EXHIBIT 10.2













                            DESA HOLDINGS CORPORATION

                               PURCHASE AGREEMENT

                         17,400.17827 Shares of Series C
                       12% Senior Redeemable Exchangeable
                                Pay-In-Kind Stock

                          Warrants to Purchase 260,212
                             Shares of Common Stock

                         638,693 Shares of Common Stock




                              DATED October 9, 1998




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                                                 TABLE OF CONTENTS

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<S>              <C>                                                                                            <C>


Section 1.        Authorization and Closing.......................................................................1
                  1.01     Authorization of Securities............................................................1
                  1.02     Purchase and Sale of the Series C Preferred, Warrants, and the
                           Voting Common..........................................................................1
                  1.03     The Closing............................................................................2

Section 2.        Conditions of Each Purchaser's Obligation at the Closing........................................2
                  2.01     Representations and Warranties; Covenants..............................................2
                  2.02     Stockholders Agreement.................................................................2
                  2.03     Tagalong Agreement.....................................................................2
                  2.04     Sale of Purchased Securities to Each Purchaser.........................................3
                  2.05     Securities Law Compliance..............................................................3
                  2.06     Senior Documents.......................................................................3
                  2.07     Opinion of the Company's Counsel.......................................................3
                  2.08     Closing Documents......................................................................3
                  2.09     Proceedings............................................................................4
                  2.10     Expenses...............................................................................4
                  2.11     Compliance with Applicable Laws........................................................4
                  2.12     Waiver.................................................................................4

Section 3.        Covenants.......................................................................................5
                  3.01     Financial Statements and Other Information.............................................5
                  3.02     Inspection of Property.................................................................7
                  3.03     Attendance at Board Meetings...........................................................7
                  3.04     Affirmative Covenants..................................................................8
                  3.05     Series C Preferred and Exchange Note Covenants.........................................9
                  3.06     Allocation of the Purchase Price......................................................19
                  3.07     Current Public Information............................................................19

Section 4.        Transfer of Purchased Securities...............................................................19
                  4.01     General Provisions....................................................................19
                  4.02     Rule 144A.............................................................................19
                  4.03     Legend Removal........................................................................19

Section 5.        Representations and Warranties of the Company..................................................20
                  5.01     Organization, Corporate Power and Licenses............................................20
                  5.02     Capital Stock and Related Matters.....................................................20
                  5.03     Series C Preferred, Warrants, Warrant Stock and Common Stock..........................21

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                  5.04     Subsidiaries; Investments.............................................................21
                  5.05     Authorization; No Breach..............................................................22
                  5.06     Financial Statements..................................................................22
                  5.07     Absence of Undisclosed Liabilities....................................................23
                  5.08     No Material Adverse Change............................................................23
                  5.09     Absence of Certain Developments.......................................................23
                  5.10     Tax Matters...........................................................................24
                  5.11     Contracts and Commitments.............................................................25
                  5.12     Intellectual Property Rights..........................................................26
                  5.13     Litigation, etc.......................................................................26
                  5.14     Brokerage.............................................................................26
                  5.15     Governmental Consent, etc.............................................................27
                  5.16     Insurance.............................................................................27
                  5.17     Employees.............................................................................27
                  5.18     Compliance with Laws..................................................................27
                  5.19     Affiliated Transactions...............................................................27
                  5.20     Disclosure............................................................................28
                  5.21     Knowledge.............................................................................28

Section 6.        Representations and Warranties of Sellers......................................................28
                  6.01     Organization and Good Standing........................................................28
                  6.02     Execution of Agreement................................................................28
                  6.03     Authorization; No Breach..............................................................28
                  6.04     Ownership of Purchased Securities.....................................................29

Section 7.        Representations and Warranties of Purchasers...................................................29
                  7.01     Purchaser's Investment Representations................................................29
                  7.02     Organization and Good Standing........................................................29
                  7.03     Execution of Agreement................................................................29
                  7.04     Authorization; No Breach..............................................................29

Section 8.        Definitions....................................................................................30
                  8.01     Definitions...........................................................................30

Section 9.        Miscellaneous..................................................................................33
                  9.01     Expenses..............................................................................33
                  9.02     Remedies..............................................................................34
                  9.03     Legend................................................................................34
                  9.04     Consent to Amendments.................................................................34
                  9.05     Survival of Representations and Warranties............................................34
                  9.06     Treatment of the Preferred Stock......................................................35

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                  9.07     Successors and Assigns................................................................35
                  9.08     Capital and Surplus; Special Reserves.................................................35
                  9.09     Severability..........................................................................35
                  9.10     Counterparts..........................................................................35
                  9.11     Descriptive Headings; Interpretation..................................................35
                  9.12     Governing Law.........................................................................36
                  9.13     Notices...............................................................................36
                  9.14     No Strict Construction................................................................36
                  9.15     Indemnification.......................................................................36

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                            DESA HOLDINGS CORPORATION

                               PURCHASE AGREEMENT


                  THIS AGREEMENT is made as of October 9, 1998, by and among JWC
Equity  Funding,  Inc.  ("JWC"),  and  UBS  Capital  LLC  ("UBS")  (UBS  and JWC
collectively,  "Sellers"),  and the Persons listed on the Schedule of Purchasers
attached  hereto  (collectively  referred  to  herein  as the  "Purchasers"  and
individually as a "Purchaser")  and Desa Holdings  Corporation  (the "Company").
Except as otherwise indicated herein,  capitalized terms used herein are defined
in Section 7 hereof.

                  The parties hereto agree as follows:

         Section 1.        Authorization and Closing.

                  1.01     Authorization of Securities.

                  The Company has issued to Sellers an aggregate of 18,849.84110
shares of Series C 12%  Senior  Redeemable  Exchangeable  Pay-In-Kind  Preferred
Stock (the "Series C  Preferred")  of which 17,600 shares were issued as part of
the  recapitalization  of the Company on November 26,  1997,  and the balance of
which  shares were issued to Sellers as a  paid-in-kind  dividend as of June 30,
1998.

                  Together with the Series C Preferred  purchased as part of the
recapitalization, the Sellers also acquired warrants to purchase an aggregate of
463,231.9468  shares of the nonvoting common stock, par value $.01 per share, of
the  Company.   Through  purchases  in  the   recapitalization   and  subsequent
transactions, the Sellers also hold an aggregate of 3,986,995.9831 shares of the
common stock, par value $.01 per share, of the Company (the "Voting Common").

                  1.02  Purchase and Sale of the Series C  Preferred,  Warrants,
and the Voting  Common.  Subject to the terms and  conditions  set forth in this
Agreement,  and in  reliance on the  representations  and  warranties  contained
herein, at the Closing, Sellers shall sell, transfer, assign and deliver to each
Purchaser and, each  Purchaser  shall purchase from Sellers the number of shares
of Series C Preferred  and Voting  Common,  along with  warrants to purchase the
number of warrant  shares of the  non-voting  common  stock,  par value $.01 per
share, of the Company set forth opposite such  Purchaser's  name on the Schedule
of  Purchasers  attached  hereto  (the  "Original  Purchased  Securities").   In
consideration  for the Original  Purchased  Securities,  Purchasers shall pay to
Sellers the  purchase  price set forth  opposite  such  Purchaser's  name on the
Schedule of Purchasers on the Closing Date (the "Purchase Price"). Each purchase
of Original Purchased Securities hereunder by a Purchaser constitutes a separate
purchase  and each  Purchaser  and each Seller shall not be jointly or otherwise
responsible  for any Original  Purchased  Securities not set forth opposite such
Purchaser's and Seller's name on the Schedule of Purchasers and Sellers attached
hereto. At the Closing (as defined herein),  the Company agrees to issue to each
Purchaser  warrants,  in the form of  Exhibit A (the  "Warrants"),  to  purchase
shares of Voting Stock (the "Warrant Shares") as set forth


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opposite  such  Purchaser's  name on the  Schedule  of  Purchasers  and  Sellers
attached hereto,  in exchange for the warrants  purchased by the Purchasers from
the Sellers  herein (the  Original  Purchased  Securities  plus the  Warrants to
Purchase Warrant Shares, collectively, the "Purchased Securities").

                  1.03 The Closing.  Subject to  satisfaction  of the conditions
and upon the terms hereunder, the closing of the separate purchases and sales of
the Purchased Securities (the "Closing") shall take place at 10:00 a.m. (C.S.T.)
on  October  9,  1998,  or at such  other  place or on such other date as may be
mutually agreeable to each Purchaser.  At the Closing, each Seller shall deliver
stock  certificates and warrants  evidencing the Original  Purchased  Securities
being sold by such Seller,  together with instruments of transfer duly endorsed,
and the Company shall deliver to each Purchaser stock  certificates and warrants
evidencing the Original Purchased  Securities to be purchased by such Purchaser,
registered  in such  Purchaser's  or its  nominee's  name,  upon  payment of the
Purchase  Price  thereof by wire  transfer  of  immediately  available  funds to
accounts  specified  by the Sellers to the  Purchasers  in writing  prior to the
Closing, in the aggregate amount set forth opposite such Purchaser's name on the
Schedule of Purchasers.

                  At the Closing, the Company will deliver to the Purchasers the
Warrants,  registered in such  Purchaser's  or its nominee's  name, as set forth
opposite  such  Purchaser's  name on the  Schedule  of  Purchasers  and  Sellers
attached  hereto,  against  delivery  to the  Company by the  Purchasers  of the
warrants purchased by them herein.

         Section 2. Conditions of Each Purchaser's Obligation at the Closing. In
the  event  that any of the  following  conditions  are not  satisfied,  then no
Purchaser  shall be  obligated  to proceed  with the  purchase of the  Purchased
Securities.  The  obligation  of  each  Purchaser  to  purchase  and pay for the
Purchased  Securities  at the Closing is subject to the  satisfaction  as of the
Closing of the following conditions:

                  2.01   Representations   and   Warranties;    Covenants.   The
representations and warranties contained in Section 5 and Section 6 hereof shall
be true and correct in all material  respects at and as of the Closing as though
then made, except to the extent of changes caused by the transactions  expressly
contemplated  herein,  and Sellers and the Company  shall have  performed in all
material  respects all of the  covenants  required to be performed by such party
hereunder prior to the Closing.

                  2.02  Stockholders  Agreement.  The Company,  the  Purchasers,
Sellers and each other holder of capital stock of the Company shall have entered
into an Amended and Restated Stockholders Agreement in form and substance as set
forth in Exhibit B attached hereto (the "Amended Stockholders  Agreement"),  and
the Amended  Stockholders  Agreement shall be in full force and effect as of the
Closing without further amendment or modification.

                  2.03  Tagalong  Agreement.  The Company,  J.W.  Childs  Equity
Partners,  L.P. and the  Purchasers  shall have  entered into a Preferred  Stock
Tagalong Agreement in form and substance

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as set forth in Exhibit C attached hereto (the "Preferred Tagalong  Agreement"),
and the Preferred Tagalong Agreement shall be in full force and effect as of the
Closing without further amendment or modification.

                  2.04 Sale of Purchased  Securities to Each Purchaser.  Sellers
shall have simultaneously sold to each Purchaser the Purchased  Securities to be
purchased by such  Purchaser  hereunder  at the Closing and shall have  received
payment therefor in full.

                  2.05 Securities Law Compliance.  Sellers and the Company shall
have made all filings under all  applicable  federal and state  securities  laws
necessary to consummate  the sale of the Purchased  Securities  pursuant to this
Agreement in compliance with such laws.

                  2.06 Senior  Documents.  The Company shall be in compliance in
all  material  respects  with  each and every  provision  of the  Senior  Credit
Facility and the Senior Subordinated Note Indenture.

                  2.07 Opinion of the Company's  Counsel.  Each Purchaser  shall
have received from Sullivan & Worcester LLP, counsel for JWC and the Company, an
opinion  addressed to each  Purchaser,  dated the date of the Closing that is in
form and substance as set forth in Exhibit D hereto.

