EXHIBIT 10.2

                            DESA HOLDINGS CORPORATION







                             STOCKHOLDERS AGREEMENT


                          Dated as of November 26, 1997











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                             STOCKHOLDERS AGREEMENT

         THIS  STOCKHOLDERS  AGREEMENT (this  "Agreement") is entered into as of
November  26,  1997,  by  and  among  Desa  Holdings  Corporation,   a  Delaware
corporation  (the  "Company"),  those  persons  listed as the JWC Holders on the
signature  pages  hereof  (the  "JWC  Holders"),  those  persons  listed  as the
Management Holders on the signature pages hereof (the "Management  Holders") and
those persons  listed as the Other  Holders on the  signature  pages hereof (the
"Other Holders").

                                    RECITALS

         A. Concurrently with the execution and delivery of this Agreement,  the
Company has issued certain shares of Common Stock (as  hereinafter  defined) and
certain warrants to acquire from the Company shares of Common Stock.

         B. All of the  Stockholders  (as  hereinafter  defined),  including (i)
those acquiring  concurrently  with the execution and delivery of this Agreement
certain shares of Common Stock and certain  warrants to acquire from the Company
shares of Common  Stock and (ii)  those  retaining  at the date  hereof  certain
equity  interests in the Company,  desire to enter into this  Agreement  for the
purpose of regulating  certain aspects of the Stockholders'  relationships  with
one another and with the Company.

                                    AGREEMENT

         In  consideration  of the foregoing  recitals and the mutual  promises,
representations,   warranties,  covenants  and  conditions  set  forth  in  this
Agreement, the parties to this Agreement mutually agree as follows:

                                    ARTICLE 1


         1.1  Definitions.  For the purposes of this  Agreement,  the  following
terms shall be defined as follows:

         The "1933 Act" shall mean the  Securities  Act of 1933, as amended,  or
any successor federal statute thereto,  and the rules and regulations of the SEC
promulgated thereunder, all as the same shall be in effect from time to time.

         The "1934 Act"  shall  mean the  Securities  Exchange  Act of 1934,  as
amended, or any successor federal statute thereto, and the rules and regulations
of the SEC promulgated thereunder,  all as the same shall be in effect from time
to time.

         An "Affiliate"  of a specified  Person (a) shall mean (i) a Person who,
directly  or  indirectly,  through  one or more  intermediaries,  controls or is
controlled  by or is under 

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                                       -2-

common control with such specified Person,  (ii) a director or executive officer
of such specified  Person,  (iii) a general partner of such specified  Person if
such  specified  Person is a  partnership,  and (iv) a manager of such specified
Person if such specified Person is a limited  liability  company,  and, (b) when
used with respect to the Company or any Subsidiary of the Company, shall include
any holder of capital  stock or any  officer or  director  of the Company or any
Subsidiary of the Company.

         "Business  Day" shall mean any day,  other than a  Saturday,  Sunday or
legal  holiday,  on  which  banks  in  both  New  York,  New  York  and  Boston,
Massachusetts are permitted to be open for business.

         "Common  Stock"  shall mean shares of Voting  Common Stock or Nonvoting
Common Stock.

         "Common Stock  Equivalents"  shall mean, as of any date, (a) all shares
of Common Stock  outstanding  as of such date and (b) all shares of Common Stock
that may be acquired as of such date pursuant to Vested Options.

         The  "Company"  shall  mean  Desa  Holdings  Corporation,   a  Delaware
corporation, and its successors and assigns.

         "Company  Notice  Period"  shall have the  meaning set forth in Section
2.4.

         "Demand Registration" shall have the meaning set forth in Section 3.2.

         "Dragalong Group" shall have the meaning set forth in Section 2.3.

         "Election Period" shall have the meaning set forth in Section 4.17.

         "Equity Partners Agreement" shall have the meaning set forth in Section
4.8.

         "First Refusal Offer" shall have the meaning set forth in Section 2.4.

         "First  Refusal  Offer  Notice"  shall  have the  meaning  set forth in
Section 2.4.

         "HMTF Attendee" shall have the meaning set forth in Section 2.5.

         "HMTF  Holders"  shall mean HMTF Inc. and its  officers,  directors and
Affiliates,  together  with those persons whose names are set forth on Exhibit A
hereto and any spouse,  children,  parents or siblings (whether natural, step or
adopted) or trust  solely for the benefit of one or more such  persons and shall
also include Permitted  Transferees of the HMTF Holders unless immediately prior
to such Transfer such transferee was a Management  Holder, a JWC Holder or a UBS
Holder.

         "HMTF  Inc."  shall mean  Hicks,  Muse,  Tate & Furst  Incorporated,  a
Delaware corporation.

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                                       -3-

         "Holder" shall have the meaning set forth in Section 3.1.

         "Initiating  Stockholder"  shall have the  meaning set forth in Section
2.2.

         "JWC Equity  Funding" shall mean JWC Equity  Funding,  Inc., a Delaware
corporation.

         "JWC Equity Partners" shall mean J.W. Childs Equity  Partners,  L.P., a
Delaware limited partnership.

         "JWC  Holders"  shall  have  the  meaning  set  forth  in the  preamble
preceding  the recitals to this  Agreement  and shall also include (a) Permitted
Transferees  of  the  JWC  Holders  (other  than  the  Warrant  Holders)  unless
immediately prior to such Transfer such transferee was a Management Holder or an
Other Holder and (b) any Permitted  Transferee in a Permitted Transfer permitted
under clause (k) of the definition of "Permitted Transfer" if, immediately prior
to such Transfer, such Permitted Transferee was a JWC Holder.

         "JWC/UBS  Holders  Notice  Period"  shall have the meaning set forth in
Section 2.4.

         "JWC  Inc."  shall  mean  J.W.  Childs  Associates,  Inc.,  a  Delaware
corporation.

         "JWC L.P." shall mean J.W. Childs Associates, L.P., a Delaware limited
partnership.

         "JWC Representative" shall have the meaning set forth in Section 4.8.

         "Management Agreement" shall mean that Management Agreement dated as of
the date hereof among the Company, the Operating Company and JWC L.P.

         "Management  Holders"  shall have the meaning set forth in the preamble
preceding  the  Recitals  to this  Agreement  and  shall  also  include  (a) any
director,  officer  or  management  employee  of  the  Company  or  any  of  its
Subsidiaries  (other  than JWC  Holders or UBS  Holders)  who,  with the written
consent of the Company and the JWC Representative,  hereafter becomes a party to
this  Agreement,  (b) Permitted  Transferees of the Management  Holders,  unless
immediately  prior to such Transfer such transferee was a JWC Holder or an Other
Holder,  and (c) any Permitted  Transferees  in a Permitted  Transfer  permitted
under  clause  (k)  of  the  definition  of  "Permitted   Transfer"  herein  if,
immediately prior to any such Transfer, such transferee was a Management Holder.

         "Nonvoting  Common Stock" shall mean shares of Nonvoting  Common Stock,
par value $.01 per share, of the Company.

         "Offered Securities" shall have the meaning set forth in Section 2.4.

         "Operating  Company"  shall mean Desa  International,  Inc., a Delaware
corporation, in its capacity as a Subsidiary of the Company.

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                                       -4-


         "Other  Holders"  shall  have the  meaning  set  forth in the  preamble
preceding  the  recitals  to this  Agreement  and shall also  include  Permitted
Transferees  of the Other  Holders and any  Permitted  Transferee in a Permitted
Transfer  permitted  under clause (k) of the definition of "Permitted  Transfer"
herein,  unless  immediately  prior to any such Transfer such  transferee  was a
Management Holder or a JWC Holder.

         "Participating  Offerees"  shall have the  meaning set forth in Section
2.2.

         "Participation Notice" shall have the meaning set forth in Section 2.2.

         "Participation  Securities" shall have the meaning set forth in Section
2.2.

         "Permitted Transfer" shall mean:

         (a)      a Transfer of any Subject Securities between any JWC Holder or
                  UBS  Holder  or HMTF  Holder  or  Management  Holder  who is a
                  natural  person  and  such  Stockholder's  spouse,   children,
                  parents or siblings (whether natural,  step or by adoption) or
                  to a trust  solely  for the  benefit  of one or more of any of
                  such Persons, provided that with respect to any such Transfer,
                  the  Stockholder  retains,  as trustee or by some other means,
                  the sole authority to vote such Subject Securities  (including
                  any Common  Stock that may be acquired  pursuant to any Vested
                  Options);

         (b)      a Transfer of Subject  Securities  by a JWC Holder to JWC Inc.
                  or to the officers, employees or consultants of JWC Inc. or to
                  a  corporation  or   corporations   or  to  a  partnership  or
                  partnerships (or other entity for collective investment,  such
                  as a fund)  which  is (and  continues  to be)  controlled  by,
                  controlling or under common control with JWC Inc.;

         (c)      a Transfer  of  Subject  Securities  (i)  between or among the
                  Management  Holders,  (ii)  between or among the JWC  Holders,
                  (iii) between or among the UBS Holders,  (iv) between or among
                  the HMTF Holders or (v) between or among the Warrant Holders;

         (d)      a Transfer of Subject  Securities  between any Stockholder who
                  is a natural person and such Stockholder's estate,  executors,
                  legal representative, guardian or conservator, or the Transfer
                  of Subject  Securities  between the estate of any  Stockholder
                  and such Stockholder's spouse,  children,  parents or siblings
                  (whether  natural,  step or by  adoption) or to a trust solely
                  for the benefit of one or more of any of such Persons;

         (e)      (i) a bona fide pledge of Subject  Securities  by a JWC Holder
                  or a UBS  Holder  or an HMTF  Holder  to a bank  or  financial
                  institution or (ii) any pledge  existing at the date hereof of
                  Subject Securities by a Management Holder;

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         (f)      a Transfer of Subject  Securities  between any Other Holder or
                  any JWC Holder and any Affiliate of such holder, provided that
                  such  Affiliate  (i) shall remain at all times an Affiliate of
                  such  Stockholder  and (ii) is an  Accredited  Investor at the
                  time of such transfer;

         (g)      a Transfer of Subject  Securities  between any Other Holder or
                  any JWC Holder and any shareholder,  member, officer, director
                  or direct or indirect  general or limited  partner (or officer
                  or  director  of such  general  or  limited  partner)  of such
                  holder;

         (h)      a Transfer of Subject Securities by a HMTF Holder to HMTF Inc.
                  or  to  the  officers  or  employees  of  HMTF  Inc.  or  to a
                  corporation   or   corporations   or  to  a   partnership   or
                  partnerships (or other entity for collective investment,  such
                  as a fund)  which  is (and  continues  to be)  controlled  by,
                  controlling or under common control with HMTF Inc.;

         (i)      a  Transfer  of  Subject  Securities  by a UBS  Holder  to UBS
                  Capital or to the officers,  employees or  consultants  of UBS
                  Capital  or  to  a  corporation  or   corporations   or  to  a
                  partnership  or  partnerships  (or other entity for collective
                  investment,  such as a fund)  which is (and  continues  to be)
                  controlled  by,  controlling  or under common control with UBS
                  Capital;

         (j)      a Transfer of Warrants or Warrant  Shares  (each as defined in
                  the  Tagalong/Dragalong  Agreement)  pursuant  to the terms of
                  Article II of the Tagalong/Dragalong Agreement; and

         (k)      a  Transfer  by a JWC  Holder or a UBS  Holder of any of those
                  576,287.8200  shares of Voting  Common Stock (with such number
                  of shares to be  adjusted  from  time to time to  reflect  any
                  split or  combination of shares of Common Stock) issued by the
                  Company to JWC Equity Funding on or about the date hereof.

