 2001   5 Fiscal
2002   5 Fiscal 2003   5
GAAP
 
5
Indemnified Party
 
45 Indemnifying Party   45 Information   37

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Initial Cash Consideration   5 Initial Purchase Price Adjustment   15
Intellectual Property Rights   24 Inventory   23
Latest Balance Sheet
 
2 Law   19 Laws   19 Liabilities   20 Liabilities Undertaking   3 Liability   20
Lien   19 Limitation Amount   47
Management Agreement
 
38 Material Adverse Effect   53 Mediation Deadline   51
Operating Income
 
5 Operating Income Margin   5
Parent
 
1 Parent SEC Filings   36 Patents   24 Payment Date   8 Period   5 Permitted
Liens   19 Properties   32 Purchase Price   5 Purchase Price Adjustment   15
Purchaser   1 Purchaser Indemnified Parties   44 Purchaser's Actual Knowledge  
49 Purchaser's Loss   44 Purchaser's Losses   44
Real Property
 
23 Registered Intellectual Property Rights   24 Rep Basket   47 Restricted
Period   41 Retained Liabilities   3 Revenue   5, 6 Revenue Base   6, 9, 10
Revenue in Fiscal 2000   6
Selected Employees
 
40 Seller   1 Seller Plan   28 Seller's Knowledge   53 Seller's Loss   43
Seller's Losses   43 Service Marks   24 severance pay   31 Shareholders   1
Shareholders' Representative   46

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Tax
 
53 Tax Return   54 Tax Returns   54 Taxes   53 Third Party Intellectual Property
Rights   25 Trade Secrets   24 Trademarks   24 Transferred Employee   40
Undisputed Contingent Consideration
 
7
Value of the Assets Adjustment
 
15
Willey
 
46
Year 2000 Compliant
 
26

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QuickLinks

Exhibit 10.19
LIST OF EXHIBITS
LIST OF DEFINED TERMS