                  2.08  Closing  Documents.  (i) At or before the  Closing,  JWC
shall have delivered to each Purchaser all of the following documents:

                           (a)   an   Officer's   Certificate   (or   equivalent
                  document),  dated  the  date of the  Closing,  certifying  its
                  compliance with the conditions  specified in Sections 2.01 and
                  2.05;

                           (b) certified  copies of the resolutions duly adopted
                  by its board of directors (or equivalent body) authorizing the
                  execution, delivery and performance of this Agreement and each
                  of the other agreements and documents contemplated hereby; and

                           (c) such other documents relating to the transactions
                  contemplated  hereby as any  Purchaser or its special  counsel
                  may reasonably request.

                  (ii) at or before the  Closing,  UBS shall have  delivered  to
         each Purchaser all of the following documents:

                           (a)   an   Officer's   Certificate   (or   equivalent
                  document),  dated  the  date of the  Closing,  certifying  its
                  compliance with the conditions  specified in Sections 2.01 and
                  2.05;

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                           (b) an Officer's Certificate (or equivalent document)
                  certifying that all limited  liability company action required
                  to duly authorize the execution,  delivery and  performance of
                  this Agreement and each of the other  agreements and documents
                  contemplated hereby by UBS has been taken; and

                           (c) such other documents relating to the transactions
                  contemplated  hereby as any  Purchaser or its special  counsel
                  may reasonably request.

                  (iii)  At or  before  the  Closing,  the  Company  shall  have
         delivered to each Purchaser all of the following documents:

                           (a) an Officer's  Certificate,  dated the date of the
                  Closing,   certifying  its  compliance   with  the  conditions
                  specified in Sections 2.01, 2.05 and 2.06;

                           (b) certified  copies of the resolutions duly adopted
                  by the Company's board of directors authorizing the execution,
                  delivery and  performance  of this  Agreement  and each of the
                  other agreements and documents contemplated hereby;

                           (c)  copies  of  all  third  party  and  governmental
                  consents,  approvals and filings  required in connection  with
                  the  consummation of the  transactions  hereunder  (including,
                  without  limitation,  all blue sky law  filings and waivers of
                  all preemptive rights and rights of first refusal); and

                           (d) such other documents relating to the transactions
                  contemplated  hereby as any  Purchaser or its special  counsel
                  may reasonably request.

                  2.09 Proceedings. All corporate and other proceedings taken or
required  to be  taken  by the  Company  in  connection  with  the  transactions
contemplated  hereby  to be  consummated  at or  prior  to the  Closing  and all
documents  incident  thereto  shall  be  reasonably  satisfactory  in  form  and
substance to each Purchaser and its special counsel.

                  2.10  Expenses.   At  the  Closing,  the  Company  shall  have
reimbursed the Purchasers for the fees and expenses of their special  counsel as
provided in Section 9.01 hereof.

                  2.11  Compliance   with  Applicable   Laws.  The  purchase  of
Purchased  Securities by each Purchaser hereunder shall not be prohibited by any
applicable  law or  governmental  rule or regulation  and shall not subject such
Purchaser to any penalty, liability or, in such Purchaser's sole judgment, other
onerous  condition under or pursuant to any applicable law or governmental  rule
or  regulation,  and the purchase of the Purchased  Securities by each Purchaser
hereunder shall be permitted by laws, rules and regulations of the jurisdictions
and governmental authorities and agencies to which such Purchaser is subject.


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                  2.12 Waiver. Any condition  specified in this Section 2 may be
waived if consented to by each Purchaser;  provided that no such waiver shall be
effective  against any Purchaser unless it is set forth in a writing executed by
such Purchaser.

         Section 3.        Covenants.

                  3.01 Financial  Statements and Other Information.  The Company
covenants  that it shall deliver to each  Purchaser  (so long as such  Purchaser
holds any Series C Preferred  or Exchange  Notes) and to each Holder of at least
10% of the outstanding shares of Series C Preferred or Exchange Notes:

                  (i) as soon as available but in any event within 30 days after
         the end of each monthly  accounting period ending after the date hereof
         (other than the last month of each fiscal year), unaudited consolidated
         statements of income and cash flows of the Company and its Subsidiaries
         for such  monthly  period and for the period from the  beginning of the
         fiscal  year to the  end of  such  month,  and  unaudited  consolidated
         balance  sheets of the  Company and its  Subsidiaries  as of the end of
         such monthly  period,  setting  forth in each case  comparisons  to the
         Company's  annual  budget  and  to  the  corresponding  period  in  the
         preceding  fiscal  year,  and all  such  statements  shall,  except  as
         otherwise  noted  therein,  be prepared in  accordance  with  generally
         accepted accounting principles, consistently applied (subject to normal
         year-end  adjustments  and the  addition  of  footnotes)  and  shall be
         certified by the Company's chief financial officer;

                  (ii)  within  45 days  after  the end of each  fiscal  quarter
         ending after the date hereof,  an  Officer's  Certificate  stating that
         neither the Company nor any of its Subsidiaries is in default under any
         of its agreements evidencing indebtedness in an amount greater than $10
         million  or, if any such  default  exists,  specifying  the  nature and
         period of  existence  thereof  and what  actions  the  Company  and its
         Subsidiaries have taken and propose to take with respect thereto;

                  (iii)  within 90 days after the end of each fiscal year ending
         after the date hereof, consolidated statements of income and cash flows
         of  the  Company  and  its  Subsidiaries  for  such  fiscal  year,  and
         consolidated  balance sheets of the Company and its  Subsidiaries as of
         the end of such fiscal year,  setting forth in each case comparisons to
         the  Company's   annual  budget  and  to  the  preceding  fiscal  year,
         accompanied  by  a  report,  without  material  qualification,   of  an
         independent  accounting  firm of  recognized  national  standing 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; provided,  however, that if
         the Company is required to file a Form 10-K, delivery of a copy thereof
         shall satisfy this Section 3.01(iii);

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                  (iv)  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;

                  (v)  promptly  upon  the  discovery  thereof,  notice  of  any
         litigation or administrative  proceeding to which the Company or any of
         its  subsidiaries  shall have hereafter  become a party which has or 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;

                  (vi)  promptly  upon  any  executive  officer  of the  Company
         obtaining  knowledge of any default,  on the part of the Company or any
         of its  Subsidiaries,  with respect to indebtedness  for borrowed money
         involving  in excess  of  $25,000,000  in  principal  amount,  a notice
         specifying  the  nature  and  period of  existence  and the  action the
         Company or any of its  subsidiaries has taken, is taking or proposes to
         take with respect thereto;

                  (vii) within ten days after  transmission  thereof,  copies of
         all  financial  statements,  proxy  statements,  reports  and any other
         general  written   communications   which  the  Company  sends  to  its
         stockholders and copies of all registration  statements and all reports
         on Form 10-K,  10-Q or 8-K (or such successor  forms as may be adopted)
         which it files with the Securities and Exchange  Commission or with any
         securities exchange on which any of its securities are then listed;

                  (viii) with reasonable promptness,  such other information and
         financial  data  concerning  the  Company and its  Subsidiaries  as any
         Person  entitled to receive  information  under this  Section  3.01 may
         reasonably request.

The Company  acknowledges that each of the financial  statements  referred to in
Section 3.01 shall be true and correct in all material  respects as of the dates
and for  the  periods  stated  therein,  subject  in the  case of the  unaudited
financial statements to changes resulting from normal year-end adjustments.

Except  as  otherwise  required  by law or  judicial  order or  decree or by any
governmental  agency or authority,  each Person entitled to receive  information
regarding the Company and its Subsidiaries pursuant to this Agreement, including
without  limitation,  Sections  3.01,  3.02  and  3.03  hereof,  agrees  to keep
confidential the information  obtained by it hereunder,  except 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 Person without violating any of its
obligations  under this Agreement,  or (C) becomes available to such Person on a
nonconfidential  basis  from a  person  who is not and was not to such  Person'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 Person.  Notwithstanding  the foregoing,  each of the Purchasers shall have
the right to disclose  such  information  or  materials  to (i) any  prospective
purchaser of Purchased  Securities  owned by such Purchaser;  provided that such
prospective

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purchaser shall have executed and delivered a confidentiality  and nondisclosure
agreement in form and substance reasonably  satisfactory to the Company and (ii)
to  such  Purchaser's  Affiliates,   accountants,  lawyers,  bankers  and  other
professionals, as reasonably necessary and (iii) as required by applicable law.

Each of the Purchasers 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 Purchasers 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.

                  3.02 Inspection of Property.  The Company  covenants with each
Purchaser  that, for so long as such  Purchaser and its  Affiliates  hold in the
aggregate  at least  one  quarter  (1/4) of the  number of  shares  (subject  to
appropriate  adjustment to reflect any split or combination of shares) of Series
C Preferred (or the equivalent in principal amount of Exchange Notes) originally
purchased  by them  hereunder,  or, if earlier,  until the Public Float Date (as
defined in the Amended  Stockholders  Agreement),  the Company  shall permit any
representatives  who are designated by such Purchaser upon reasonable notice, at
reasonable  intervals,  and during normal business  hours,  at such  Purchaser's
expense,  to (i) visit and inspect any of the  properties of the Company and its
Subsidiaries,  (ii) examine the corporate  and financial  records of the Company
and its  Subsidiaries  and make copies  thereof or extracts  therefrom and (iii)
discuss the affairs,  finances and accounts of the Company and its  Subsidiaries
with the directors and executive  officers and  independent  accountants  of the
Company and its Subsidiaries;  provided,  however, that the right to discuss the
affairs,  finances  and accounts of the Company and its  Subsidiaries  with such
accountants  shall exist only when the Company is not a reporting  company under
the  Securities  Act of  1934.  The  presentation  of an  executed  copy of this
Agreement  by any  Purchaser  to the  Company's  independent  accountants  shall
constitute  the  Company's   permission  to  its   independent   accountants  to
participate in discussions with such Persons.

                  3.03 Attendance at Board Meetings.  The Company covenants with
each Purchaser  that, (i) for so long as such Purchaser and its Affiliates  hold
in the aggregate at least  one-quarter (1/4) of the number of shares (subject to
appropriate  adjustment to reflect any split or combination of shares) of Series
C Preferred (or the equivalent in principal amount of Exchange Notes) originally
purchased  by them  hereunder,  or, if earlier,  until the Public Float Date (as
defined in the Amended Stockholders  Agreement),  and (ii) at any time, prior to
or after the Public Float Date,  during which the right of the holders of Series
C  Preferred  to elect a director  pursuant to Section  6(c) of the  Certificate
shall have been suspended  pursuant to Section  6(c)(v) of the  Certificate  and
during  which  such  Purchaser  or its  Affiliates  hold any  shares of Series C
Preferred,  the Company shall give such Purchaser  notice of each meeting of its
board of directors and each committee thereof at the same

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time and by the same means as such notice is provided to members of the board or
such  committee,  and the Company shall permit a single  representative  of such
Purchaser and its  Affiliates to attend as an observer all meetings of its board
of directors and all committees thereof;  and each such representative  shall be
given the opportunity to listen to telephonic meetings.  Any such representative
shall  recuse  himself  or  herself  from any such  meeting  during the board of
directors' or the committee's  discussions,  deliberations and voting on matters
with  respect to which the board of directors or the  committee  determines,  in
good faith, such representative's presence presents a conflict of interest. Each
representative  shall be entitled to receive  all  written  materials  and other
information (including,  without limitation, copies of meeting minutes) given to
directors in connection  with such meetings at the same time such  materials and
information  are given to the  directors.  If the  Company  takes any  action by
written  consent  in lieu of a  meeting  of its  board  of  directors  or of any
committee  thereof,  the  Company  shall  give  a  copy  thereof  to  each  such
representative promptly following the effective date of such consent.