No Permitted  Transfer shall be effective unless and until the transferee of the
Subject  Securities  so  transferred  executes  and  delivers  to the Company an
executed counterpart of this Agreement in accordance with Section 4.12 hereof.

         "Permitted  Transferee"  shall mean any Person who shall have  acquired
and who shall hold any Subject Securities pursuant to a Permitted Transfer.

         "Person"  means  an  individual,   corporation,   partnership,  limited
liability company, trust, unincorporated  association,  government or any agency
or political subdivision thereof, or other entity.

         "Preemptive  Rights Notice" shall have the meaning set forth in Section
4.17.


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         "Preferred Stock" shall mean shares of any class or series of preferred
stock  of  the  Company,  whether  now  authorized  and  existing  or  hereafter
authorized and existing.

         "Public Float Date" shall mean the date on which shares of Common Stock
shall  have been sold  pursuant  to one or more  Public  Offerings  in which the
aggregate proceeds (before deducting  underwriter  discounts and commissions) to
the Company and the selling stockholders, if any, of such shares equal or exceed
$50 million.

         A "Public  Offering"  shall mean the  completion of a sale of shares of
Common Stock pursuant to a  registration  statement  which has become  effective
under the 1933 Act, excluding registration statements on Form S-4 or Form S-8 or
similar limited purpose forms.

         "Registrable  Securities"  shall mean, as of any date,  with respect to
any  Stockholder,  (a) all shares of Common Stock held by such Stockholder as of
such date and (b) all  shares of Common  Stock that may be  acquired  as of such
date by such Stockholder  upon exercise of Vested Options;  provided that, as to
any  particular  Registrable  Securities,  such  securities  shall  cease  to be
Registrable   Securities  when  (i)  a  registration  statement  (other  than  a
registration statement on Form S-8) with respect to the sale or exchange of such
securities  shall have become  effective  under the 1933 Act and such securities
shall have been disposed of in accordance with such registration statement, (ii)
a registration  statement on Form S-8 with respect to such securities shall have
become  effective under the 1933 Act, (iii) such securities shall have been sold
or acquired under a Rule 144 Transaction, or (iv) such securities have ceased to
be outstanding.

         "Rule 144  Transaction"  means a transfer of Common Stock (a) complying
with  Rule 144  under the 1933 Act as such  rule or a  successor  thereto  is in
effect  on the  date of such  transfer  (but not  including  a sale  other  than
pursuant  to a "brokers  transaction"  as  defined  in  clauses  (i) and (ii) of
paragraph  (g) of Rule 144 as in effect on the date hereof) and (b) occurring at
a time when the Common  Stock is  registered  pursuant to Section 12 of the 1934
Act.

         "Sale Request" shall have the meaning set forth in Section 2.3.

         "Schedule of Stockholders"  shall refer to the Schedule of Stockholders
attached  hereto as Exhibit B as from time to time  amended  pursuant to Section
4.2.

         "Stockholder"  shall  mean any party  hereto  other  than the  Company,
including any Person who hereafter becomes a party to this Agreement pursuant to
Section 4.12 hereof.

         "Stockholder  Group" shall mean any of (a) the Other Holders (including
the HMTF  Holders  and the UBS  Holders)  taken as a group,  (b) the JWC Holders
taken as a group,  (c) the  Management  Holders  taken as a group,  (d) the HMTF
Holders taken as a group,  and (e) the UBS Holders taken as a group. The Company
shall not in any case be deemed to be a member of any Stockholder Group (whether
or not the Company holds or  repurchases  any Common Stock  Equivalents).  Where
provisions  of this  Agreement  contemplate  that actions be taken or notices be
given by a Stockholder Group, actions taken or notices given by the holders 
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                                       -7-

of a  majority  of the  Common  Stock  Equivalents  held in the  aggregate  by a
Stockholder  Group shall be deemed to be actions  taken or notices given by such
Stockholder Group, and the other parties hereto are and will be entitled to rely
on any  action so taken or any  notice so given by such  majority  holders  of a
Stockholder Group.

         "Subject  Securities" shall mean any Common Stock or Vested Options now
or hereafter held by any Stockholder.

         "Subsidiary"  with respect to any Person (the "parent")  shall mean any
Person of which such parent,  at the time in respect of which such term is used,
(a) owns directly or  indirectly  more than fifty percent (50%) of the equity or
beneficial  interest,  on a consolidated basis, or (b) owns directly or controls
with  power to vote,  indirectly  through  one or more  Subsidiaries,  shares of
capital  stock  or  beneficial  interest  having  the  power  to cast at least a
majority  of the  votes  entitled  to be cast  for the  election  of  directors,
trustees,  managers  or other  officials  having  powers  analogous  to those of
directors of a corporation.  Unless otherwise specifically indicated,  when used
herein the term Subsidiary shall refer to a direct or indirect Subsidiary of the
Company.

         "Tagalong/Dragalong   Agreement"  shall  mean  the   Tagalong/Dragalong
Agreement  of even date  herewith  among JWC Equity  Funding,  Inc.  and the UBS
Holders.

         "Third Party" means any Person other than the Company.

         "Third Party Offer" shall have the meaning set forth in Section 2.4.

         "Third Party Offeror" shall have the meaning set forth in Section 2.4.

         "Transfer" shall mean to transfer,  sell, assign, pledge,  hypothecate,
give, grant or create a security  interest in or lien on, place in trust (voting
or otherwise), assign an interest in or in any other way encumber or dispose of,
directly or indirectly and whether or not by operation of law or for value,  any
of the Subject Securities.

         "UBS Attendee" shall have the meaning set forth in Section 2.5.

         "UBS Capital" shall mean UBS Capital LLC, a Delaware limited  liability
company.

         "UBS Holders"  shall mean UBS Capital and shall also include  Permitted
Transferees of UBS Capital (other than the Warrant Holders),  unless immediately
prior to such Transfer such transferee was a Management  Holder, a JWC Holder or
an HMTF Holder.

         "Vested  Options"  shall  mean,  as of  any  date,  options,  warrants,
securities  and  other  rights  to  acquire  from  the  Company,   by  exercise,
conversion,  exchange  or  otherwise,  shares  of  Common  Stock  or  securities
convertible  into  Common  Stock,  but only to the  extent  that  such  options,
warrants,  securities  and other  rights are both,  as of such date,  (a) vested
under the terms thereof or under any plan,  agreement or instrument  pursuant to
which such options,  

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                                       -8-

warrants,  securities  and other  rights were issued,  and (b) so  exchangeable,
exercisable or convertible.

         "Voting Common Stock" shall mean shares of Common Stock, par value $.01
per share, of the Company.

         "Warrant  Holders"  shall mean the Persons,  if any, to whom any of the
Warrants or Warrant Shares may be transferred in a Permitted  Transfer  pursuant
to clause (j) of the  definition of "Permitted  Transfer"  contained  herein and
shall  also  include  Permitted  Transferees  of  the  Warrant  Holders,  unless
immediately  prior to such Transfer such transferee was a Management  Holder,  a
JWC Holder, a UBS Holder or an HMTF Holder.


                                    ARTICLE 2


                           Transferability and Voting

         2.1  Restrictions on Transfers

                  (a) Without  the written  consent of the holders of a majority
of the  Common  Stock  Equivalents  at the  time  held  by the JWC  Holders,  no
Management  Stockholder shall Transfer all or any part of the Subject Securities
at the time held by such  Management  Stockholder  to any  Person  other than in
accordance  with the  provisions of Section 2.3 or in  accordance  with and as a
Participating Offeree (as defined in Section 2.2 hereof) under the provisions of
Section 2.2 hereof.  Without the written consent of the holders of a majority of
the  Common  Stock  Equivalents  at the time held by the JWC  Holders,  no Other
Holder shall Transfer all or any part of the Subject Securities at the time held
by such Other Holder to any Person other than in accordance  with the provisions
of  Section  2.3 or 2.4  hereof  or in  accordance  with and as a  Participating
Offeree under the provisions of Section 2.2 hereof.  Without the written consent
of the holders of a majority of the Common Stock Equivalents at the time held by
the Other  Holders,  no JWC Holder shall Transfer all or any part of the Subject
Securities  at the time held by such JWC  Holder  to any  Person  other  than in
accordance  with the provisions of Section 2.3 hereof or in accordance  with and
as  an  Initiating   Stockholder  (as  defined  in  Section  2.2  hereof)  or  a
Participating Offeree under the provisions of Section 2.2 hereof.

                  (b) The  provisions  of this  Section 2.1 shall not apply to a
Transfer which is (i) a Permitted Transfer,  (ii) pursuant to a Public Offering,
or (iii) after the Public Float Date, pursuant to a Rule 144 Transaction.

         2.2 Tagalong. No Stockholder shall Transfer any Subject Securities to a
Third Party without  complying  with the terms and  conditions set forth in this
Section 2.2, as applicable,  provided that any  Stockholder may be an Initiating
Stockholder  (as defined  below) under this Section 2.2 only if such Transfer is
permitted under Section 2.1(a).

<PAGE>


                                       -9-

                  (a) Any Stockholder (the "Initiating Stockholder") desiring to
Transfer such Subject  Securities shall give not less than 15 days prior written
notice of such  intended  Transfer  to each  other  Stockholder  ("Participating
Offerees") and to the Company.  Such notice (the  "Participation  Notice") shall
set forth terms and conditions of such proposed Transfer,  including the name of
the prospective  transferee,  the number of Common Stock Equivalents proposed to
be transferred (the "Participation  Securities") by the Initiating  Stockholder,
the purchase  price per share proposed to be paid therefor and the payment terms
and type of Transfer to be effectuated. Within 10 days following the delivery of
the  Participation  Notice by the Initiating  Stockholder to each  Participating
Offeree and to the  Company,  each  Participating  Offeree  shall,  by notice in
writing to the Initiating  Stockholder and to the Company,  have the opportunity
and right to sell to the  purchasers  in such proposed  Transfer  (upon the same
terms and conditions as the Initiating Stockholder) up to that number of Subject
Securities  representing  Common  Stock  Equivalents  at the  time  held by such
Participating  Offeree that  constitutes  the same  percentage  of the aggregate
number of Common Stock Equivalents owned by such Participating Offeree as of the
date of such proposed Transfer as the number of Subject Securities  representing
Common Stock  Equivalents to be sold in such proposed Transfer by the Initiating
Stockholder  (after  giving  effect to the  provisions of this and the following
sentence)  constitutes of the aggregate number of Common Stock Equivalents owned
as of the date of such  proposed  Transfer  by the  Initiating  Stockholder.  As
contemplated by the preceding sentence,  the amount of Participation  Securities
to be sold by an Initiating  Stockholder and the amount of Subject Securities to
be sold by any Participating  Offerees shall be adjusted to the extent necessary
to provide for sales by the Initiating Stockholder and Participating Offerees of
an  aggregate  number of Subject  Securities  (i) which is not greater  than the
number of Participation  Securities originally proposed to be transferred by the
Initiating  Stockholder  and (ii) such that the  number  of  Subject  Securities
representing  Common Stock  Equivalents  at the time held by each  Participating
Offeree to be sold in such proposed Transfer  constitutes the same percentage of
the aggregate  number of Common Stock  Equivalents  owned by such  Participating
Offeree  as of the date of such  proposed  Transfer  as the  number  of  Subject
Securities  representing  Common Stock  Equivalents  to be sold in such proposed
Transfer by the Initiating Stockholder (after giving effect to the provisions of
this  Section  2.2)   constitutes  of  the  aggregate  number  of  Common  Stock
Equivalents  owned as of the date of such  proposed  Transfer by the  Initiating
Stockholder.