                  3.04  Affirmative  Covenants.  The Company  covenants with the
Holders  that so long as any  Series  C  Preferred  or  Exchange  Notes  remains
outstanding, the Company shall, and shall cause each Subsidiary to:

                  (i)  cause  to be  done  all  things  necessary  to  maintain,
         preserve and renew its corporate  existence and all material  licenses,
         authorizations  and permits  necessary to the conduct of its businesses
         where failure to so comply would have a material  adverse effect on the
         financial  condition,  assets  or  business  of  the  Company  and  its
         Subsidiaries taken as a whole;

                  (ii) maintain and keep its properties in good repair,  working
         order and condition,  and from time to time make all repairs,  renewals
         and  replacements  which in the  reasonable  opinion of the Company are
         necessary,  so that its businesses  may be properly and  advantageously
         conducted at all times;

                  (iii) pay and  discharge  when payable all taxes,  assessments
         and governmental charges imposed upon its properties or upon the income
         or profits  therefrom (in each case before the same becomes  delinquent
         and before penalties accrue thereon) and all material claims for labor,
         materials  or supplies  which if unpaid would by law become a Lien upon
         any of its  property  unless and to the extent  that the same are being
         contested  in good faith and by  appropriate  proceedings  and adequate
         reserves  (as  determined  in  accordance   with   generally   accepted
         accounting  principles,  consistently applied) have been established on
         its books with respect thereto;

                  (iv) comply with all applicable laws, rules and regulations of
         all governmental  authorities,  the violation of which would reasonably
         be  expected  to have a  material  adverse  effect  upon the  financial
         condition,  assets,  or business  of the  Company and its  Subsidiaries
         taken as a whole;

                                      - 8 -
<PAGE>

                  (v) apply for and continue in force with good and  responsible
         insurance  companies  such  types  and  amounts  of  insurance  as  the
         Company's  executive  officers,  after  consultation with an accredited
         insurance broker,  shall have determined to be necessary or appropriate
         to protect the Company from the insurable  hazards or risks  associated
         with the conduct of the Company's business,  except that the Company or
         any Subsidiary may effect worker's compensation or similar insurance in
         respect of operations in any state or other jurisdiction either through
         an insurance  fund operated by such state or other  jurisdiction  or by
         causing to be maintained a system or systems of self-insurance which is
         in accord with applicable laws;

                  (vi) maintain proper books of record and account which present
         fairly in all material respects its financial  condition and results of
         operations and make provisions on its financial statements for all such
         proper  reserves  as in each  case  are  required  in  accordance  with
         generally accepted accounting principles, consistently applied.

                  3.05  Series  C  Preferred   and  Exchange   Note   Covenants.
Notwithstanding  anything to the  contrary  in the  Certificate,  including  the
Exchange  Note  attached  as Exhibit A to the  Certificate,  the  Purchasers  or
Holders (as  designated)  shall have  additional and  independent  rights as set
forth in the following covenants:

                  (i) Payment  Covenant.  In addition to and without limiting in
         any way the  obligations  of the Company under the  Certificate  or the
         Exchange  Notes,  the Company  covenants with the  Purchasers  that all
         amounts  actually  paid after the date hereof in cash by the Company in
         respect  of the  Series  C  Preferred  or  the  Exchange  Notes  to any
         Purchaser (or its Affiliates) shall be paid by wire transfer.

                  (ii) Notice  Covenant.  In addition to and without limiting in
         any way the  obligations of the Company set forth in Section 4(b)(i) of
         the  Certificate  or Section  2.2(a) of the Exchange  Note, the Company
         covenants  with the Holders  that notice of Change of Control  shall be
         given to the holders of Series C Preferred  or Exchange  Notes not less
         than thirty  (30) days prior to such  Change of Control,  to the extent
         the Company has knowledge of the matters to be set forth therein.  Such
         notice  shall set forth,  in addition to the  statements  described  in
         Sections  4(b)(i)(A),  (B),  and  (C) of the  Certificate  or  Sections
         2.2(a)(i),  (ii),  and  (iii)  of  the  Exchange  Note,  the  Company's
         calculation and estimate of the amount of Cash Available for Redemption
         as of the date of the  Change of  Control  if any  Senior  Subordinated
         Notes will remain  outstanding after such Change of Control;  provided,
         however,  that any failure to give or receive such notice or any defect
         therein shall not affect the legality or validity or  effectiveness  of
         any such Change of Control.

                  (iii)  Repurchase  Covenants.   In  addition  to  and  without
         limiting  in  any  way  the   obligations  of  the  Company  under  the
         Certificate  or the  Exchange  Notes,  the Company  covenants  with the
         Holders  that,  in the event of a Change of Control  (as defined in the
         Senior Subordinated Note Indenture), to the extent that the Company may
         do so in compliance with

                                      - 9 -
<PAGE>

         and without causing (with or without the lapse of time or the giving of
         notice or both) a breach or violation of or default or event of default
         under  any  law  or any  note,  bond,  debenture,  indenture  or  other
         agreement or instrument  governing  indebtedness  for borrowed money of
         the Company or Desa  International,  Inc. at the time applicable to the
         Company or Desa International, Inc. (including, without limitation, the
         Senior Subordinated Note Indenture,  the Credit Agreement,  dated as of
         November 26, 1997,  among Desa  International,  Inc., the Company,  the
         banks, financial institutions and other institutional lenders listed on
         the signature pages thereof as the initial lenders, the initial issuing
         bank and the swing  line bank  named  therein,  NationsBank,  N.A.,  as
         administrative   agent,   UBS   Securities  LLC  as  co-  arranger  and
         documentation agent and NationsBanc Montgomery Securities,  Inc. as co-
         arranger and  syndication  agent, as amended and in effect from time to
         time  (the  "Credit  Agreement"),  and any  indentures,  credit or loan
         agreements  hereafter  executed in connection  with any  refinancing or
         replacement  of the Senior  Subordinated  Note  Indenture or the Credit
         Agreement):

                           (a)      Offer to Repurchase.

                                    (I) Initial Offer to  Repurchase.  Within 10
                           business  days after a Change of Control  (as defined
                           in  the  Senior  Subordinated  Note  Indenture),  the
                           Company   shall,   unless  the  Company   shall  have
                           theretofore  given  notice  of  either  the  optional
                           redemption  by the Company of all of the  outstanding
                           shares  of Series C  Preferred  pursuant  to  Section
                           4(a)(i) of the  Certificate or of all of the Exchange
                           Notes pursuant to Section 2.1 of the Exchange  Notes,
                           make an Offer to Repurchase.  On the Repurchase  Date
                           specified  in such Offer to  Repurchase,  the Company
                           shall (A) accept for payment the lesser of

                                            (i) all of the  shares  of  Series C
                                    Preferred or Exchange Notes validly tendered
                                    by  each  Holder  thereof  pursuant  to such
                                    Offer  to  Repurchase  on or  prior  to  the
                                    Expiration Date for such Offer to Repurchase
                                    and

                                            (ii) such number of shares of Series
                                    C Preferred or Exchange Notes held of record
                                    by such Holder as shall equal the product of
                                    (a) all of the shares of Series C  Preferred
                                    Stock or Exchange Notes validly  tendered by
                                    such Holder in accordance with such Offer to
                                    Repurchase multiplied by (b) a fraction, the
                                    numerator  of  which  shall  be equal to the
                                    Cash Available for Repurchase, determined as
                                    provided   in  this   Section   as  of  such
                                    Repurchase  Date,  and  the  denominator  of
                                    which shall be equal to the aggregate of the
                                    Repurchase Price, as of such Repurchase Date
                                    for all of the shares of Series C  Preferred
                                    Stock or Exchange Notes so validly  tendered
                                    by  Holders of Series C  Preferred  Stock or
                                    Exchange Notes;


                                     - 10 -
<PAGE>

                           (B) pay to the Holders  thereof the Repurchase  Price
                           therefor   in  cash;   (C)  cancel  and  retire  each
                           surrendered certificate representing shares of Series
                           C Preferred or Exchange Note validly  tendered;  and,
                           (D) in case fewer than all the shares  represented by
                           any  certificate  validly  tendered  pursuant to such
                           Offer to Repurchase  are to be  repurchased,  issue a
                           new certificate representing the remaining shares or,
                           in case  less than all of the  outstanding  principal
                           amount of any Exchange Note validly tendered pursuant
                           to such Offer to Repurchase is to be repurchased, the
                           Company  shall,  at its option,  either return to the
                           Holder  thereof such Exchange  Note with  appropriate
                           notation of payment or issue a new  Exchange  Note or
                           Notes to such Holder in an aggregate principal amount
                           equal to the then unpaid principal amount hereof,  in
                           either case without cost to the Holder hereof.

                                    (II) Subsequent Offers to Repurchase. Within
                           10  business  days after each June 30th and  December
                           31st  occurring  at least  three  months  after  such
                           Change  of   Control   (as   defined  in  the  Senior
                           Subordinated  Note  Indenture),  unless  none  of the
                           Series C  Preferred  or Exchange  Notes shall  remain
                           outstanding,  the  Company  shall  make an  Offer  to
                           Repurchase.  On the Repurchase Date specified in such
                           Offer to Repurchase, the Company shall (A) accept for
                           payment the lesser of

                                            (i) all of the  shares  of  Series C
                                    Preferred or Exchange Notes validly tendered
                                    by  each  Holder  thereof  pursuant  to such
                                    Offer  to  Repurchase  on or  prior  to  the
                                    Expiration Date for Offer to Repurchase and

                                            (ii) such number of shares of Series
                                    C Preferred or Exchange Notes held of record
                                    by such Holder as shall equal the product of
                                    (a) all of the shares of Series C  Preferred
                                    Stock or Exchange Notes validly  tendered by
                                    such Holder in accordance with such Offer to
                                    Repurchase multiplied by (b) a fraction, the
                                    numerator  of  which  shall  be equal to the
                                    Cash Available for Repurchase, determined as
                                    provided   in  this   Section   as  of  such
                                    Repurchase  Date,  and  the  denominator  of
                                    which shall be equal to the aggregate of the
                                    Repurchase  Price,  as  of  such  Repurchase
                                    Date,  for all of the  shares  of  Series  C
                                    Preferred  Stock or Exchange  Notes  validly
                                    tendered  by Holders  of Series C  Preferred
                                    Stock or Exchange Notes;

                           (B) pay to the Holders  thereof the Repurchase  Price
                           therefor   in  cash;   (C)  cancel  and  retire  each
                           surrendered certificate representing shares of Series
                           C Preferred or Exchange Note validly  tendered;  and,
                           (D) in case fewer than all the shares  represented by
                           any  certificate  validly  tendered  pursuant to such
                           Offer to Repurchase  are to be  repurchased,  issue a
                           new certificate

                                     - 11 -
<PAGE>

                           representing  the  remaining  shares or, in case less
                           than all of the outstanding  principal  amount of any
                           Exchange Note validly tendered pursuant to such Offer
                           to  Repurchase  is to  be  repurchased,  the  Company
                           shall,  at its  option,  either  return to the Holder
                           thereof such Exchange Note with appropriate  notation
                           of payment or issue a new  Exchange  Note or Notes to
                           such Holder in an aggregate principal amount equal to
                           the then unpaid  principal  amount hereof,  in either
                           case without cost to the Holder hereof.