                  (b) At the  closing  of any  proposed  Transfer  in respect of
which a  Participation  Notice has been delivered,  the Initiating  Stockholder,
together with all Participating  Offerees so electing to sell Subject Securities
pursuant  to  this  Section  2.2  shall  deliver  to  the  proposed   transferee
certificates and/or other instruments  representing the Subject Securities to be
sold, free and clear of all liens and encumbrances, together with stock or other
appropriate  powers  duly  endorsed  therefor,  and shall  receive  in  exchange
therefor the consideration to be paid or delivered by the proposed transferee in
respect of such Subject Securities as described in the Participation Notice.

                  (c) The  provisions of this Section 2.2 shall not apply to (i)
any Transfer  pursuant to a Public Offering or, following the Public Float Date,
pursuant to a Rule 144  

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                                      -10-

Transaction  or (ii) any Permitted  Transfer or (iii) any Transfers  pursuant to
Section 2.3 or 2.4 hereof.

         2.3  Dragalong.

         (a) If, at the time a Sale Request (as  hereinafter  defined) is given,
both (i) the JWC Holders hold more Common Stock Equivalents than the UBS Holders
and (ii) JWC Holders holding at least a majority of Common Stock  Equivalents at
the time held by such JWC Holders  (the  Dragalong  Group)  determine to sell or
exchange  (in a sale or  exchange of  securities  of the Company or in a merger,
consolidation or other business combination or any similar transaction),  in one
or  a  series  of  bona  fide  arms-length  transactions  to  an  unrelated  and
unaffiliated  Third Party fifty percent (50%) or more of the Subject  Securities
at the time held by them  then,  upon 30 days'  prior  written  notice  from the
Dragalong Group to the other Stockholders, which notice shall include reasonable
details of the proposed  sale or exchange  including the proposed time and place
of closing and the consideration to be received by the Stockholders (such notice
being  referred  to as the "Sale  Request"),  each  other  Stockholder  shall be
obligated to, and shall,  (i) sell,  transfer and deliver,  or cause to be sold,
transferred and delivered,  to such Third Party an equivalent percentage of such
Stockholder's  Subject Securities in the same transaction at the closing thereof
and shall (A) execute  and  deliver  such  agreements  for the  purchase of such
Subject  Securities and other  agreements,  instruments and  certificates as the
members of the Dragalong Group shall execute and deliver in connection with such
proposed  transaction  (provided  that no Holder  shall be  required to make any
representations  or warranties in  connection  with such sale or transfer  other
than  representations and warranties as to (x) such Holder's ownership of his or
its Subject  Securities to be sold or  transferred  free and clear of all liens,
claims,  and encumbrances,  (y) such Holder's power and authority to effect such
transfer and (z) such matters  pertaining to compliance  with securities laws as
the transferee may reasonably require) and (B) deliver certificates and/or other
instruments   representing  such  percentage  of  such   Stockholder's   Subject
Securities,  together  with  stock or other  appropriate  powers  therefor  duly
executed, at the closing, free and clear of all claims, liens and encumbrances),
and each Stockholder shall receive upon the closing of such transaction the same
per share consideration  (including terms of payment) to be paid or delivered by
the proposed  transferee in respect of such Stockholder's  Subject Securities as
shall be  payable  to the  members  of the  Dragalong  Group in respect of their
Subject  Securities,  and (ii) if  stockholder  approval of the  transaction  is
required, vote such Stockholder's Common Stock in favor thereof.

                  (b) The  provisions of this Section 2.3 shall not apply to any
Transfer  (i)  pursuant  to a Public  Offering  or (ii)  pursuant to a Permitted
Transfer.

         2.4 Right of First  Refusal.  If at any time prior to the Public  Float
Date,  any Other Holder shall  receive a bona fide written offer (a "Third Party
Offer") from a Third Party (the "Third  Party  Offeror") to purchase any Subject
Securities and such Other Holder desires to accept such Third Party Offer,  such
Other Holder shall,  prior to accepting the Third Party Offer, offer (the "First
Refusal Offer") to sell such Subject  Securities  (the "Offered  Securities") in
accordance with the procedures, and upon the terms, set forth below.

<PAGE>

                                      -11-


                  (a)      (i)      The Other Holder shall send a written notice
                                    of the First Refusal Offer (a "First Refusal
                                    Offer  Notice") to the Company,  which First
                                    Refusal  Offer  Notice shall state that such
                                    Other Holder  proposes to effect a sale to a
                                    Third Party Offeror, the number and class or
                                    type of  Subject  Securities  subject to the
                                    Third  Party  Offer and the name and address
                                    of the Third Party Offeror,  together with a
                                    copy of all writings between the Third Party
                                    Offeror and such Other  Holder  necessary to
                                    establish  the  terms  of  the  Third  Party
                                    Offer.

                           (ii)     Subject  to  Section  2.4(b),  the  right of
                                    first   refusal  may  be  exercised  by  the
                                    Company by delivery  of a written  notice to
                                    the Other  Holder  making the First  Refusal
                                    Offer  within 20 days  after  receipt by the
                                    Company  of  the  applicable  First  Refusal
                                    Offer Notice (the "Company Notice  Period"),
                                    which  notice  shall  state  the  number  of
                                    Offered  Securities  the Company  intends to
                                    purchase pursuant to this paragraph (ii). If
                                    the  Company  fails to  respond to the Other
                                    Holder making the First Refusal Offer within
                                    the Company Notice Period, the failure shall
                                    be deemed a rejection  of the First  Refusal
                                    Offer.

                           (iii)    If the Company has not  exercised  the right
                                    of first  refusal with respect to all of the
                                    Offered Securities  pursuant to this Section
                                    2.4,  the Other  Holder  shall  send a First
                                    Refusal Offer Notice to the JWC Holders, the
                                    UBS  Holders  and  the  Management   Holders
                                    (other  than the  Other  Holder  making  the
                                    First  Refusal  Offer) with respect to those
                                    Offered  Securities  as to which the Company
                                    has  not   exercised   its  right  of  first
                                    refusal.  Subject  to  Section  2.4(b),  the
                                    right of first  refusal may be  exercised by
                                    the JWC  Holders,  such UBS  Holders and the
                                    Management  Holders,  pro rata in accordance
                                    with the respective Common Stock Equivalents
                                    at the time  held by the JWC  Holders,  such
                                    UBS  Holders and the  Management  Holders so
                                    exercising  their  rights under this Section
                                    2.4, by delivery of a written  notice to the
                                    Other Holder  making the First Refusal Offer
                                    within  20  days  after  receipt  by the JWC
                                    Holders, such UBS Holders and the Management
                                    Holders  of  the  applicable  First  Refusal
                                    Offer Notice (the  "JWC/UBS  Holders  Notice
                                    Period"),   which  notice  shall  state  the
                                    number of Offered Securities each of the JWC
                                    Holders, such UBS Holders and the Management
                                    Holders intend to purchase  pursuant to this
                                    paragraph  (iii). If the JWC Holders or such
                                    UBS Holders or the  Management  Holders,  as
                                    the  case  may be,  fail to  respond  to the
                                    Other Holder  making the First Refusal Offer
                                    within the JWC/UBS  Holders  Notice  Period,
                                    the failure  shall be deemed a rejection  of
                                    the First  Refusal  Offer by the JWC Holders
                                    or  such  UBS  Holders  or  the   Management
                                    Holders, as the case may be.

<PAGE>
                                      -12-

                           (iv)     The  purchase of the Offered  Securities  by
                                    the Company and/or the JWC Holders, such UBS
                                    Holders and the Management  Holders pursuant
                                    to this Section 2.4 shall be effected at the
                                    offices  of JWC  Equity  Partners  within 30
                                    days  after the  expiration  of the  Company
                                    Notice  Period  (or,  if the JWC  Holders or
                                    such UBS Holders or the  Management  Holders
                                    are exercising  their right of first refusal
                                    with   respect   to  any   of  the   Offered
                                    Securities,   within   30  days   after  the
                                    expiration  of the  JWC/UBS  Holders  Notice
                                    Period) on those terms and conditions of the
                                    Third  Party  Offer.  The price per  Offered
                                    Security  payable by the Company  and/or the
                                    JWC  Holders,   such  UBS  Holders  and  the
                                    Management  Holders  shall  be  equal to the
                                    price per Offered  Security set forth in the
                                    Third Party Offer.  The  purchase  price for
                                    the  Offered  Securities  purchased  by  the
                                    Company  and/or  the JWC  Holders,  such UBS
                                    Holders and the Management  Holders shall be
                                    paid by certified  checks  payable,  or wire
                                    transfer,  to the Other  Holder  making  the
                                    First  Refusal  Offer  against  receipt of a
                                    certificate or certificates representing
                                    all   Offered   Securities   so   purchased,
                                    properly   endorsed   for  transfer  to  the
                                    Company  and/or  the JWC  Holders,  such UBS
                                    Holders and the Management  Holders,  as the
                                    case may be.

                           (v)      Any  purchase of the Offered  Securities  by
                                    the Company and/or the JWC Holders, such UBS
                                    Holders and the Management  Holders pursuant
                                    to this Section 2.4 shall be conditioned (by
                                    the Other  Holder  making the First  Refusal
                                    Offer)  upon the  Company's  and/or  the JWC
                                    Holders',   such   UBS   Holders'   and  the
                                    Management   Holders'   exercising   in  the
                                    aggregate  the right of first  refusal  with
                                    respect to all the Offered Securities.

                  (b) Notwithstanding anything to the contrary contained herein,
if the Company  and/or the JWC  Holders,  such UBS  Holders  and the  Management
Holders have not exercised the right of first refusal with respect to all of the
Offered  Securities  pursuant to this  Section  2.4,  then such Other Holder may
transfer to the Third  Party  Offeror on the terms and  conditions  of the Third
Party Offer all but not less than all of the Offered  Securities;  provided that
such  sale is  consummated  within 45 days from the  expiration  of the  JWC/UBS
Holders Notice Period; and provided further, that such Third Party Offeror shall
agree in writing in advance  with the  Company to be bound by and to comply with
all applicable  provisions of this Agreement to the same extent as if such Third
Party Offeror were such Other  Holder.  If such sale is not  consummated  within
such 45-day  period,  the  restrictions  provided  for in this Section 2.4 shall
again become effective,  and no transfer of such Offered  Securities may be made
thereafter  without  again  offering  the  same to the  Company  and/or  the JWC
Holders,  such 
<PAGE>

                                      -13-

UBS  Holders  and the  Management  Holders  in  accordance  with the  terms  and
conditions of this Agreement.

                  (c) The  provisions of this Section 2.4 shall not apply to (i)
any  Transfer  pursuant to a Public  Offering or,  following a Public  Offering,
pursuant to a Rule 144  Transaction or (ii) any Permitted  Transfer or (iii) any
Transfers pursuant to Section 2.2 or 2.3 hereof.

         2.5  Corporate Governance.

                  (a) The Company and each of the JWC Holders, the Other Holders
and the Management  Holders shall take all action  (including but not limited to
such Stockholder's voting, or executing proxies or written consents with respect
to, the Common Stock at the time held by such Stockholder as may be from time to
time  requested by holders of a majority of the Common Stock  Equivalents at the
time held by the JWC Holders) so that the  Company's  Board of  Directors  shall
include  such  number of members as may be from time to time  designated  by the
holders of a majority of the Common  Stock  Equivalents  at the time held by the
JWC Holders (or the JWC Representative). The holders of a majority of the Common
Stock   Equivalents   at  the  time  held  by  the  JWC   Holders  (or  the  JWC
Representative)  shall  also be  entitled  to  require  that any  member  of the
Company's  Board of  Directors  so  designated  pursuant to this  Section 2.5 be
removed or  replaced  by another  designee  of the  holders of a majority of the
Common  Stock  Equivalents  at the  time  held  by the JWC  Holders  (or the JWC
Representative), in which event the Company and each such Stockholder shall take
all action, including but not limited to such Stockholder's voting, or executing
written  consents  with  respect  to, the Common  Stock at the time held by such
Stockholder as may be necessary to effect such removal or replacement.

                  (b)  Notwithstanding  the  provisions of Section  2.5(a),  the
Company  and each of the JWC  Holders,  the  Other  Holders  and the  Management
Holders shall take all action,  including but not limited to such  Stockholder's
voting,  or executing  proxies or written  consents  with respect to, the Common
Stock at the time held by such Stockholder as may be from time to time requested
by holders of a majority of the Common Stock Equivalents at the time held by the
UBS Holders,  so that the  Company's  Board of Directors  shall  include one (1)
member  designated by the holders of a majority of the Common Stock  Equivalents
at the time held by the UBS  Holders  which one (1) member  shall  initially  be
Michael  Greene;  provided that the number of members of the Company's  Board of
Director's that the UBS Holders shall be entitled to designate  pursuant to this
Section  2.5(b)  shall be  permanently  reduced  from one (1) member to zero (0)
members at such time as the UBS Holders  shall hold less than 770,000  shares of
Voting Common Stock (with such number of shares to be adjusted from time to time
to reflect any split or combination of shares of Common Stock). The holders of a
majority  of the Common  Stock  Equivalents  at the time held by the UBS Holders
shall also be  entitled  to require  that any member of the  Company's  Board of
Directors so designated  pursuant to this Section  2.5(b) be removed or replaced
by another designee of the holders of a majority of the Common Stock Equivalents
at the time held by the UBS  Holders,  in which  event the Company and each such
Stockholder   shall  take  all  action,   including  but  not  limited  to  such
Stockholder's  

<PAGE>
                                      -14-

voting,  or executing  written consents with respect to, the Common Stock at the
time held by such  Stockholder  as may be  necessary  to effect such  removal or
replacement.

                  (c)  Notwithstanding  the  provisions  of  Section  2.5(a)  or
2.5(b),  the Stockholders  shall vote their shares of Common Stock to elect each
of Robert H. Elman and Terry G.  Scariot  to the  Company's  Board of  Directors
until  such  person  is no  longer  employed  by  the  Company  or  any  of  its
Subsidiaries.

                  (d)  The  HMTF  Holders  shall  have  the  right  to  have  an
individual  appointed by them (the "HMTF Attendee") in attendance at all regular
and special meetings of the Company's Board of Directors to observe,  but not to
vote on any matters before the Board of Directors at, such  meetings;  provided,
however,  that the HMTF Attendee  shall recuse  himself or herself from any such
meeting during the Board of Directors' discussions,  deliberations and voting on
matters  with respect to which the Board of  Directors  determines,  in the good
faith exercise of its business judgment, the HMTF Attendee's presence presents a
conflict of interest.  The HMTF Attendee shall be provided with all  information
prepared and delivered to board members in general,  at the same time and by the
same means as such information is provided to members of the board.

         2.6 Restrictions on Other Agreements. Except as provided in Section 4.8
and clause (a) of the definition of "Permitted  Transfer" herein, no Stockholder
shall grant any proxy or enter into or agree to be bound by any voting  trust or
voting  agreement  with  respect  to  any  Subject   Securities  nor  shall  any
Stockholder  enter into any stockholders  agreements or arrangements of any kind
with any Person  with  respect to any of the Subject  Securities  on terms which
conflict with the provisions of this Agreement  (whether or not such  agreements
and  arrangements  are with  other  Stockholders  or  holders  of  Common  Stock
Equivalents that are not parties to this Agreement),  including, but not limited
to, agreements or arrangements  with respect to the acquisition,  disposition or
voting of Subject Securities inconsistent herewith.

         2.7  Stockholder   Action.   Each  Stockholder  agrees  that,  in  such
Stockholder's  capacity as a stockholder of the Company, such Stockholder shall,
subject to delivery of the Sale Request pursuant to Section 2.3 hereof, vote, or
grant proxies  relating to the Common Stock at the time held by such Stockholder
to vote, all of such Stockholder's Common Stock in favor of any sale or exchange
of  securities  of the Company or any merger,  consolidation  or other  business
combination  or any similar  transaction  pursuant to Section 2.3 hereof  (other
than a transaction  with an Affiliate)  if, and to the extent that,  approval of
the Company's stockholders is required in order to effect such transaction.

                                    ARTICLE 3

                               Registration Rights

         3.1 General.  For purposes of this Article 3: (a) the terms "register",
"registered" and  "registration"  refer to a registration  effected by preparing
and filing a registration  

<PAGE>
                                      -15-

statement  on Form  S-1,  S-2 or S-3 in  compliance  with  the  1933 Act and the
declaration or ordering of effectiveness of such registration statement; and (b)
the term "Holder" means any Stockholder.

         3.2  Demand and Piggyback Registration.

                  (a)      Demand Registration.

                           (i)      Subject to the  provisions of this Agreement
                                    (including Section 3.2(b), at any time after
                                    the  Public  Float  Date,  upon the  written
                                    request of any UBS Holders  requesting  that
                                    the Company  effect the  registration  under
                                    the  1933  Act  of  Registrable  Securities,
                                    which  request  shall  specify in reasonable
                                    detail the number of Registrable  Securities
                                    to be registered and the intended  method of
                                    distribution  thereof, the Company shall use
                                    its   reasonable   commercial   efforts   to
                                    register  under  the  1933  Act  (a  "Demand
                                    Registration")  the  Registrable  Securities
                                    which  the  Company  has been  requested  to
                                    register  by such  UBS  Holders,  all to the
                                    extent  requisite to permit the  disposition
                                    of such Registrable Securities in accordance
                                    with the plan of  distribution  set forth in
                                    the applicable  registration  statement.  In
                                    the case of such Demand  Registration,  such
                                    UBS Holders  must  request  registration  of
                                    Registrable Securities representing not less
                                    than such number of  Registrable  Securities
                                    the expected gross proceeds of which, on the
                                    date of the aforementioned  written request,
                                    would equal at least $5 million  unless such
                                    registration  request  is for all  remaining
                                    Registrable  Securities  held  by  such  UBS
                                    Holders.

                           (ii)     Registration   Statement  Form.  Any  Demand
                                    Registration  under this Section shall be on
                                    Form  S-3,  if and to the  extent  that  the
                                    Company  is  eligible  under the 1933 Act to
                                    use  such  form at the  time of the  written
                                    request for such Demand Registration.

                           (iii)    Limitations on Demand Registration. Anything
                                    herein to the contrary notwithstanding,  the
                                    Company shall not be required to effect more
                                    than one (1) Demand Registration pursuant to
                                    this Section.

                           (iv)     Effective Registration Statement.  Except as
                                    otherwise  provided  in Section  3.2(a)(vii)
                                    hereof,  a  Demand  Registration   requested
                                    pursuant to this Section 3.2(a) shall not be
                                    deemed to have been  effected  (A)  unless a
                                    registration  statement with respect thereto
                                    has  become  effective,  (B) if after it has
                                    become   effective,   such  registration  is
                                    materially   interfered  with  by  any  stop
                                    order,   injunction   or  similar  order  or
                                    requirement   of  the  Commission  or  other
                                    governmental  agency or court for any reason
<PAGE>
                                      -16-

                                    not  attributable  to any UBS Holder and has
                                    not thereafter become  effective,  or (C) if
                                    the  conditions to closing  specified in the
                                    underwriting agreement, if any, entered into
                                    in connection with such registration are not
                                    satisfied or waived, other than by reason of
                                    a failure on the part of any UBS Holder.

                           (v)      Selection  of  Underwriters.  In the case of
                                    such Demand  Registration,  the selection of
                                    any managing and other  underwriter(s) shall
                                    be made by the Company,  with the consent of
                                    UBS  Capital  (which  consent  shall  not be
                                    unreasonably withheld).

                           (vi)     Certain   Requirements  in  Connection  with
                                    Registration  Rights.  In the  case  of such
                                    Demand  Registration,   if  the  Holder  has
                                    determined   to  enter   into  one  or  more
                                    underwriting    agreements   in   connection
                                    therewith, no Person may participate in such
                                    Demand   Registration   unless  such  Person
                                    agrees to sell his or its  securities on the
                                    basis    provided   in   the    underwriting
                                    arrangements      and      completes     all
                                    questionnaires,    powers    of    attorney,
                                    indemnities,   underwriting  agreements  and
                                    other  documents  which are  reasonable  and
                                    customary under the circumstances.

                           (vii)    Certain  Other  Matters.   Should  a  Demand
                                    Registration not become effective due to the
                                    failure of any of the UBS Holders requesting
                                    such  Demand  Registration  to  perform  its
                                    obligations  under  this  Agreement  or  the
                                    inability  of  such  UBS  Holders  to  reach
                                    agreement with the  underwriters on price or
                                    other customary terms for such  transaction,
                                    or in the event such UBS Holders withdraw or
                                    do not pursue the  request  for such  Demand
                                    Registration   (in  each  of  the  foregoing
                                    cases,   provided  that  at  such  time  the
                                    Company  is in  compliance  in all  material
                                    respects  with its  obligations  under  this
                                    Agreement),  then such  Demand  Registration
                                    shall be deemed to have been effected.