                                    (III) The  Company  acknowledges  and agrees
                           that  notwithstanding  anything to the contrary under
                           this Section 3.05(iii):

                                            (A) if at any  Repurchase  Date  for
                                    any Offer to Repurchase  (x) there is not in
                                    force or effect any note,  bond,  debenture,
                                    indenture or other  agreement or  instrument
                                    governing indebtedness for borrowed money of
                                    the  Company  or  Desa  International,  Inc.
                                    applicable    to   the   Company   or   Desa
                                    International,   Inc.  (including,   without
                                    limitation,  the  Senior  Subordinated  Note
                                    Indenture  and the Credit  Agreement) or (y)
                                    one  or  more  notes,   bonds,   debentures,
                                    indentures    or   other    agreements    or
                                    instruments   governing   indebtedness   for
                                    borrowed   money  of  the  Company  or  Desa
                                    International,  Inc. is in force and effect,
                                    but no such note,  bond,  debenture or other
                                    agreement   or   instrument   restricts   or
                                    prohibits the purchase,  redemption or other
                                    acquisition  or retirement  for value of the
                                    Series C Preferred or Exchange  Notes,  then
                                    in either case (x) or (y) the  Company  will
                                    be   obligated   on  and   subject   to  the
                                    provisions  of  this  Section  3.05(iii)  to
                                    accept for payment the lesser of

                                                     (i)  all of the  shares  of
                                            Series C Preferred or Exchange Notes
                                            validly   tendered  by  each  Holder
                                            thereof  pursuant  to such  Offer to
                                            Repurchase   on  or   prior  to  the
                                            Expiration  Date for  such  Offer to
                                            Repurchase and

                                                     (ii) such  number of shares
                                            of Series C  Preferred  or  Exchange
                                            Notes held of record by such  Holder
                                            as shall  equal the  product  of (a)
                                            all  of  the   shares  of  Series  C
                                            Preferred  Stock or  Exchange  Notes
                                            validly  tendered  by such Holder in
                                            accordance   with   such   Offer  to
                                            Repurchase   multiplied   by  (b)  a
                                            fraction,  the  numerator  of  which
                                            shall be equal to the maximum dollar
                                            amount   of   shares   of  Series  C
                                            Preferred or the Exchange Notes that
                                            the  Company  could,  on such  date,
                                            purchase,    redeem   or   otherwise
                                            acquire or retire for value  without
                                            causing  (with or without  the lapse
                                            of time or the  giving  of notice or
                                            both) a breach  or  violation  of or
                                            default or

                                     - 12 -
<PAGE>

                                            event of default  under any law, and
                                            the  denominator  of which  shall be
                                            equal  to  the   aggregate   of  the
                                            Repurchase   Price,   as   of   such
                                            Repurchase  Date,  for  all  of  the
                                            shares of Series C  Preferred  Stock
                                            or Exchange  Notes validly  tendered
                                            by  Holders  of  Series C  Preferred
                                            Stock or Exchange Notes; and

                                    (IV)   For    purposes   of   this   Section
                                    3.05(iii)(a):

                                            (A) "Cash  Available for Repurchase"
                                    shall  mean,  as of any  date,  the  maximum
                                    dollar   amount   of   shares  of  Series  C
                                    Preferred  or the  Exchange  Notes  that the
                                    Company  could,  on  such  date,   purchase,
                                    redeem or  otherwise  acquire  or retire for
                                    value  without  causing (with or without the
                                    lapse of time or the  giving  of  notice  or
                                    both) a breach or violation of or default or
                                    event of default  under any law or any note,
                                    bond,   debenture,    indenture   or   other
                                    agreement    or     instrument     governing
                                    indebtedness   for  borrowed  money  of  the
                                    Company or Desa  International,  Inc. at the
                                    time  applicable  to  the  Company  or  Desa
                                    International,   Inc.  (including,   without
                                    limitation,  the  Senior  Subordinated  Note
                                    Indenture,  the  Credit  Agreement  and  any
                                    indentures,   credit   or  loan   agreements
                                    hereafter  executed in  connection  with any
                                    refinancing  or  replacement  of the  Senior
                                    Subordinated  Note  Indenture  or the Credit
                                    Agreement).

                                            (B) "Offer to Repurchase" shall mean
                                    a written offer to each registered Holder of
                                    Series C Preferred or Exchange Notes at such
                                    Holder's address appearing in the records of
                                    the  Company  on the  date of the  Offer  to
                                    Repurchase, offering to purchase in cash all
                                    outstanding  shares of Series C Preferred or
                                    Exchange  Notes, on and subject to the terms
                                    and  provisions  of  this  Section,  at  the
                                    Repurchase   Price,   and  unless  otherwise
                                    required by  applicable  law,  each Offer to
                                    Repurchase  shall specify an expiration date
                                    (the  "Expiration  Date")  of such  Offer to
                                    Repurchase  which  shall be,  subject to any
                                    contrary requirements of applicable law, not
                                    less than 30 days or more than 60 days after
                                    the date of such Offer to Repurchase,  and a
                                    settlement date (the "Repurchase  Date") for
                                    purchase  of  the  Series  C  Preferred   or
                                    Exchange  Notes  within five  business  days
                                    after  the  Expiration  Date,  and shall (i)
                                    include  written notice of the occurrence of
                                    such  Change of  Control,  (ii)  specify the
                                    place at which  certificates  for  shares of
                                    Series C Preferred  Stock or Exchange  Notes
                                    may be surrendered  for repurchase  pursuant
                                    to  such   Offer  to   Repurchase   and  the
                                    Expiration Date and Repurchase Date for such
                                    Offer to  Repurchase,  (iii)  set  forth the
                                    aggregate  number  of  shares  of  Series  C
                                    Preferred or aggregate  principal  amount of
                                    Exchange  Notes  outstanding  at the date of
                                    such

                                     - 13 -

<PAGE>

                                    Offer  to  Repurchase,  (iv) set  forth  the
                                    Company's  estimate  of the  amount  of Cash
                                    Available  for  Repurchase as of the date of
                                    such  Offer to  Repurchase  and  calculation
                                    thereof (to the extent  applicable)  and (v)
                                    state that each  Holder  electing  to tender
                                    any shares of Series C Preferred or Exchange
                                    Note  pursuant  to such Offer to  Repurchase
                                    will  be  required  to  surrender  such  the
                                    certificate representing such shares or such
                                    note at the  place or  places  specified  in
                                    such Offer to Repurchase  prior to the close
                                    of  business  on the  Expiration  Date (such
                                    certificate or note being, if the Company so
                                    requires,  duly endorsed by, or  accompanied
                                    by a written  instrument of transfer in form
                                    satisfactory  to the Company  duly  executed
                                    by, the Holder  thereof or his attorney duly
                                    authorized in writing).

                                            (C)  "Repurchase  Price" shall mean,
                                    as of any  particular  Repurchase  Date,  an
                                    amount  equal  to,  (i) in the  case  of any
                                    share  of  Series  C  Preferred,  as of  any
                                    particular  Repurchase Date, the Liquidation
                                    Value (as  defined  in the  Certificate)  of
                                    such share of Series C  Preferred  Stock or,
                                    (ii) in the case of any Exchange Note, as of
                                    any   particular    Repurchase   Date,   the
                                    outstanding   principal   amount   of   such
                                    Exchange Note, without premium, but together
                                    with  all   accrued   and  unpaid   interest
                                    thereon.

                                    (V)  Notwithstanding  anything under Section
                           3.05 to the contrary,  the Company  acknowledges  and
                           agrees that nothing in this  Section  3.05 shall,  or
                           shall  be   construed   to,   limit   the   Company's
                           obligations   under   this   Section   3.05(iii)   to
                           repurchase  shares of Series C Preferred  or Exchange
                           Notes  by  reason  of the  amount  of  cash  or  cash
                           equivalents    held   by   the    Company   or   Desa
                           International,  Inc.  on any  Repurchase  Date or the
                           undrawn  amount  available  to the  Company  or  Desa
                           International,  Inc. as of any Repurchase  Date under
                           any  credit or loan  agreements,  as  amended  and in
                           effect  from time to time,  to which the  Company  or
                           Desa International, Inc.
                           may be a party as borrower.

                  (iv) Remedies Covenant.  In addition to any remedies set forth
         in the  Certificate and Exchange Note but subject to Section 6(c)(v) of
         the  Certificate,  the  Purchasers  shall  have the right to pursue all
         remedies at law or equity for any failure to redeem  Series C Preferred
         or Exchange Note in accordance  with the  Certificate  or Exchange Note
         and this Agreement.

                  (v)      Voting Covenants.

                  In addition to and without limiting in any way the obligations
of the Company under the Certificate or the Exchange Note, the Company covenants
with the Holders that the Company shall not:

                                     - 14 -
<PAGE>

                           (a) without the prior written  consent of the Holders
                  who  hold  at  least  75% of the  then  outstanding  Series  C
                  Preferred or Exchange Notes, directly or indirectly declare or
                  pay any  dividends or make any  distributions  upon any Junior
                  Security  (other  than  legally  issued  dividends  payable in
                  Junior Securities);

                           (b) without the prior written  consent of the Holders
                  who  hold  at  least  75% of the  then  outstanding  Series  C
                  Preferred or Exchange  Notes,  directly or indirectly  redeem,
                  purchase or otherwise  acquire,  or permit any  Subsidiary  to
                  redeem,  purchase or otherwise acquire, any Junior Security or
                  directly or indirectly  redeem,  purchase or make any payments
                  with respect to any stock appreciation  rights,  phantom stock
                  plans or similar  rights or plans other than any redemption or
                  purchase in Junior  Securities;  provided,  however,  that the
                  Company shall be allowed to repurchase,  redeem or acquire any
                  Junior  Security  from  employees or former  employees of Desa
                  International,  Inc. in an aggregate  amount not to exceed the
                  sum of $500,000 in any fiscal year;  provided,  however,  that
                  proceeds  used to redeem or acquire any Junior  Security  from
                  employees  or former  employees  of Desa  International,  Inc.
                  shall be excluded to the extent of the aggregate cash proceeds
                  received  by the Company or Holdings  from any  reissuance  of
                  Junior Securities during the same fiscal year.

                           (c) without the prior written  consent of the Holders
                  who  hold  at  least  75% of the  then  outstanding  Series  C
                  Preferred or Exchange Notes,  liquidate,  dissolve or effect a
                  consolidation,  merger,  combination,  recapitalization or any
                  other form of transaction (including,  without limitation, any
                  reorganization into a limited liability company, a partnership
                  or any  other  non-corporate  entity  which  is  treated  as a
                  partnership  for  federal  income tax  purposes)  in which the
                  rights of the Holders under the Certificate, this Agreement or
                  the Exchange  Notes,  as in effect  immediately  prior to such
                  transaction,  are adversely affected,  provided, however, that
                  no  such  vote  shall  be  required   with   respect  to  such
                  transaction  if the  Company has  redeemed or redeems,  to the
                  extent  requested  by the  holders  of Series C  Preferred  or
                  Exchange Notes,  Series C Preferred at the Redemption Price or
                  the  outstanding  principal  amount of Exchange Notes plus all
                  accrued and unpaid  interest due under the Exchange Note, with
                  such  redemptions  to  be  fully  paid  in  cash  before  such
                  transaction is effectuated or concurrently therewith.

                           (d) without the prior written  consent of the Holders
                  of at least 75% of the then  outstanding  Series C  Preferred,
                  except  as  expressly  contemplated  by  this  Agreement,  (1)
                  increase the number of authorized shares of Series C Preferred
                  or (2)  authorize or issue any  additional  shares of Series C
                  Preferred  (other  than as  provided  in  Section  2(a) of the
                  Certificate)  or  (3)  authorize,  issue  or  enter  into  any
                  agreement providing for the issuance (contingent or otherwise)
                  of any Senior  Securities or Parity  Securities  (as each such
                  term  is  defined  in the  Certificate),  or any  security  or
                  obligations  convertible into any Senior  Securities or Parity
                  Securities  (other than shares of Series C Preferred issued as
                  provided in Section 2(a) of the

                                     - 15 -
<PAGE>

                  Certificate)  or (4) otherwise  adversely  affect or otherwise
                  impair the rights or the relative  preferences  and priorities
                  of the holders of Series C Preferred.