                  (b)  Piggyback  Registration.  If  at  any  time  the  Company
determines  to  register  any  Public  Offering  of  any  of  the  Common  Stock
Equivalents  for the account of any JWC Holder under the 1933 Act in  connection
with the public  offering  of such  securities  or  pursuant  to a request for a
Demand  Registration  pursuant to Section 3.2(a) hereof,  the Company shall,  at
each such time,  promptly give each Holder written notice of such  determination
no later than 30 days before its intended  filing with the SEC. Upon the written
request of any Holder received by the Company within 10 days after the giving of
any  such  notice  by the  Company,  the  Company  shall  use  all  commercially
reasonable  efforts  to cause  to be  registered  under  the 1933 Act all of the
Registrable  Securities  of such  Holder  that  such  Holder  has  requested  be
registered.  If the  total  amount  of  Registrable  Securities  that  are to be
included by the Company in such  registration  exceeds the amount of  securities
that the  underwriters  reasonably  believe  compatible  with the success of the
offering,  then the Company will include in such 
<PAGE>
                                      -17-

registration  only  the  number  of  securities  which  in the  opinion  of such
underwriters can be sold, in the following order:

                           (i)      first,  all  securities of the Company to be
                                    offered for the account of the Company; and

                           (ii)     second, the Registrable Securities, pro rata
                                    based   on   the   number   of   Registrable
                                    Securities  held by each  Holder  seeking to
                                    have Registrable Securities included in such
                                    registration   (including  any  UBS  Holders
                                    seeking  to  have   Registrable   Securities
                                    included in such registration  pursuant to a
                                    Demand Registration  requested under Section
                                    3.2(a) hereof).

         3.3  Obligations of the Company.

                  (a)  Whenever  required  under  Section  3.2 hereof to use all
commercially  reasonable  efforts  to  effect  the  registration  of any  Public
Offering Registrable Securities, the Company shall:

                           (i)      prepare and file with the SEC a registration
                                    statement  with respect to such  Registrable
                                    Securities   and   use   all    commercially
                                    reasonable    efforts    to    cause    such
                                    registration  statement to become and remain
                                    effective,  including,  without  limitation,
                                    filing  of  post-effective   amendments  and
                                    supplements to any registration statement or
                                    prospectus    necessary    to    keep    the
                                    registration statement current;

                           (ii)     as  expeditiously  as  reasonably  possible,
                                    prepare   and   file   with   the  SEC  such
                                    amendments    and    supplements   to   such
                                    registration  statement  and the  prospectus
                                    used in  connection  with such  registration
                                    statement as may be necessary to comply with
                                    the  provisions of the 1933 Act with respect
                                    to the disposition of all securities covered
                                    by such  registration  statement and to keep
                                    each  registration and  qualification  under
                                    this Agreement  effective (and in compliance
                                    with the 1933 Act) by such actions as may be
                                    necessary or appropriate  for a period of 90
                                    days  after  the  effective   date  of  such
                                    registration     statement    (unless    all
                                    securities   covered  by  such  registration
                                    statement  are sooner  disposed  of), all as
                                    requested by such Holder or Holders;

                           (iii)    as  expeditiously  as  reasonably   possible
                                    furnish  to  the  Holders  such  numbers  of
                                    copies   of  a   prospectus,   including   a
                                    preliminary  prospectus,  in conformity with
                                    the  requirements  of the 1933 Act, and such
                                    other   documents  as  they  may  reasonably
                                    request   in   order   to   facilitate   the
                                    disposition of Registrable  Securities owned
<PAGE>
                                      -18-

                                    by  them  in  accordance  with  the  plan of
                                    distribution    provided    for   in    such
                                    registration statement;

                           (iv)     as expeditiously as reasonably  possible use
                                    all  commercially   reasonable   efforts  to
                                    register and qualify the securities  covered
                                    by such  registration  statement  under such
                                    securities   or  "blue  sky"  laws  of  such
                                    jurisdictions   as   shall   be   reasonably
                                    appropriate  for  the  distribution  of  the
                                    securities   covered  by  the   registration
                                    statement,  provided  that the Company shall
                                    not be required in  connection  therewith or
                                    as a  condition  thereto  to  qualify  to do
                                    business  or to file a  general  consent  to
                                    service of process in any such jurisdiction,
                                    and further  provided that (anything in this
                                    Agreement  to the  contrary  notwithstanding
                                    with  respect to the bearing of expenses) if
                                    any  jurisdiction  in which  the  securities
                                    shall  be  qualified   shall   require  that
                                    expenses  incurred  in  connection  with the
                                    qualification  of  the  securities  in  that
                                    jurisdiction    be    borne    by    selling
                                    stockholders,  then such  expenses  shall be
                                    payable by selling stockholders pro rata, to
                                    the extent required by such jurisdiction;

                           (v)      notify each seller of Registrable Securities
                                    covered by such registration  statement,  at
                                    any time when a prospectus  relating thereto
                                    is required to be  delivered  under the 1933
                                    Act,  upon  discovery   that,  or  upon  the
                                    happening of any event as a result of which,
                                    the prospectus included in such registration
                                    statement,  as then in effect,  includes  an
                                    untrue statement of a material fact or omits
                                    to state any  material  fact  required to be
                                    stated  therein  or  necessary  to make  the
                                    statements  therein  not  misleading  in the
                                    light of the circumstances  under which they
                                    were made (each  Holder  hereby  covenanting
                                    that,  upon receipt of any such  notice,  it
                                    shall   forthwith   cease   using  any  such
                                    prospectus  unless  and until it shall  have
                                    received from the Company a supplement to or
                                    amendment of such  prospectus as hereinafter
                                    referred to in this Section 3.3(a)(v)),  and
                                    at the  request of any such seller or Holder
                                    promptly  prepare to furnish to such  seller
                                    or Holder a reasonable number of copies of a
                                    supplement   to  or  an  amendment  of  such
                                    prospectus  as may be necessary so that,  as
                                    thereafter  delivered to the  purchasers  of
                                    such  securities,  such prospectus shall not
                                    include  an untrue  statement  of a material
                                    fact  or  omit  to  state  a  material  fact
                                    required to be stated  therein or  necessary
                                    to   make   the   statements   therein   not
                                    misleading in the light of the circumstances
                                    under which they were made;

                           (vi)     otherwise  use all  commercially  reasonable
                                    efforts to comply with all applicable  rules
                                    and   regulations   of  the  SEC,  and  make
                                    available to its security  holders,  as soon

<PAGE>
                                      -19-

                                    as  reasonably   practicable,   an  earnings
                                    statement covering the period of at least 12
                                    months   but  not  more   than  18   months,
                                    beginning with the first full calendar month
                                    after   the    effective    date   of   such
                                    registration   statement,   which   earnings
                                    statement  shall  satisfy the  provisions of
                                    Section  11(a)  of the  1933  Act,  and will
                                    furnish  to  each  such  seller  at  least 2
                                    Business Days prior to the filing  thereof a
                                    copy of any  amendment or supplement to such
                                    registration  statement  or  prospectus  and
                                    shall not file any thereof to which any such
                                    seller  shall  have   reasonably   objected,
                                    except to the extent required by law, on the
                                    grounds that such  amendment  or  supplement
                                    does not  comply  in all  material  respects
                                    with the  requirements of the 1933 Act or of
                                    the rules or regulations thereunder;

                           (vii)    provide  and  cause  to  be   maintained   a
                                    transfer   agent  and   registrar   for  all
                                    Registrable   Securities   covered  by  such
                                    registration statement from and after a date
                                    not later  than the  effective  date of such
                                    registration statement; and

                           (viii)   use all commercially  reasonable  efforts to
                                    list all Registrable  Securities  covered by
                                    such    registration    statement   on   any
                                    securities  exchange  on which  any class of
                                    Registrable Securities is then listed.

                  (b) The Company  will  furnish to each Holder on whose  behalf
Registrable  Securities have been registered pursuant to this Agreement a signed
counterpart,  addressed  to such  Holder,  of (i) an opinion of counsel  for the
Company  dated the effective  date of such  registration  statement,  and (ii) a
so-called "cold comfort" letter signed by the independent public accountants who
have certified the Company's financial  statements included in such registration
statement,  and such opinion of counsel and accountants' letter, with respect to
events subsequent to the date of such financial  statements,  as are customarily
covered in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in connection with underwritten public offerings of securities.

                  (c) If the Company at any time proposes to register any of its
securities  under the 1933 Act subject to the piggyback  registration  rights of
the Holders  under Section  3.2(b)  hereof or pursuant to a Demand  Registration
under Section  3.2(a)  hereof,  and such  securities are to be distributed by or
through one or more underwriters, then the Company will make reasonable efforts,
if requested by any Holder of Registrable  Securities who requests  registration
of  Registrable  Securities  in  connection  therewith  pursuant  to Section 3.2
hereof, to arrange for such underwriters to include such Registrable  Securities
among the securities to be distributed by or through such underwriters.

                  (d) In  connection  with the  preparation  and  filing of each
registration statement registering  Registrable Securities under this Agreement,
the Company will give the Holders of Registrable Securities on whose behalf such
Registrable  Securities are to be so registered and their underwriters,  if any,
and their  respective  counsel and accountants the opportunity to 


<PAGE>
                                      -20-

participate in the preparation of such registration  statement,  each prospectus
included therein or filed with the SEC, and each amendment thereof or supplement
thereto,  and will give each of them such  access to its books and  records  and
such opportunities to discuss the business of the Company with its officers, its
counsel and the independent  public accountants who have certified its financial
statements,  as shall be reasonably necessary, in the opinion of such Holders or
such underwriters or their respective  counsel, in order to conduct a reasonable
and diligent  investigation within the meaning of the 1933 Act. Without limiting
the foregoing, each registration statement, prospectus, amendment, supplement or
any other  document  filed with respect to a  registration  under this Agreement
shall be subject to review and  reasonable  approval by the Holders  registering
Registrable Securities in such registration and by their counsel.

         3.4  Furnish  Information.  It shall be a  condition  precedent  to the
obligations  of the Company to take any action  pursuant to this  Article 3 that
each Holder shall furnish to the Company such information regarding such Holder,
the  Registrable  Securities  held by such Holder,  and the  intended  method of
disposition of such  securities as the Company shall  reasonably  request and as
shall be required in connection with the action to be taken by the Company.

         3.5 Expenses of Registration.  All expenses incurred in connection with
a registration pursuant to Section 3.2 hereof (excluding underwriters' discounts
and  commissions,  which  shall  be  borne by the  Holders),  including  without
limitation all registration  and  qualification  fees,  printers' and accounting
fees, fees and disbursements of counsel for the Company, and the reasonable fees
and disbursements of one counsel for the selling Holders (which counsel shall be
selected  by the  holders  of a majority  of the  Registrable  Securities  to be
included in such registration) shall be borne by the Company.

         3.6 Underwriting  Requirements.  In connection with any registration of
Registrable Securities under this Agreement,  the Holders shall, if requested by
the Company or the underwriters for any Registrable  Securities included in such
registration,  enter into an underwriting  agreement with such  underwriters for
such offering,  such agreement to contain such representations and warranties by
the Company and such other terms and provisions as are customarily  contained in
underwriting  agreements  with  respect to secondary  distributions,  including,
without  limitation,  provisions  relating to  indemnification  and contribution
provided,  that no  Holder  shall be  required  to make any  representations  or
warranties,  or provide any indemnity, with respect to any matter other than (x)
such  Holder's  ownership  of  his or  its  Subject  Securities  to be  sold  or
transferred  free and  clear of all  liens,  claims,  and  encumbrances  and (y)
information  regarding  such Holder  appearing  in the  registration  statement,
preliminary or final  prospectus or amendments or  supplements  thereto that has
been provided in writing by such Holder. The Holders on whose behalf Registrable
Securities are to be distributed  by such  underwriters  shall be parties to any
such underwriting agreement,  and the representations and warranties by, and the
other  agreements  on the part of, the  Company  to and for the  benefit of such
underwriters  shall  be also  made to and for the  benefit  of such  Holders  of
Registrable  Securities.  Such underwriting  agreement shall comply with Section
3.7.


<PAGE>
                                      -21-

         3.7  Indemnification.  In the  event  any  Registrable  Securities  are
included in a registration statement pursuant to this Article 3:

                  (a) To the fullest  extent  permitted by law, the Company will
indemnify  and  hold  harmless  each  Holder  joining  in  a  registration,  any
underwriter  (as defined in the 1933 Act) for it, and each  Person,  if any, who
controls  such  Holder or such  underwriter  within the meaning of the 1933 Act,
from and against any losses,  claims,  damages,  expenses (including  reasonable
attorneys'  fees  and  expenses  and  reasonable  costs  of   investigation)  or
liabilities,  joint or several,  to which they or any of them may become subject
under  the 1933 Act or  otherwise,  insofar  as such  losses,  claims,  damages,
expenses  or  liabilities  (or  actions or  proceedings,  whether  commenced  or
threatened,  in  respect  thereof)  arise out of or are  based on any  untrue or
alleged  untrue  statement of any material fact  contained in such  registration
statement  including any preliminary  prospectus or final  prospectus  contained
therein or any amendments or supplements  thereto,  or arise out of or are based
upon the omission or alleged  omission to state therein a material fact required
to be stated  therein or  necessary  to make the  statements  made  therein  not
misleading in light of the circumstances under which they were made or arise out
of any violation by the Company of any rule or regulation  promulgated under the
1933 Act  applicable to the Company and relating to action or inaction  required
of the  Company in  connection  with any such  registration,  provided  that the
indemnity  agreement contained in this Section 3.7(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage,  liability or action if such
settlement is effected  without the consent of the Company  (which consent shall
not be unreasonably withheld), nor shall the Company be liable to anyone for any
such loss claim, damage, liability or action to the extent that it arises out of
or is based upon an untrue  statement or omission made in  connection  with such
registration statement,  preliminary prospectus,  final prospectus or amendments
or  supplements  thereto  in  reliance  upon  and  in  conformity  with  written
information  furnished expressly for use in connection with such registration by
such Holder,  underwriter or control person. Such indemnity shall remain in full
force and effect  regardless of any  investigation  made by or on behalf of such
Holder,  underwriter  or control  person and shall  survive the transfer of such
securities by such Holder.

                  (b) To the  fullest  extent  permitted  by  law,  each  Holder
joining in a registration shall indemnify and hold harmless the Company, each of
its directors,  each of its officers who has signed the registration  statement,
each Person,  if any,  who  controls the Company  within the meaning of the 1933
Act,  and each  agent and any  underwriter  for the  Company  and any Person who
controls any such agent or underwriter  and each other Holder and any Person who
controls  such Holder  (within the meaning of the 1933 Act)  against any losses,
claims,  damages  or  liabilities  to which the  Company  or any such  director,
officer,  control person, agent, underwriter or other Holder may become subject,
under the 1933 Act or  otherwise,  insofar as such  losses,  claims,  damages or
liabilities  (or actions or  proceedings,  whether  commenced or threatened,  in
respect  thereof)  arise out of or are based  upon an  untrue  statement  of any
material  fact  contained  in  such   registration   statement,   including  any
preliminary  prospectus or final prospectus  contained therein or any amendments
or supplements  thereto, or arise out of or are based upon the omission to state
therein a material fact  required to be stated  therein or necessary to make the
statements  therein not misleading,  in each case to the extent, but only to the
extent,  that such untrue  statement or omission  was made in such  registration
statement,

<PAGE>

                                      -21-

preliminary  or final  prospectus,  or amendments  or  supplements  thereto,  in
reliance  upon and in  conformity  with  written  information  furnished by such
Holder with respect to such Holder  expressly  for use in  connection  with such
registration,  and such  Holder  shall  reimburse  any  legal or other  expenses
reasonably  incurred  by the  Company  or any such  director,  officer,  control
person,  agent,  underwriter or other Holder in connection with investigating or
defending any such loss, claim, damage,  liability or action,  provided that the
indemnity obligation of each such Holder hereunder shall be limited to and shall
not  exceed  the  proceeds  actually  received  by  such  Holder  upon a sale of
Registrable  Securities  pursuant to a  registration  statement  hereunder,  and
provided,  further that the indemnity agreement contained in this Section 3.7(b)
shall not apply to amounts paid in settlements  effected  without the consent of
such Holder (which consent shall not be unreasonably  withheld).  Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of the Company or any such director,  officer, Holder,  underwriter or
control person and shall survive the transfer of such securities by such Holder.

                  (c) Any Person seeking  indemnification under this Section 3.7
will (i) give prompt notice to the indemnifying  party of any claim with respect
to which it seeks indemnification,  but the failure to give such notice will not
affect  the  right  to  indemnification  hereunder  (except  to the  extent  the
indemnifying  party is  prejudiced  by such  failure),  and (ii)  unless in such
indemnified party's reasonable judgment a conflict of interest may exist between
such  indemnified and  indemnifying  parties with respect to such claim,  permit
such indemnifying  party, and other  indemnifying  parties  similarly  situated,
jointly to assume the defense of such claim with counsel reasonably satisfactory
to the parties. In the event that the indemnifying parties cannot mutually agree
as to the  selection of counsel,  each  indemnifying  party may retain  separate
counsel to act on its behalf and at its expense.  The indemnified party shall in
all events be entitled to participate in such defense at its expense through its
own  counsel.  If such  defense is not assumed by the  indemnifying  party,  the
indemnifying  party will not be subject to any liability for any settlement made
without its consent  (but such consent will not be  unreasonably  withheld).  No
indemnifying  party  will  consent  to entry of any  judgment  or enter into any
settlement which does not include as an unconditional term thereof the giving by
the  claimant  or  plaintiff  to such  indemnified  party of a release  from all
liability in respect of such claim or litigation.  An indemnifying  party who is
not  entitled  to, or elects not to,  assume the  defense of a claim will not be
obligated  to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable  judgment of any  indemnified  party a conflict of interest may exist
between such indemnified  party and any other of such  indemnified  parties with
respect to such claim, in which event the indemnifying  party shall be obligated
to pay the reasonable fees and expenses of such additional counsel.

                 (d)  If  for  any  reason  the  foregoing  indemnification  is
unavailable  to any  party or  insufficient  to hold it  harmless  as and to the
extent  contemplated by the preceding  paragraphs of this Section 3.7, then each
indemnifying  party  shall  contribute  to the  amount  paid or  payable  by the
indemnified party as a result of such loss,  claim,  damage expense or liability
in such proportion as is appropriate to reflect the relative  benefits  received
by the Company,  on the one hand, and the applicable  indemnified  party, as the
case may be, on the
<PAGE>
                                      -23-


other  hand,  and also the  relative  fault of the  Company  and any  applicable
indemnified  party, as the case may be, as well as any other relevant  equitable
considerations.

         3.8 Rule 144. With a view to making  available to the Holders and their
transferees  the  benefits  of Rule 144 and Rule 144A under the 1933 Act and any
other rule or regulation of the SEC that may at any time permit a Holder to sell
securities of the Company to the public without registration, the Company agrees
to use all  commercially  reasonable  efforts  to take  all  action  that may be
required as a condition to the availability after a public offering of Rule 144,
Rule 144A or such other rules or regulations, including without limitation to:

                  (a) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times subsequent to 90 days after
the effective date of the first registration  statement covering an underwritten
public offering filed by the Company;

                  (b) file with the SEC in a timely manner all reports and other
documents  required  of the  Company  under  the  1933  Act  and  the  1934  Act
(including, without limitation, under Section 13 or Section 15 of the 1934 Act);
and

                  (c)  furnish to any Holder  forthwith  upon  request a written
statement by the Company that it has complied with the reporting requirements of
Rule 144 (at any time  after 90 days  after  the  effective  date of said  first
registration  statement filed by the Company),  and of the 1933 Act and the 1934
Act (at any time after it has become subject to such reporting requirements),  a
copy of the most recent  annual or  quarterly  report of the  Company,  and such
other  reports  and  documents  so filed  by the  Company  as may be  reasonably
requested in availing any Holder of any rule or regulation of the SEC permitting
the selling of any such securities without registration.

         3.9 Market Stand-Off Agreement.  Each Stockholder agrees not to sell or
otherwise  transfer or dispose of any Common Stock (or other  securities) of the
Company at the time held by such Stockholder (other than securities  included in
the applicable  registration  statement or shares purchased in the public market
after the effective  date of  registration)  or any interest or future  interest
therein during such period (not to exceed 180 days) as is mutually acceptable to
a majority  in  interest  of  Stockholders  and the  underwriter  following  the
effective date of the registration statement of the Company filed under the 1933
Act which  includes  securities  of the  Company  to be sold to the public in an
underwritten offer.

                                    ARTICLE 4

                     Certain Miscellaneous Other Provisions

         4.1 Remedies.  The parties to this Agreement acknowledge and agree that
the covenants of the Company and the  Stockholders  set forth in this  Agreement
may be enforced in equity by a decree requiring  specific  performance.  Without
limiting  the  foregoing,  if any dispute  arises  concerning  the sale or other
disposition of any of the securities of the Company subject to this Agreement or
concerning  any  other  provisions  hereof  or the  obligations  of the 
<PAGE>

                                      -24-

parties hereunder, the parties to this Agreement agree that an injunction may be
issued  in  connection   therewith.   Such  remedies  shall  be  cumulative  and
non-exclusive  and shall be in addition  to any other  rights and  remedies  the
parties may have under this Agreement or otherwise.

         4.2  Entire Agreement; Amendment; Termination.

                  (a) This Agreement sets forth the entire  understanding of the
parties,  and supersedes all prior  agreements  and all other  arrangements  and
communications,  whether  oral or written,  with  respect to the subject  matter
hereof.

                  (b) The Schedule of Stockholders  may be amended in writing by
the  Company  to reflect  changes in the  composition  of the  Stockholders  and
changes in their addresses or telecopy  numbers that may occur from time to time
as a result of Permitted  Transfers,  Transfers permitted under Article 2 hereof
or  issuances  contemplated  by Section  4.12.  Amendments  to the  Schedule  of
Stockholders reflecting Permitted Transfers, Transfers permitted under Article 2
hereof or issuances contemplated by Section 4.12 shall become effective when the
amended  Schedule of  Stockholders,  and a copy of this Agreement as executed by
any new  transferee or other new party hereto in  accordance  with Section 4.12,
are filed with the Company. Upon written request of any Stockholder, the Company
will promptly provide to such Stockholder a copy of the Schedule of Stockholders
as in effect at the date of such request therefor.

                  (c) Any other  amendment to this Agreement shall be in writing
and shall  require the written  consent of (i) the Company,  (ii) either the JWC
Representative  or the holders of a majority of Common Stock  Equivalents at the
time  held  by the  JWC  Holders,  (iii)  if  adverse  to the  interests  of the
Stockholder  Group comprised of the Other Holders,  Other Holders,  both (A) the
holders of a majority of the Common  Stock  Equivalents  at the time held by the
Other Holders and (B) the holders of a majority of the Common Stock  Equivalents
at the time held by the UBS Holders,  and (iv) if adverse to the  interests of a
particular  Stockholder  or any  Stockholder  Group (other than the  Stockholder
Group  comprised of the Other  Holders),  that  Stockholder  or the holders of a
majority of the Common Stock  Equivalents  at the time held by that  Stockholder
Group, as the case may be.