                           (e)  Notwithstanding  anything to the contrary in the
                  Certificate,  so  long  as  any  Series  C  Preferred  remains
                  outstanding,  the Company shall not, without the prior written
                  consent of the holders of 100% of the then outstanding  Series
                  C Preferred:

                           (1)  change  (A) the rate or time of  payment  of any
                  dividends on, or (B) the time or amount of any  redemption of,
                  or (C) the  amount of any  payments  upon  liquidation  of the
                  Company with respect to, or (D) the priorities afforded by the
                  provisions of Section 2(d) of the  Certificate for the benefit
                  of,  shares of Series C Preferred or (2) amend  Section  4(b),
                  4(c) or 6 of the Certificate.

                  (vi)     Director Election Covenants.

                           (a) The  Company  covenants  with the  Holders  that,
                  following  the  occurrence  of each Voting  Rights  Triggering
                  Event and until the  expiration of the  corresponding  Default
                  Period  (as  defined  in the  Certificate),  upon the  written
                  request of the  Holders  who hold a  majority  of the Series C
                  Preferred at the time  outstanding,  the Company shall as soon
                  as reasonably practicable,  but in any event within 5 business
                  days  following such written  request,  increase the number of
                  directors  of the  Company  by one (1) and  fill  the  vacancy
                  created by such increase with the individual designated by the
                  Holders in the foregoing written request;  provided,  however,
                  that the Company shall have no  obligations to create and fill
                  such an  additional  vacancy  during the term of office of any
                  director  designated  in  writing  pursuant  to  this  Section
                  3.05(vi)(a) or elected by the Holders pursuant to Section 6(c)
                  of the Certificate.

                           (b) The Company  further  covenants  with the Holders
                  that,  in the event  that the term of  office of the  director
                  elected  pursuant to Section 6(c) of the  Certificate has been
                  terminated pursuant to Section 6(c)(v) of the Certificate, and
                  if the  action,  lawsuit or other  proceeding  that caused the
                  termination  of  such  director's  term  shall  no  longer  be
                  continuing but a Default Period shall be continuing,  upon the
                  written  request of the  Holders  who hold a  majority  of the
                  Series C Preferred at the time outstanding,  the Company shall
                  as soon as reasonably  practicable,  but in any event within 5
                  business days  following  such written  request,  increase the
                  number of  directors  of the  Company  by one (1) and fill the
                  vacancy   created  by  such  increase   with  the   individual
                  designated by the Holders in the foregoing written request.

                           (c) The Holders  covenant  with the Company  that the
                  Holders shall cause any individual designated by them pursuant
                  to either of the  foregoing  paragraphs  (a) and (b) to resign
                  immediately from the Board of Directors (I) as a condition

                                     - 16 -
<PAGE>

                  precedent to the exercise of their right under Section 6(c) of
                  the  Certificate  to vote their  shares of Series C  Preferred
                  Stock,  together with the holders of any Parity Securities (as
                  defined in the Certificate) upon which like voting rights have
                  been conferred and are  exercisable,  to elect, as a class, an
                  additional one (1) director, (II) upon the commencement of any
                  action,  lawsuit or other  proceeding  of a type  described in
                  Section   6(c)(v)  of  the   Certificate  or  (III)  upon  the
                  expiration of all then existing Default  Periods.  The Holders
                  and the  Company  hereby  acknowledge  and agree  that (x) the
                  resignation of any such individual pursuant to this clause (c)
                  shall not disqualify such individual from serving on the Board
                  of  Directors  if  subsequently   designated  by  the  Holders
                  pursuant to paragraph  (a) or (b) of this Section  3.05(vi) or
                  subsequently  elected to do so pursuant to Section 6(c) of the
                  Certificate  and (y) the  resignation  of any such  individual
                  pursuant  to  clause  (I) of  this  paragraph  (c) may be made
                  subject to and  effective  only upon the taking of office as a
                  director of the individual elected pursuant to Section 6(c) of
                  the Certificate.

                  (vii)  Other  Covenants.   The  Company   covenants  with  the
         Purchasers  that copies of all notices  required under the  Certificate
         shall also be given to the  Purchasers  in  accordance  with the notice
         provisions herein as long as they hold Series C Preferred.

                  (viii) Repurchase/Prepayment Covenants.

                           (a) Series C Preferred. Notwithstanding any provision
                  of the Certificate to the contrary, the Company shall have the
                  right to repurchase, by delivery of not less than ten (10) and
                  not more than thirty (30) Business  Days' prior written notice
                  to the  holders of record of the Series C  Preferred,  and all
                  holders  shall be required  to sell to the  Company  (pro rata
                  according to their then current holdings),  all or any part of
                  the outstanding shares of the Series C Preferred in increments
                  of 500 shares  (unless  all of the  outstanding  shares of the
                  Series C Preferred  are being so  repurchased)  at a price per
                  share equal to the Redemption Price. Such notice shall specify
                  the  Redemption  Price  and the  place at which  and the date,
                  which  date shall be a  Business  Day,  on which the shares so
                  called for  repurchase  shall be  repurchased  (the  "Series C
                  Payment  Date")  and  shall  specify  the  shares  called  for
                  repurchase.  On the  Series C Payment  Date for any  shares of
                  Series C Preferred, the holders of such shares shall surrender
                  the  certificate  or  certificates  for  such  shares  at  the
                  principal office of the Company during regular business hours,
                  together  with stock powers  therefor  duly endorsed in blank,
                  against payment by the Company of the Redemption Price,  which
                  shall be paid in cash on the Series C Payment  Date,  assuming
                  such surrender  occurs on the Series C Payment Date.  From and
                  after  the  Series C Payment  Date for any  shares of Series C
                  Preferred, dividends on such shares so repurchased shall cease
                  to  accrue,  such  shares  shall no  longer  be  deemed  to be
                  outstanding,   and  all  rights  of  the  holders  thereof  as
                  stockholders   of  the  Company  with  respect  to  shares  so
                  repurchased  shall  cease  (including  any  right  to  receive
                  dividends  otherwise  payable on any Dividend  Reference  Date
                  that accrued from the

                                     - 17 -
<PAGE>

                  Series  C  Payment  Date to  such  Dividend  Reference  Date);
                  provided,  that if the  Company  has  withheld  payment of the
                  Redemption   Price  from  any  Holder   because   certificates
                  representing  such Holder's  shares to be so repurchased  have
                  not  been  surrendered  at  the  Company's   principal  office
                  together with a stock power duly endorsed in blank,  then such
                  Holder's  right  to  receive  the  Redemption  Price,  without
                  interest,  upon such surrender shall not cease;  and provided,
                  further,  that  to the  extent  the  Company  defaults  in the
                  payment of the  Redemption  Price on the Series C Payment Date
                  (or,  if  applicable,  on a  later  date  on  which  a  Holder
                  surrenders  certificates and duly endorsed stock powers),  the
                  Series C Preferred  shall  remain  outstanding.  In case fewer
                  than all the shares represented by any such certificate are to
                  be repurchased, a new certificate shall be issued representing
                  the unrepurchased shares,  without cost to the Holder thereof.
                  The  Holders   acknowledge   and  agree  that  the   Company's
                  withholding  of the  Repurchase  Price in respect of shares of
                  Series C Preferred  pending  surrender  of stock  certificates
                  representing  such shares and duly  endorsed  stock  powers as
                  described  above shall not constitute a default in the payment
                  of the Redemption Price.

                           (b) Exchange Notes.  Notwithstanding any provision of
                  the Exchange Note to the contrary,  the Company shall have the
                  right to repay,  by delivery of not less than ten (10) and not
                  more than thirty (30) Business  Days' prior written  notice to
                  the holders of record of the Exchange  Notes,  all or any part
                  of the outstanding Exchange Notes in increments of $500,000 in
                  principal  amount of Exchange Notes, pro rata according to the
                  then current holdings of the holders of record of the Exchange
                  Notes, (unless all of the outstanding Exchange Notes are being
                  so prepaid),  without  premium but  together  with accrued and
                  unpaid interest  thereon through the date of prepayment.  Such
                  notice  shall  specify the place at which and the date,  which
                  date shall be a Business  Day, on which the Exchange  Notes to
                  be so prepaid  shall be prepaid  (the  "Prepayment  Date") and
                  shall  specify the  Exchange  Notes and the  principal  amount
                  thereof  to be so  prepaid.  On the  Prepayment  Date  for any
                  Exchange   Note,  the  holder  of  such  Exchange  Note  shall
                  surrender such Exchange Notes against  payment by the Company,
                  which  shall be made in cash on the  Prepayment  Date,  of the
                  principal  amount  thereof  to be  so  prepaid  together  with
                  accrued and unpaid  interest  thereon  through the  Prepayment
                  Date.  In case  less  than  all of the  outstanding  principal
                  amount  of an  Exchange  Note is to be  prepaid,  the  Company
                  shall, at its option, either return to the holder thereof such
                  Exchange Note with appropriate  notation of payment or issue a
                  new  Exchange  Note to such holder in an  aggregate  principal
                  amount  equal to the then  unpaid  principal  amount  thereof,
                  without cost to the holder thereof.

                           (c) The Company agrees that tendering of an affidavit
                  by a Holder, and an indemnity  reasonably  satisfactory to the
                  Company,  that the certificates for such Series C Preferred or
                  Exchange  Notes that are to be surrendered by that Holder on a
                  Series C Payment Date or  Prepayment  Date pursuant to Section
                  3.05(viii) have

                                     - 18 -
<PAGE>

                  been lost, stolen,  destroyed or mutilated shall be tantamount
                  to   surrender   under   Section   3.05(viii).   The   Company
                  acknowledges  and agrees  that the  failure of the  Company to
                  accept such an  affidavit  and such an  indemnity  tendered in
                  accordance with this section shall not constitute a failure of
                  the Holder to  surrender  its Series C  Preferred  or Exchange
                  Notes hereunder.

                  (ix) Dividend Accrual Covenant.  Until the Repurchase Price or
         Redemption  Price  is paid in full in  cash,  the  shares  of  Series C
         Preferred to be repurchased  under this Agreement or redeemed under the
         Certificate  from any Holder shall remain  outstanding  and continue to
         accrue dividends as provided in Section 2 of the Certificate unless the
         Company has withheld  such payment  from Holder  pending such  Holder's
         surrender to the Company of certificates  representing the shares to be
         redeemed or  repurchased  hereunder  together with stock power therefor
         duly endorsed.

                  (x) Authorization  Covenant. The Company covenants to take all
         actions necessary,  and to seek all approvals and consents thereto,  to
         authorize and make effective an amendment to the Company's Charter,  in
         substantially  the form of Exhibit E hereto,  providing for an increase
         in the number of  authorized  shares  that are  designated  as Series C
         Preferred from 40,000 shares to 75,000 shares, and the Holders covenant
         to vote all shares of Series C Preferred and Voting Common held by them
         in favor of such amendment.

                  3.06 Allocation of the Purchase Price.  The Purchasers and the
Company acknowledge and agree that, as of the Closing,  the fair market value of
the Series C Preferred shares purchased  herein is  $17,562,904.67  and the fair
market value of the warrants purchased herein is $415,054.86. The Purchasers and
the Company covenant and agree to allocate the Purchase Price between the shares
of Series C Preferred  purchased  herein and the  warrants  purchased  herein in
accordance  with such fair market  values for all tax and  financial  accounting
purposes,  including without  limitation,  the preparation and filing of all tax
returns.

                  3.07  Current  Public  Information.  At all  times  after  the
Company has filed a  registration  statement  with the  Securities  and Exchange
Commission  pursuant to the  requirements  of either the  Securities  Act or the
Securities Exchange Act, the Company shall file all reports required to be filed
by it under the Securities Act and the Securities Exchange Act and the rules and
regulations  adopted by the  Securities and Exchange  Commission  thereunder and
shall take such further action as any holder or holders of Purchased  Securities
may reasonably request,  all with a view toward making available to such holders
the benefits of Rule 144 adopted by the Securities and Exchange Commission under
the  Securities  Act (as such  rule  may be  amended  from  time to time) or any
similar rule or  regulation  hereafter  adopted by the  Securities  and Exchange
Commission.  Upon request,  the Company shall deliver to any holder of Purchased
Securities  a  written  statement  as to  whether  it  has  complied  with  such
requirements.