                  (d) Notwithstanding  the foregoing  provisions of this Section
4.2, this  Agreement  may be terminated at any time upon the written  consent of
(i) the  Company  and  (ii)  the  holders  of a  majority  of the  Common  Stock
Equivalents  at the time held by the Management  Holders,  the Other Holders and
the JWC Holders (or the JWC Representative),  each voting separately as a group;
provided  that the  provisions  of  Sections  3.7 and  4.20  shall  survive  any
termination of this Agreement.

         4.3 Severability.  The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other  provisions  hereof,  and
this  Agreement  shall  be  construed  in  all  respects  as if the  invalid  or
unenforceable provision were omitted.

<PAGE>
                                      -25-


         4.4 Notices. All notices,  consents and other communications  required,
or contemplated  under this Agreement shall be in writing and shall be delivered
in the manner specified herein or, in the absence of such  specification,  shall
be deemed to have been duly given (i) three (3) Business  Days after  mailing by
first class certified mail, postage prepaid,  (ii) when delivered by hand, (iii)
upon  confirmation  of receipt  by  telecopy,  or (iv) one day after  sending by
overnight delivery service, to the respective addresses of the parties set forth
below:

                  For notices and communications to the Company:

                           c/o J.W. Childs Associates, L.P.
                           One Federal Street
                           Boston, MA 02110
                           Attention:  John W. Childs
                           Telecopy:  617-753-1101

                           with a copy to:

                           Desa International, Inc.
                           2701 Industrial Drive
                           Bowling Green, KY  42102
                           Attention:  President
                           Telecopy:  502-781-9807

                  For notices and  communications  to the  Stockholders,  to the
                  respective   addresses   set   forth   in  the   Schedule   of
                  Stockholders.

                  With a copy in the case of the JWC Holders to:

                           Sullivan & Worcester LLP
                           One Post Office Square
                           Boston, MA  02109
                           Attention: Christopher Cabot, Esq.
                           Telecopy:  617-338-2880

By notice  complying  with the  foregoing  provisions  of this Section 4.4, each
party shall have the right to change the mailing  address or telecopy number for
future notices and communications to such party.

         4.5 Binding Effect;  Assignment.  This Agreement shall binding upon and
inure to the benefit of the parties hereto and to their respective  transferees,
successors,  assigns,  heirs and administrators,  provided that the rights under
this Agreement may not be assigned except as expressly  provided herein. No such
assignment shall relieve an assignor of its obligations hereunder.

<PAGE>
                                      -26-

         4.6  Termination.   Without  affecting  any  other  provision  of  this
Agreement  requiring  termination  of any  rights  in favor of any  Stockholder,
Permitted  Transferee  or  any  other  transferee  of  Subject  Securities,  the
provisions of Articles 2 and 3 (other than Section 3.7, which in any event shall
survive any  termination of this Agreement or the  termination of this Agreement
as to any  Stockholder,  Permitted  Transferee  or other  transferee  when  such
Stockholder, Permitted Transferee or other transferee no longer owns any Subject
Securities)  and Sections 4.17,  4.18 and 4.19 of this Agreement shall terminate
as to such Stockholder, Permitted Transferee or other transferee, when, pursuant
to and in accordance with this Agreement, such Stockholder, Permitted Transferee
or other transferee, as the case may be, no longer owns any Subject Securities.

         4.7 Recapitalizations, Exchanges, etc. The provisions of this Agreement
shall  apply,  to the full extent set forth  herein with respect to Common Stock
Equivalents  and to any and all  shares of capital  stock of the  Company or any
successor or assign of the Company  (whether by merger,  consolidation,  sale of
assets or  otherwise)  which may be issued in respect of, in exchange for, or in
substitution  of the Common Stock  Equivalents,  by reason of a stock  dividend,
stock split, stock issuance, reverse stock split, combination, recapitalization,
reclassification, merger, consolidation or otherwise. Upon the occurrence of any
such events, amounts hereunder shall be appropriately adjusted.

         4.8 JWC Representative.  Each JWC Holder hereby designates and appoints
(and each  Permitted  Transferee of each such JWC Holder shall be deemed to have
so designated and appointed) John W. Childs and Adam L. Suttin, and each of them
acting singly, with full power of substitution (the "JWC  Representative"),  the
representative  of each such  Person to perform  all such acts as are  required,
authorized or  contemplated by this Agreement to be performed by any such Person
and hereby  acknowledges  that the JWC  Representative  shall be the only Person
authorized to take any action so required,  authorized or  contemplated  by this
Agreement by each such Person.  Each such Person further  acknowledges  that the
foregoing  appointment  and  designation  shall be deemed to be coupled  with an
interest and shall  survive the death or  incapacity  of such Person.  Each such
Person hereby authorizes (and each Permitted  Transferee shall be deemed to have
authorized)  the other  parties  hereto to disregard  any notice or other action
taken  by  such  Person   pursuant  to  this   Agreement   except  for  the  JWC
Representative. The other parties hereto are and will be entitled to rely on any
action so taken or any notice given by the JWC  Representative  and are and will
be entitled and  authorized to give notices only to the JWC  Representative  for
any notice  contemplated  by this  Agreement to be given to any such  Person.  A
successor to the JWC  Representative  may be chosen by the holders of a majority
of the Common Stock  Equivalents  at the time held by the JWC Holders,  provided
that written notice thereof is given by the successor JWC  Representative to the
Company, the Other Holders, the Management Holders and the other JWC Holders.

         4.9 Action  Necessary to Effectuate the  Agreement.  The parties hereto
agree to take or cause to be taken all such corporate and other action as may be
necessary to effect the intent and purposes of this Agreement.

         4.10 Purchase for Investment;  Legend on Certificate.  Each Stockholder
acknowledges  that all of the securities of the Company held by such Stockholder
are being (or have  been) 

<PAGE>

                                      -27-

acquired for investment and not with a view to the distribution thereof and that
no transfer,  hypothecation or assignment of any such securities  (including the
Common Stock for which such  securities may be exercisable  or  exchangeable  or
into which such securities may be convertible)  may be made except in compliance
with applicable federal and state securities laws. All the certificates or other
instruments  representing any of such securities (including the Common Stock for
which such  securities  may be exercisable  or  exchangeable  or into which such
securities  may  be  convertible)  which  are  now  or  hereafter  held  by  any
Stockholder  shall be  subject  to the terms of this  Agreement  and shall  have
endorsed  in  writing,  stamped  or  printed,  thereon  either of the  following
legends:

         "THE  SECURITIES  REPRESENTED  BY THIS  CERTIFICATE  ARE SUBJECT TO THE
         TERMS AND CONDITIONS OF A STOCKHOLDERS  AGREEMENT  DATED AS OF NOVEMBER
         __, 1997, AS AMENDED FROM TIME TO TIME, A COPY OF WHICH IS ON FILE WITH
         AND AVAILABLE FROM THE SECRETARY OF THE COMPANY."

or

         "THE SECURITIES  REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
         PROVISIONS REGARDING THE VOTING OF SUCH SECURITIES AND CERTAIN TRANSFER
         RESTRICTIONS  SET  FORTH  IN THE  STOCKHOLDERS  AGREEMENT  DATED  AS OF
         NOVEMBER __, 1997, A COPY OF WHICH MAY BE OBTAINED  FROM THE COMPANY AT
         ITS PRINCIPAL EXECUTIVE OFFICES."

         4.11 Effectiveness of Transfers.  Any Subject Securities transferred by
a Stockholder (other than pursuant to an effective  registration statement under
the 1933 Act or a Rule 144 Transaction)  shall be held by the transferee thereof
pursuant to this Agreement. Such transferee shall, except as otherwise expressly
stated herein, have all the rights and be subject to all of the obligations of a
Stockholder under this Agreement automatically and without requiring any further
act by such  transferee or by any parties to this Agreement.  Without  affecting
the preceding sentence,  if such transferee is not a Stockholder on the dates of
such transfer,  then such  transferee,  as a condition to such  transfer,  shall
confirm such transferee's  obligations hereunder in accordance with Section 4.12
hereof.  No Subject  Securities  shall be transferred on the Company's books and
records,  and no transfer of thereof  shall be otherwise  effective,  unless any
such  transfer  is made in  accordance  with the  terms and  conditions  of this
Agreement,  and the Company is hereby  authorized by all of the  Stockholders to
enter appropriate stop transfer notations on its transfer records to give effect
to this Agreement.

         4.12  Additional   Stockholders.   Any  Person  acquiring  any  Subject
Securities  (except for any  acquisition  thereof (a) in an offering  registered
under  the 1933 Act or (b) in a Rule 144  Transaction)  shall on or  before  the
transfer  or  issuance  to it of such  Subject  Securities,  sign a  counterpart
signature page hereto in form reasonably satisfactory to the Company and the JWC
Representative and shall thereby become a party to this Agreement; provided that
a  transferee  which is a pledgee  and  within  the  definition  of a  Permitted
Transferee  shall not be obligated so to agree until  foreclosure on its pledge.
The Company shall require each Person acquiring an


<PAGE>

                                      -28-

option,  warrant or other  right to  purchase  shares of Common  Stock under any
option or other equity  participation  plan to execute a  counterpart  signature
page hereto.

         4.13 No Waiver.  No course of  dealing  and no delay on the part of any
party  hereto  in  exercising  any  right,  power or  remedy  conferred  by this
Agreement shall operate as a waiver thereof or otherwise  prejudice such party's
rights, powers and remedies. No single or partial exercise of any rights, powers
or remedies  conferred  by this  Agreement  shall  preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.

         4.14  Counterparts.  This  Agreement  may be  executed  in two or  more
counterparts each of which shall be deemed an original but all of which together
shall constitute one and the same instrument, and all signatures need not appear
on any one counterpart.

         4.15 Headings, etc. All headings and captions in this Agreement are for
purposes of  references  only and shall not be  construed to limit or affect the
substance of this  Agreement.  Words used in this  Agreement,  regardless of the
gender  and  number  used,  will be deemed and  construed  to include  any other
gender,  masculine,  feminine,  or neuter,  and any other  number,  singular  or
plural,  as  the  context  requires.  As  used  in  this  Agreement,  the  words
"including",  "includes" and  "included" are not limiting,  and the word "or" is
not exclusive.  The words "this  Agreement",  "hereto",  "herein",  "hereunder",
"hereof",  and words or phrases of similar  import refer to this  Agreement as a
whole,  together with any and all Schedules and Exhibits hereto,  and not to any
particular article, section,  subsection,  paragraph, clause or other portion of
this Agreement.

         4.16  Governing  Law.  This  Agreement  shall be  construed  under  and
governed  by the  substantive  and  procedural  laws of the  State  of  Delaware
applicable to a contract executed in and wholly performed within Delaware.