                                     - 19 -
<PAGE>

         Section 4.        Transfer of Purchased Securities.

                  4.01  General  Provisions.  The  Purchasers  and  the  Company
acknowledge  and agree that  Purchased  Securities,  Exchange  Notes and Warrant
Shares are transferable  only pursuant to (i) public offerings  registered under
the  Securities  Act, (ii) Rule 144 or Rule 144A of the  Securities and Exchange
Commission  (or  any  similar  rule or  rules  then in  force)  if such  rule is
available and (iii) any other legally available means of transfer.

                  4.02 Rule 144A. Upon the request of any Purchaser, the Company
shall  promptly  supply to such  Purchaser or its  prospective  transferees  all
information  regarding the Company required to be delivered in connection with a
transfer pursuant to Rule 144A of the Securities and Exchange Commission.

                  4.03 Legend  Removal.  Any legend endorsed on a certificate or
instrument  evidencing  a security  pursuant  to Section  9.03  hereof  shall be
removed,  and the Company shall issue a certificate  or instrument  without such
legend to the holder of such security, (a) if such security is being disposed of
pursuant  to  an  effective  registration  under  the  Securities  Act  and  any
applicable  state acts,  or (b) if such  holder  provides  the  Company  with an
opinion  of counsel  satisfactory  to the  Company  to the  effect  that a sale,
transfer,  assignment, offer, pledge or distribution (including pursuant to Rule
144 or any similar  rule then in effect) for value of such  security may be made
without  registration  and that  such  legend is not  required  to  satisfy  the
applicable exemption from registration.

         Section 5. Representations and Warranties of the Company. As a material
inducement  to the  Purchasers  to enter into this  Agreement  and  purchase the
Purchased Securities hereunder, the Company hereby represents and warrants that:

                  5.01 Organization,  Corporate Power and Licenses.  The Company
is a corporation duly organized, validly existing and in good standing under the
laws of Delaware and is qualified to do business in every  jurisdiction in which
its ownership of property or conduct of business  requires it to qualify  except
where the  failure  to do so would  not have a  material  adverse  effect on the
financial condition, assets or business of the Company or its Subsidiaries.  The
Company  possesses all requisite  corporate power and authority and all material
licenses,   permits  and  authorizations   necessary  to  own  and  operate  its
properties, to carry on its businesses in all material respects as now conducted
and  presently  proposed  to be  conducted  and to  carry  out the  transactions
contemplated  by  this   Agreement.   The  copies  of  the  Company's  and  each
Subsidiary's  charter  documents  and bylaws  which have been  furnished  to the
Purchasers'  special  counsel  reflect all  amendments  made thereto at any time
prior to the date of this Agreement and are correct and complete.


                                     - 20 -
<PAGE>

                  5.02     Capital Stock and Related Matters.

                  (i)  As  of  the  Closing  and  immediately  thereafter,   the
         authorized capital stock of the Company shall consist of (a) 50,000,000
         shares of Voting Common Stock, of which 15,548,692.4204  shares will be
         issued and  outstanding,  1,813,037.6020  shares will be reserved,  and
         32,638,269.9776 shares will be authorized, unreserved and unissued; (b)
         3,000,000 shares of Nonvoting Common Stock will be authorized, of which
         90,603.6022  will  be  issued  and  outstanding,   and   2,909,396.3978
         unreserved and unissued;  (c) 2,000,000  shares of Preferred  Stock, of
         which (1)  465,000  shares  have been  designated  Series A  Cumulative
         Redeemable  Preferred  Stock,  none of which are issued and outstanding
         (2) 265,000 shares have been designated Series B Cumulative  Redeemable
         Preferred  Stock,  none of which are  issued and  outstanding,  and (3)
         40,000  shares  have  been  designated  Series  C  Preferred,  of which
         18,849.84110  will be issued and outstanding,  and 21,150.15890 will be
         authorized,  unreserved  and unissued.  As of the Closing,  neither the
         Company  nor  any  Subsidiary  shall  have  outstanding  any  stock  or
         securities  convertible or  exchangeable  for any shares of its capital
         stock or containing  any profit  participation  features,  nor shall it
         have  outstanding any rights or options to subscribe for or to purchase
         its  capital  stock or any  stock  or  securities  convertible  into or
         exchangeable for its capital stock or any stock appreciation  rights or
         phantom   stock   plans,   except   as  set   forth  on  the   attached
         "Capitalization  Schedule." The Capitalization Schedule accurately sets
         forth the following information with respect to all outstanding options
         and rights to acquire the  Company's  capital  stock:  the holder,  the
         number of shares covered,  the exercise price and the expiration  date.
         As of the  Closing,  neither the Company  nor any  Subsidiary  shall be
         subject to any  obligation  (contingent  or otherwise) to repurchase or
         otherwise  acquire  or retire any  shares of its  capital  stock or any
         warrants,  options or other rights to acquire its capital stock, except
         as set forth on the Capitalization  Schedule and except pursuant to the
         Certificate.  As of the Closing,  all of the outstanding  shares of the
         Company's  capital  stock  shall  be  validly  issued,  fully  paid and
         nonassessable.

                  (ii) Except as contained in the Amended Stockholders Agreement
         and  the  Tagalong/Dragalong  Agreement,  there  are  no  statutory  or
         contractual  stockholders  preemptive  rights or rights of refusal with
         respect to the purchase and sale of the Purchased  Securities hereunder
         or the  exercise of the  Warrants.  The Company  has not  violated  any
         applicable  federal or state  securities  laws in  connection  with the
         offer,  sale or issuance of any of its capital stock, and the offer and
         sale of the Purchased  Securities hereunder do not require registration
         under the Securities Act or any applicable state securities laws. There
         are no agreements  between the Company's  stockholders  with respect to
         the voting or transfer of the Company's  capital stock,  except for the
         Amended Stockholders  Agreement,  the Tagalong/Dragalong  Agreement and
         certain  stock  options  issued to  certain  members  of the  Company's
         management.

                  5.03 Series C Preferred,  Warrants,  Warrant  Stock and Common
Stock.  The Series C Preferred  and Common  Stock are duly  authorized,  validly
issued and outstanding, fully

                                     - 21 -
<PAGE>

paid, and nonassessable,  and the shares of Warrant Stock issuable upon exercise
of the Warrants have been reserved for issuance based upon the initial  purchase
price,  and when issued and paid for upon exercise of the Warrants in accordance
with the terms thereof will be duly authorized,  validly issued and outstanding,
fully paid, and  nonassessable.  The Warrants and the certificates  representing
the  Series C  Preferred  to be  delivered  by the  Company  hereunder,  and the
certificates representing the Warrant Stock to be delivered upon exercise of the
Warrants,  will be genuine,  and the Company has no  knowledge of any fact which
would impair the validity thereof.

                  5.04  Subsidiaries;   Investments.  The  attached  "Subsidiary
Schedule" correctly sets forth the name of each Subsidiary,  the jurisdiction of
its incorporation  and the Persons owning the outstanding  capital stock of such
Subsidiary.  Each  Subsidiary is duly  organized,  validly  existing and in good
standing under the laws of the jurisdiction of its incorporation,  possesses all
requisite  corporate power and authority and all material licenses,  permits and
authorizations necessary to own its properties and to carry on its businesses as
now being  conducted and as presently  proposed to be conducted and is qualified
to do business in every  jurisdiction  in which its ownership of property or the
conduct of business  requires it to qualify  except where failure to do so would
not have a  material  adverse  effect  on the  financial  condition,  assets  or
business  of the  Company  and its  Subsidiaries  taken as a  whole.  All of the
outstanding shares of capital stock of each Subsidiary are validly issued, fully
paid and nonassessable,  and all such shares are owned by the Company or another
Subsidiary  free and clear of any Lien and not subject to any option or right to
purchase  any such  shares.  Except  as set  forth on the  Subsidiary  Schedule,
neither the Company  nor any  Subsidiary  owns or holds the right to acquire any
shares of stock or any other security or interest in any other Person.

                  5.05  Authorization;  No Breach.  The execution,  delivery and
performance of this Agreement, the Warrants, the Amended Stockholders Agreement,
the Exchange  Notes and all other  agreements  contemplated  hereby to which the
Company is a party have been duly authorized by the Company. This Agreement, the
Warrants,   the  Amended  Stockholders   Agreement,   the  Exchange  Notes,  the
Certificate and all other agreements contemplated hereby to which the Company is
a party  each  constitutes  a  valid  and  binding  obligation  of the  Company,
enforceable  in accordance  with its terms,  except as such  enforcement  may be
limited  by  bankruptcy,  insolvency,   reorganization  or  other  similar  laws
affecting  the  enforcement  of  creditors'  rights  generally,  and  except for
judicial  limitations on the  enforcement of the remedy of specific  performance
and other equitable remedies.  Except as set forth on the "No Breach;  Consents"
Schedule,  the  execution  and  delivery by the Company of this  Agreement,  the
Stockholders Agreement and all other agreements contemplated hereby to which the
Company is a party, the offering and sale of the Purchased Securities hereunder,
and the  fulfillment  of and  compliance  with the  respective  terms hereof and
thereof by the  Company  and each  Seller,  do not and could not  reasonably  be
expected to (i) conflict with or result in a breach of the terms,  conditions or
provisions of, (ii) constitute a default under,  (iii) result in the creation of
any lien,  security  interest,  charge or encumbrance  upon the Company's or any
Subsidiary's  capital stock or assets pursuant to, (iv) give any third party the
right to modify,  terminate or accelerate any obligation  under, (v) result in a
violation of, or (vi) require any authorization, consent, approval, exemption or
other  action by or  notice or  declaration  to,  or filing  with,  any court or
administrative

                                     - 22 -
<PAGE>

or  governmental  body or agency  pursuant  to, (A) the charter or bylaws of the
Company or any Subsidiary,  or (B) any law, statute, rule or regulation to which
the Company or any  Subsidiary  is subject,  or (C) any  agreement,  instrument,
order,  judgment  or decree to which the Company or any  Subsidiary  is subject,
except in the case of clauses (B) and (C) only,  for such  conflicts,  breaches,
defaults, encumbrances, rights, violations and requirements which would not have
a material adverse effect on the financial condition,  assets or business of the
Company and its Subsidiaries taken as a whole.

                  5.06 Financial  Statements.  Attached hereto as the "Financial
Statements Schedule" are the following financial statements:

                  (i) the audited consolidated balance sheets of the Company and
         its Subsidiaries as of February 28, 1998, and the related statements of
         income  and  cash  flows  (or  the   equivalent)   for  the  respective
         twelve-month periods then ended; and

                  (ii) the unaudited  consolidated  balance sheet of the Company
         and its  Subsidiaries as of May 31, 1998 (the "Latest Balance  Sheet"),
         and the related statements of income and cash flows (or the equivalent)
         for the three-month period then ended.

Each of the  foregoing  financial  statements  (including in all cases the notes
thereto,  if  any)  is  accurate  and  complete  in all  material  respects,  is
consistent  with the books and  records  of the  Company  (which,  in turn,  are
accurate  and  complete  in all  material  respects)  and has been  prepared  in
accordance with generally accepted accounting principles,  consistently applied,
except  that the  unaudited  financial  statements  have not  been  prepared  in
accordance  with  generally  accepted  accounting  principles and are subject to
normal year-end audit adjustments.

                  5.07 Absence of Undisclosed  Liabilities.  Except as set forth
on the attached "Liabilities  Schedule," the Company and its Subsidiaries do not
have  any  obligation  or  liability  (whether  accrued,  absolute,  contingent,
unliquidated  or  otherwise,  whether  or  not  known  to  the  Company  or  any
Subsidiary,  whether  due or to  become  due and  regardless  of when  asserted)
arising out of  transactions  entered  into at or prior to the  Closing,  or any
action or inaction at or prior to the Closing, or any state of facts existing at
or prior to the Closing  other  than:  (i)  liabilities  set forth on the Latest
Balance Sheet  (including any notes thereto),  (ii)  liabilities and obligations
which have arisen  after the date of the Latest  Balance  Sheet in the  ordinary
course  of  business  (none of which is a  liability  resulting  from  breach of
contract, breach of warranty, tort, infringement, claim or lawsuit), (iii) other
liabilities and obligations  expressly  disclosed in the other Schedules to this
Agreement,  and (iv)  liabilities and obligations  which would not reasonably be
expected to have a material adverse effect upon the financial condition,  assets
or business of the Company and its Subsidiaries taken as a whole.

                  5.08 No Material  Adverse  Change.  Since  February  28, 1998,
there has been no material adverse change in the financial condition,  operating
results, assets, operations, business

                                     - 23 -
<PAGE>

prospects,  employee  relations or customer or supplier relations of the Company
and its Subsidiaries taken as a whole.

                  5.09     Absence of Certain Developments.

                  (i) Except as expressly  contemplated  by this Agreement or as
         set forth on the attached  "Developments  Schedule,"  since the date of
         the Latest Balance Sheet, neither the Company nor any Subsidiary has:

                           (a) issued any notes,  bonds or other debt securities
                  or  any  capital  stock  or  other  equity  securities  or any
                  securities  convertible,  exchangeable or exercisable into any
                  capital stock or other equity securities;

                           (b) borrowed any amount or incurred or become subject
                  to any liabilities, except current liabilities incurred in the
                  ordinary  course of business and  liabilities  under contracts
                  entered into in the ordinary course of business;

                           (c)  discharged  or  satisfied  any  Lien or paid any
                  obligation or liability,  other than current  liabilities paid
                  in the ordinary course of business;

                           (d) declared or made any payment or  distribution  of
                  cash or other property to its stockholders with respect to its
                  capital  stock or other  equity  securities  or  purchased  or
                  redeemed  any  shares  of its  capital  stock or other  equity
                  securities  (including,   without  limitation,  any  warrants,
                  options or other rights to acquire its capital  stock or other
                  equity securities);

                           (e)  mortgaged  or pledged any of its  properties  or
                  assets or subjected them to any Lien, except Liens for current
                  property  taxes not yet due and payable and Liens  incurred in
                  the ordinary course of business  involving assets not material
                  in the aggregate;

                           (f) sold, assigned or transferred any of its tangible
                  assets, except in the ordinary course of business, or canceled
                  any debts or claims;

                           (g) sold,  assigned  or  transferred  any  patents or
                  patent applications,  trademarks,  service marks, trade names,
                  corporate names, copyrights or copyright registrations,  trade
                  secrets  or  other   intangible   assets,   or  disclosed  any
                  proprietary confidential information to any Person;

                           (h) suffered any  extraordinary  losses or waived any
                  rights of value,  other  than any waiver of rights of value in
                  the ordinary course of business consistent with past practice;


                                     - 24 -
<PAGE>

                           (i) made capital expenditures or commitments therefor
                  that aggregate in excess of $1,500,000;

                           (j) made any loans or advances to, guarantees for the
                  benefit of any Persons in excess of $500,000 in the aggregate;

                           (k) suffered any damage, destruction or casualty loss
                  exceeding in the aggregate $500,000, whether or not covered by
                  insurance; or

                           (l) entered into any other  transaction other than in
                  the  ordinary  course of  business  or entered  into any other
                  material transaction, whether or not in the ordinary course of
                  business.

                  5.10     Tax Matters.

                  (i) Except as set forth on the attached "Taxes Schedule":  the
         Company and each  Subsidiary  have filed all Tax Returns which they are
         required to file under  applicable laws and  regulations;  all such Tax
         Returns are complete and correct in all material respects and have been
         prepared in compliance  with all applicable laws and regulations in all
         material  respects;  the Company and each  Subsidiary  in all  material
         respects have paid all Taxes due and owing by them (whether or not such
         Taxes are  required  to be shown on a Tax  Return),  except such as are
         being  contested  in good faith in  appropriate  proceedings,  and have
         withheld and paid over to the  appropriate  taxing  authority all Taxes
         which they are  required to withhold  from amounts paid or owing to any
         employee,  stockholder,  creditor  or other  third  party;  neither the
         Company nor any Subsidiary  has waived any statute of limitations  with
         respect to any Taxes or agreed to any extension of time with respect to
         any Tax assessment or  deficiency;  the accrual for Taxes on the Latest
         Balance  Sheet  would be  adequate  to pay all Tax  liabilities  of the
         Company and its  Subsidiaries if their current tax year were treated as
         ending on the date of the Latest  Balance Sheet  (excluding  any amount
         recorded which is  attributable  solely to timing  differences  between
         book and Tax income);  since the date of the Latest Balance Sheet,  the
         Company and its Subsidiaries  have not incurred any liability for Taxes
         other than in the ordinary  course of business;  the  assessment of any
         additional  Taxes for periods for which Tax Returns  have been filed by
         the Company and each Subsidiary shall not exceed the recorded liability
         therefor on the Latest  Balance Sheet  (excluding  any amount  recorded
         which is attributable solely to timing differences between book and Tax
         income);  the  federal  income  Tax  Returns  of the  Company  and  its
         Subsidiaries have been audited and closed and/or the applicable statute
         of  limitations  with  respect  thereto  has  expired for all tax years
         through  fiscal  year 1994;  no  foreign,  federal,  state or local tax
         audits or administrative  or judicial  proceedings are pending or being
         conducted with respect to the Company,  any Subsidiary,  no information
         related to Tax  matters has been  requested  by any  foreign,  federal,
         state or local taxing  authority  and no written  notice  indicating an
         intent  to open an audit  or other  review  has  been  received  by the
         Company from any foreign, federal, state or local

                                     - 25 -
<PAGE>

         taxing  authority;  and the Company or Subsidiaries  are unaware of any
         material  unresolved  questions or claims  concerning  the Company's or
         Subsidiary's Tax liability.

                  (ii) "Tax" or "Taxes" means  federal,  state,  county,  local,
         foreign  or  other  income,  gross  receipts,  ad  valorem,  franchise,
         profits,  sales  or  use,  transfer,  registration,   excise,  utility,
         environmental,  communications,  real  or  personal  property,  capital
         stock, license, payroll, wage or other withholding,  employment, social
         security, severance, stamp, occupation,  alternative or add-on minimum,
         estimated and other taxes of any kind  whatsoever  (including,  without
         limitation,  deficiencies,  penalties,  additions  to tax, and interest
         attributable  thereto)  whether disputed or not. "Tax Return" means any
         return,  information report or filing with respect to Taxes,  including
         any schedules  attached  thereto and  including any amendment  thereof.
         "Affiliated  Group"  means any  affiliated  group as  defined in I.R.C.
         ss.1504  that has filed a  consolidated  return for federal  income tax
         purposes (or any similar group under state, local or foreign law) for a
         period during which any of the Company or any of its Subsidiaries was a
         member.

                  5.11     Contracts and Commitments.

                  (i) Except to the extent not reasonably  likely to result in a
         material adverse effect on the business,  assets or financial condition
         of the Company and its Subsidiaries taken as a whole or as set forth on
         Schedule  __:  (a)  all  of the  Company's  contracts,  agreements  and
         instruments are valid, binding and enforceable in accordance with their
         respective  terms;  (b) the Company and each  Subsidiary have performed
         all obligations required to be performed by them and are not in default
         under or in breach of nor in receipt of any written claim of default or
         breach under any contract, agreement or instrument to which the Company
         or any Subsidiary is subject;  (c) no event has occurred which with the
         passage  of time or the  giving  of notice  or both  would  result in a
         default,  breach  or  event  of  noncompliance  by the  Company  or any
         Subsidiary  under any  contract,  agreement or  instrument to which the
         Company or any  Subsidiary is subject;  and (d) neither the Company nor
         any Subsidiary has knowledge of any breach or threatened  breach by the
         other parties to any contract,  agreement,  instrument or commitment to
         which it is a party;

                  (ii) The Purchasers' special counsel has been supplied with or
         given  access in a data room to a true and correct  copy of each of the
         material written  instruments,  plans,  contracts and agreements and an
         accurate  description of each contract and agreement which are referred
         to on the Due Diligence Requests, together with all amendments, waivers
         or other changes thereto as of June 22, 1998.

                  5.12     Intellectual Property Rights.

                  There have been no written  claims made against the Company or
any Subsidiary which have not been resolved asserting the invalidity,  misuse or
unenforceability  of any of material  Intellectual  Property Rights, and, to the
Company's knowledge, there are no grounds for the same,

                                     - 26 -
<PAGE>

neither the Company nor any Subsidiary has received any written  notices of, and
is not aware of any facts which  indicate a likelihood of, any  infringement  or
misappropriation  by, or conflict  with,  any third  party with  respect to such
material Intellectual Property Rights (including, without limitation, any demand
or request  that the Company or any  Subsidiary  license any rights from a third
party) and the conduct of the Company's and each Subsidiary's  business,  to the
Company's knowledge,  has not infringed,  misappropriated or conflicted with and
does not infringe,  misappropriate  or conflict with any  Intellectual  Property
Rights of other Persons, nor would any future conduct as presently  contemplated
infringe,  misappropriate  or conflict with any Intellectual  Property Rights of
other Persons except for such infringements,  misappropriations or conflicts as,
singly or in the aggregate,  do not and are not reasonably likely to result in a
material  adverse effect on the business,  assets or financial  condition of the
Company and its Subsidiaries taken as a whole or as set forth on Schedule __.

                  5.13  Litigation,  etc.  Except as set  forth on the  attached
"Litigation Schedule," and except for those matters which, if resolved adversely
to the Company or any  Subsidiary,  would not have a material  adverse effect on
the business,  assets or financial condition of the Company and its Subsidiaries
taken  as  a  whole,  there  are  no  actions,   suits,   proceedings,   orders,
investigations  or claims  pending or, to the best of the  Company's  knowledge,
threatened  against or  affecting  the  Company or any  Subsidiary  at law or in
equity, or before or by any governmental department,  commission, board, bureau,
agency or instrumentality  (including,  without limitation,  any actions,  suit,
proceedings or investigations  with respect to the transactions  contemplated by
this  Agreement);  neither  the  Company  nor any  Subsidiary  is subject to any
arbitration  proceedings under collective bargaining agreements or otherwise or,
to the best of the  Company's  knowledge,  any  governmental  investigations  or
inquiries.

                  5.14 Brokerage. There are no claims for brokerage commissions,
finders'  fees or  similar  compensation  in  connection  with the  transactions
contemplated  by this Agreement  based on any  arrangement or agreement  binding
upon any Seller or the Company or any  Subsidiary.  The Company  shall pay,  and
hold each Purchaser harmless against, any liability, loss or expense (including,
without  limitation,  reasonable  attorneys'  fees and  out-of-pocket  expenses)
arising in connection with any such claim.

                  5.15  Governmental  Consent,  etc.  Except as  provided on the
"Government Consent" Schedule, permit, consent, approval or authorization of, or
declaration  to or filing  with,  any  governmental  authority  is  required  in
connection  with the execution,  delivery and performance by the Company of this
Agreement or the other agreements  contemplated  hereby,  or the consummation by
the Company of any other transactions contemplated hereby or thereby.

                  5.16 Insurance.  Since February 28, 1998,  neither the Company
nor any  Subsidiary  is in default in any  material  respect with respect to its
obligations under any insurance policy maintained by it, and neither the Company
nor any Subsidiary has been denied insurance coverage. The insurance coverage of
the Company and its  Subsidiaries is customary for  corporations of similar size
engaged in similar lines of business.