         4.17 Preemptive Right Provisions. The Company hereby agrees, so long as
both (i) the  Stockholders  hold any of  Common  Stock  Equivalents,  and (ii) a
Public Offering shall not have occurred, as follows:

                  (a) Except as otherwise provided in Section 4.17(b) hereof, if
the Company  proposes  to issue or sell any shares of its  capital  stock or any
security  convertible into,  exchangeable or exercisable for or having rights to
purchase any shares of capital stock of the Company (the  "Company  Securities")
to any person, the Company shall deliver to the Stockholders at the time holding
any Subject  Securities at least 20 days' prior written notice (the  "Preemptive
Rights Notice") stating its desire to issue or sell such Company Securities. The
Preemptive  Rights  Notice  must  specify  the  class of and the  amount of such
Company  Securities  that the Company desires so to issue or sell and the price,
payment  terms and other  material  terms and  conditions  at and on which it is
willing to sell such Company  Securities and the material terms,  provisions and
conditions  of such  Company  Securities.  Within 10 days  after  the  Company's
delivery of a Preemptive Rights Notice (the "Election Period"), each Stockholder
at the time  holding  any  Subject  Securities  shall have the right to elect to
purchase,  at the  designated  offering  price and on other terms and conditions
specified in the  Preemptive  Rights  Notice,  up to that number of such Company
Securities so that, after giving effect to
<PAGE>

                                      -29-

such purchase, such Stockholder shall continue to maintain in the aggregate his,
her or its same proportionate  equity ownership of the Company as of the date of
the Preemptive  Rights Notice.  For purposes of determining the equity ownership
of the  Company  as of the  date  of the  Preemptive  Rights  Notice  under  the
preceding sentence,  each holder (including but not limited to each Stockholder)
of Vested Options shall be treated as though he, she or it had fully  converted,
exchanged or exercised all Vested  Options at the time held by him, her or it at
the  then  existing  conversion,  exchange  or  exercise  price or  ratio.  Each
Stockholder at the time holding any Subject  Securities may exercise his, her or
its rights  under this  Section  4.17(a) by  delivering  a notice to the Company
during the Election Period.  Should such Stockholder  elect to purchase any such
Company  Securities  pursuant to this Section 4.17(a),  such  Stockholder  shall
purchase  such  Company  Securities  at the closing and on the closing  date set
forth in the Preemptive Rights Notice.

                  (b) Exclusions. The provisions of Section 4.17(a) hereof shall
not apply to the issuance or sale of (i) Company  Securities  issued or issuable
to officers,  directors or  employees  of the Company or any  subsidiary  of the
Company who are not affiliated with J.W. Childs Associates, L.P., (ii) shares of
capital  stock of the Company  Securities  issued or issuable upon the exercise,
exchange or conversion  of any Company  Security or other  securities,  options,
warrants and other rights issued by the Company and  outstanding  as of the date
hereof,  after  giving  effect to the closing of certain  transactions  that are
closing  concurrently  with the issuance of the Subject  Securities  pursuant to
this  Agreement,  (iii) shares of Common Stock issued or issuable in  connection
with  any pro  rata  stock  split,  stock  dividend  or  recapitalization  by or
reorganization of the Company,  (iv) Company  Securities issued or issuable as a
pro rata dividend on the Common Stock, (v) Company Securities issued or issuable
by the Company in connection  with and as  consideration  for the acquisition of
another business or entity by the Company or any of its  subsidiaries,  and (vi)
Company Securities issued or issuable to any person or entity who (A) is neither
an Affiliate of JWC Equity  Partners nor a financial buyer and (B) is either (I)
directly  or  indirectly  through  its  subsidiaries  a  significant  actual  or
prospective  supplier  of  goods to or  customer  of the  Company  or any of its
subsidiaries,  to whom such  Company  Securities  are issued or issuable for the
purpose of  establishing  or enhancing  the business  relationship  between such
supplier or customer  and the Company and its  subsidiaries  or (II) engaged in,
and having a principal  business  unit  engaged in,  manufacturing  or marketing
tools, specialty tools,  decorative,  indoor, outdoor or other heating products,
lighting products, security products, home improvement or decorative products or
other accessories or products for the home.

         4.18 Transactions with Affiliates.  Other than the Management Agreement
and other agreements entered into on or prior to the date hereof and arms-length
agreements entered into in the ordinary course of business after the date hereof
on terms no less  favorable to the Company than would be available in agreements
entered into with Persons who are not  Affiliates  of JWC Equity  Partners,  the
Company  shall not enter into any  transaction  with any Affiliate of JWC Equity
Partners  without the  consent of the holders of a majority of the Common  Stock
Equivalents at the time held in the aggregate by the Management  Holders and the
Other Holders.


<PAGE>
                                      -30-


         4.19 Certain Covenants of the Company.  The Company hereby agrees,  for
the benefit of the UBS  Holders  and the HMTF  Holders for so long as the Public
Float Date shall not have occurred,  the Company will comply with and will cause
its subsidiaries to comply with the following covenants:

                  (a) Annual  Statements.  As soon as available and in any event
within 90 days after the close of each fiscal year of the Company  ending  after
the date of this Agreement,  the Company will deliver to each of UBS Capital and
HMTF Inc. a balance sheet of the Company and its  subsidiaries and statements of
income and of cash flows of the  Company  and its  subsidiaries,  audited by any
"big six" independent  public  accounting firm selected by the Company (or other
independent  public  accounting  firm  selected by the  Company  and  reasonably
acceptable  to the UBS Holders  and the HMTF  Holders),  showing  the  financial
position of the Company and its subsidiaries as of the close of such fiscal year
and the results of the  operations  of the Company and its  subsidiaries  during
such fiscal year, all on a consolidated basis. Each of the financial  statements
delivered  pursuant to this  Section  4.19(a) will be  accompanied  by a report,
without material qualification,  of such accounting firm to the effect that such
financial  statements  have  been  prepared,  except as may be  otherwise  noted
therein,   in  accordance   with  generally   accepted   accounting   principles
consistently applied.

                  (b) Monthly  Statements.  Within 30 days after the end of each
of the first eleven months in each fiscal year of the Company,  the Company will
deliver to each of UBS Capital and HMTF Inc. a  consolidated  unaudited  balance
sheet of the Company and its  subsidiaries  and statements of income and of cash
flows of the Company and its  subsidiaries as of the end of each such month, all
on a consolidated  basis,  with (i) a comparison of such month's  results to the
budgeted  results  for such  month and to the  corresponding  month of the prior
fiscal  year and,  (ii) a  comparison  of the  results  for the period  from the
beginning  of the  then  current  fiscal  year to the end of such  month  to the
budgeted  results for such period and to the  corresponding  period of the prior
fiscal year,  certified by the chief financial officer of the Company to be true
and correct in all material respects and to have been prepared, except as may be
otherwise  noted  therein,  in accordance  with  generally  accepted  accounting
principles consistently applied,  subject to normal year-end adjustments and the
addition of footnotes.

                  (c) Other Financial  Information.  The Company will deliver to
each of UBS Capital and HMTF Inc., within 90 days after the commencement of each
fiscal year,  projected monthly balance sheets and statements of income for such
fiscal year prepared by management of the Company.

                  (d) Notice of  Litigation,  Defaults,  Etc.  The Company  will
promptly  give notice to each of UBS Capital and HMTF Inc. of any  litigation or
administrative  proceeding to which the Company or any of its  subsidiaries  may
hereafter  become a party which has or, in the good faith  business  judgment of
senior  management  of the  Company,  is  reasonably  likely to have a  material
adverse effect on the business, assets or financial condition of the Company and
its subsidiaries,  taken as a whole.  Promptly upon any executive officer of the
Company  obtaining  knowledge of any default with  respect to  indebtedness  for
borrowed  money  involving in excess of  $25,000,000  in principal  amount,  the
Company  will  furnish a notice to each of UBS Capital and HMTF Inc.  specifying
the nature and period of existence and the action the

<PAGE>

                                      -31-

Company or any of its subsidiaries has taken, is taking or proposes to take with
respect thereto.  Promptly after the receipt  thereof,  the Company will provide
each of UBS Capital  and HMTF Inc.  copies of any  reports as to  adequacies  in
accounting  controls  submitted by independent  accountants  with respect to the
Company and its subsidiaries.

                  (e) Other  Information.  From  time to time  upon the  written
request of UBS Capital or HMTF Inc.,  the Company will furnish such  information
regarding  the  business,  affairs,  prospects  and  financial  condition of the
Company and its  subsidiaries as the  representatives  of any UBS Holder or HMTF
Holder  may  reasonably  request;  provided  that,  upon  the  request  and as a
condition to the delivery of such information,  each of the UBS Holders and HMTF
Holders  who  is to  receive  such  information  shall  execute  and  deliver  a
confidentiality  and  nondisclosure  agreement in form and substance  reasonably
satisfactory  to the  Company.  Each such  representative  shall  have the right
during normal business hours to examine the financial books and records, and the
certificate  of  incorporation,  bylaws,  minutes of meetings  of  stockholders,
boards of directors and  committees  thereof,  stockholders  records and similar
corporate records, of the Company and its subsidiaries and to make copies, notes
and abstracts therefrom,  all at such reasonable times and intervals as such UBS
Holder or HMTF Holder may reasonably request.

         4.20   Confidentiality Covenant.

                  (a) Each of the UBS  Holders  and the HMTF  Holders  agrees to
keep  confidential any information or materials  provided by or on behalf of the
Company hereunder,  except (i) as may be otherwise required by law and (ii) such
information and materials as (A) are or become generally available to the public
other than as a result of a disclosure in violation of this  Agreement,  (B) was
independently acquired or developed by such Stockholder without violating any of
its  obligations  under  this  Agreement,  or  (C)  becomes  available  to  such
Stockholder on a  nonconfidential  basis from a person who is not and was not to
such  Stockholder's  knowledge  bound  by a  confidentiality  obligation  to the
Company,  or is not and was not  otherwise  prohibited  from  transmitting  such
information  or materials to such  Stockholder.  Notwithstanding  the foregoing,
each of the UBS  Holders and the HMTF  Holders  shall have the right to disclose
such information or materials to any prospective  purchaser of securities of the
Company  owned by such  Stockholder,  provided that such  prospective  purchaser
shall have executed and delivered a confidentiality and nondisclosure  agreement
in form and substance reasonably satisfactory to the Company.

                  (b) Each of the UBS Holders and HMTF Holders acknowledges that
securities  laws  prohibit  any  person  who has  received  material  non-public
information regarding the Company or its subsidiaries from purchasing or selling
securities of the Company or from  communicating  such  information to any other
person  under  circumstances  in which it is  reasonably  foreseeable  that such
person is likely to  purchase or sell such  securities.  Each of the UBS Holders
and HMTF  Holders  agrees  that it will not,  at any time  that it has  received
material  non-public  information  regarding  the  Company or its  subsidiaries,
purchase or sell  securities of the Company in violation of such securities laws
or communicate such information to any other person under circumstances in which
it is reasonably foreseeable that such person is likely to purchase or sell such
securities in violation of such securities laws.


<PAGE>


                                      -32-



                         [Signatures on Following Pages]


<PAGE>



                            Desa Holdings Corporation
                             Stockholders Agreement

                           Counterpart Signature Page

         IN WITNESS  WHEREOF,  the parties have  executed  this  Agreement as an
instrument under SEAL as of the date first set forth above.

                                          THE COMPANY:

                                          DESA HOLDINGS CORPORATION


                                          By: /s/
                                              Name:
                                              Title:

                                          [Stockholders]




<PAGE>


                    [Schedules of stockholders have not been
                    included and are available upon request]