                                     - 27 -
<PAGE>


                  5.17 Employees. The Company is not aware that any executive or
key employee of the Company or any  Subsidiary  or any group of employees of the
Company or any Subsidiary has any plans to terminate employment with the Company
or any  Subsidiary.  The Company is not aware that it or any  Subsidiary has any
material labor relations  problems  (including,  without  limitation,  any union
organization  activities,  threatened  or actual  strikes or work  stoppages  or
material grievances).  Neither the Company, its Subsidiaries nor, to the best of
the Company's knowledge,  any of their employees is subject to any noncompete or
similar  covenants or agreements  that  materially  conflict with the present or
proposed  business  activities  of the Company and its  Subsidiaries,  except as
described on the "Employees" Schedule.

                  5.18  Compliance  with  Laws.  Neither  the  Company  nor  any
Subsidiary  has violated any law or any  governmental  regulation or requirement
which violation has had since February 28, 1998 or would  reasonably be expected
to have a material  adverse  effect upon the  financial  condition,  assets,  or
business of the Company and its  Subsidiaries  taken as a whole, and neither the
Company nor any Subsidiary has received written notice of any such violation. To
the Company's  knowledge,  neither the Company nor any  Subsidiary is subject to
any liability  (contingent  or  otherwise) or corrective or remedial  obligation
arising  under any  federal,  state,  local or foreign law,  rule or  regulation
(including the common law) relating to or regulating health,  safety,  pollution
or the protection of the environment  ("Environmental Laws") except as described
on the "Environmental  Safety" Schedule.  Without limiting the generality of the
foregoing,  (i) to the Company's knowledge, the Company and each Subsidiary have
obtained all material permits,  licenses and authorizations  required under, and
have complied in all material respects with, all Environmental Laws; and (ii) to
the Company's  knowledge,  no written notice has been received by the Company or
any Subsidiary regarding any violation of, or any claim, liability or corrective
or remedial obligation under, any Environmental Laws, except as set forth on the
"Environmental Safety" Schedule.

                  5.19  Affiliated  Transactions.  Except  as set  forth  on the
attached "Affiliated  Transactions  Schedule," no officer,  director,  employee,
stockholder  or Affiliate  of the Company or any  Subsidiary  or any  individual
related by blood,  marriage or adoption to any such  individual or any entity in
which any such Person or individual owns any beneficial interest,  is a party to
any agreement,  contract, commitment currently in effect or transaction with the
Company or any Subsidiary  since February 28, 1998 or has any material  interest
in any material property used by the Company or any Subsidiary.

                  5.20  Disclosure.  Neither  this  Agreement  nor  any  of  the
exhibits or schedules  hereto contain any untrue statement of a material fact or
omit a  material  fact  necessary  to make the  statements  contained  herein or
therein, in light of the circumstances in which they were made, not misleading.

                  5.21  Knowledge.   As  used  in  this  Section  5,  the  terms
"knowledge"  or "aware"  shall mean and  include  (i) the  actual  knowledge  or
awareness  of the  executive  officers  and  directors  of the  Company  and its
Subsidiaries and (ii) the knowledge or awareness which an executive officer

                                     - 28 -
<PAGE>

or  director  of the  Company or its  Subsidiaries  would have  obtained  in the
conduct of his business after making reasonable inquiry and reasonable diligence
with respect to the particular matter in question.

         Section 6.  Representations  and  Warranties  of  Sellers.  Each Seller
hereby represents and warrants to the Purchasers as to itself only as follows:

                  6.01  Organization  and  Good  Standing.   Such  Seller  is  a
corporation or limited  liability  company,  as the case may be, duly organized,
validly  existing and in good standing under the laws of the jurisdiction of its
organization.

                  6.02 Execution of Agreement.  Such Seller has the corporate or
limited liability company, as the case may be, power and authority to enter into
and perform its obligations under this Agreement.  The execution and delivery of
this Agreement,  and the consummation of the transactions  contemplated  hereby,
have been duly  authorized  by all  necessary  corporate  or  limited  liability
company action,  as the case may be, on the part of such Seller.  This Agreement
has been duly executed and delivered by such Seller. This Agreement  constitutes
the legal, valid and binding obligation of such Seller,  enforceable  against it
in  accordance  with its  terms,  except as such  enforcement  may be limited by
bankruptcy,  insolvency,  reorganization  or other  similar laws  affecting  the
enforcement of creditors' rights generally,  and except for judicial limitations
on the  enforcement of the remedy of specific  performance  and other  equitable
remedies.

                  6.03  Authorization;  No Breach. The execution and delivery by
such Seller of this Agreement,  and all other agreements  contemplated hereby to
which such Seller is a party, do not and could not reasonably be expected to (i)
conflict with or result in a breach of the terms,  conditions or provisions  of,
(ii)  constitute  a default  under,  (iii)  result in the  creation of any lien,
security interest,  charge or encumbrance upon the Company's or any Subsidiary's
capital  stock or assets  pursuant  to,  (iv) give any third  party the right to
modify,  terminate or accelerate any obligation under, (v) result in a violation
of, or (vi) require any  authorization,  consent,  approval,  exemption or other
action  by  or  notice  or  declaration   to,  or  filing  with,  any  court  or
administrative   or   governmental   body  or  agency   pursuant   to,  (A)  the
organizational  documents  of such  Seller  or (B)  any  law,  statute,  rule or
regulation to which such Seller is subject,  or (C) any  agreement,  instrument,
order, judgment or decree to which such Seller is subject except, in the case of
clauses (B) and (C) only, for such conflicts, breaches, defaults,  encumbrances,
rights,  violations  and  requirements  which would not have a material  adverse
effect on the  financial  condition,  assets or  business of the Company and its
Subsidiaries taken as a whole.

                  6.04 Ownership of Purchased  Securities.  Such Seller has good
and  marketable  title  to  the  Purchased  Securities  to  be  sold,  assigned,
transferred  and delivered by it pursuant to this  Agreement,  free and clear of
any and all  encumbrances,  except as set forth in Schedule  ___. Upon the sale,
assignment, transfer and delivery of such Purchased Securities to the Purchasers
at the Closing,  such Seller will have sold, assigned,  transferred and conveyed
to the Purchasers all of its

                                     - 29 -
<PAGE>

right, title and interest in and to such Purchased Securities, free and clear of
any and all encumbrances and other restrictions, except as set forth on Schedule
____.

         Section 7. Representations and Warranties of Purchasers. Each Purchaser
hereby represents and warrants to the Sellers as to itself only as follows:

                  7.01 Purchaser's Investment Representations. Such Purchaser is
acquiring the Purchased  Securities  purchased  hereunder or acquired herein for
its own account  with the  present  intention  of holding  such  securities  for
purposes of investment,  and that it has no intention of selling such securities
in a public  distribution  in  violation of the federal  securities  laws or any
applicable state securities laws;  provided that nothing  contained herein shall
prevent any  Purchaser  and  subsequent  holders of  Purchased  Securities  from
transferring  such  securities in compliance with the provisions of Section 9.07
hereof.

                  7.02  Organization  and Good  Standing.  Such  Purchaser  is a
corporation or limited  liability  company,  as the case may be, duly organized,
validly  existing and in good standing under the laws of the jurisdiction of its
organization.

                  7.03 Execution of Agreement.  Such Purchaser has the corporate
or limited liability  company,  as the case may be, power and authority to enter
into and  perform  its  obligations  under this  Agreement.  The  execution  and
delivery  of  this  Agreement,   and  the   consummation  of  the   transactions
contemplated  hereby,  have been duly  authorized by all necessary  corporate or
limited  liability  company  action,  as the  case  may be,  on the part of such
Purchaser.  This  Agreement  has  been  duly  executed  and  delivered  by  such
Purchaser. This Agreement constitutes the legal, valid and binding obligation of
such Purchaser,  enforceable  against it in accordance with its terms, except as
such  enforcement may be limited by bankruptcy,  insolvency,  reorganization  or
other similar laws affecting the enforcement of creditors' rights generally, and
except for judicial  limitations  on the  enforcement  of the remedy of specific
performance and other equitable remedies.

                  7.04  Authorization;  No Breach. The execution and delivery by
such Purchaser of this Agreement,  and all other agreements  contemplated hereby
to which such  Purchaser is a party,  do not and shall not (i) conflict  with or
result in a breach of the terms,  conditions or provisions of, (ii) constitute a
default   under,   (iii)  result  in  a  violation   of,  or  (iv)  require  any
authorization,  consent,  approval,  exemption  or other  action by or notice or
declaration to, or filing with, any court or administrative or governmental body
or agency pursuant to, (A) the organizational documents of such Purchaser or (B)
any law, statute,  rule or regulation to which such Purchaser is subject, or (C)
any agreement,  instrument, order, judgment or decree to which such Purchaser is
subject.

         Section 8. Definitions.

                  8.01  Definitions.  For the  purposes of this  Agreement,  the
following terms have the meanings set forth below:


                                     - 30 -
<PAGE>

                  "Affiliate"  of any  particular  Person means any other Person
controlling,  controlled by or under common control with such particular Person,
where "control" means the  possession,  directly or indirectly,  of the power to
direct the management and policies of a Person whether  through the ownership of
voting securities, contract or otherwise.

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

                  "Certificate" shall mean the Certificate of Designation of the
Company for  Preferred  Stock filed on November  26, 1997 with the  Secretary of
State for the State of Delaware.

                  "Change  of  Control"  shall  have the same  meaning as in the
Certificate.

                  "Default  Period"  shall  have  the  same  meaning  as in  the
Certificate.

                  "Dividend  Reference  Date" shall have the same  meaning as in
the Certificate.

                  "Due Diligence  Requests" shall mean the memorandum  dated May
27, 1998 summarizing the requests for documents produced by the Purchasers.

                  "Exchange  Notes"  shall  have  the same  meaning  as the term
"Notes" in Section 5(a) of the Certificate.

                  "Holder"  means,  at a  particular  time,  a  Person  who is a
registered  holder  on the  books  of the  Company  of any  shares  of  Series C
Preferred or any Exchange Notes as of such time.

                  "Indebtedness"   means   at   a   particular   time,   without
duplication,  (i) any  indebtedness for borrowed money or issued in substitution
for or  exchange of  indebtedness  for  borrowed  money,  (ii) any  indebtedness
evidenced  by any  note,  bond,  debenture  or other  debt  security,  (iii) any
indebtedness  for the  deferred  purchase  price of property  or  services  with
respect to which a Person is liable,  contingently  or otherwise,  as obligor or
otherwise (other than trade payables and other current  liabilities  incurred in
the ordinary course of business),  (iv) any commitment by which a Person assures
a creditor against loss (including, without limitation, contingent reimbursement
obligations with respect to letters of credit), (v) any indebtedness  guaranteed
in any manner by a Person (including, without limitation, guarantees in the form
of an  agreement  to  repurchase  or  reimburse),  (vi)  any  obligations  under
capitalized  leases with  respect to which a Person is liable,  contingently  or
otherwise,  as  obligor,  guarantor  or  otherwise,  or with  respect  to  which
obligations a Person  assures a creditor  against loss,  (vii) any  indebtedness
secured by a Lien on a Person's assets and (viii) any unsatisfied obligation for
"withdrawal  liability"  to a "multi  employer  plan" as such terms are  defined
under ERISA.

                                     - 31 -
<PAGE>

                  "Intellectual  Property Rights" means all (i) patents,  patent
applications, patent disclosures and inventions, (ii) trademarks, service marks,
trade dress,  trade  names,  logos and  corporate  names and  registrations  and
applications  for  registration  thereof  together  with  all  of  the  goodwill
associated  therewith,   (iii)  copyrights   (registered  or  unregistered)  and
copyrightable works and registrations and applications for registration thereof,
(iv) mask works and registrations and applications for registration thereof, (v)
computer  software,  data,  data  bases and  documentation  thereof,  (vi) trade
secrets  and other  confidential  information  (including,  without  limitation,
ideas,  formulas,  compositions,  inventions (whether patentable or unpatentable
and whether or not reduced to practice), know-how,  manufacturing and production
processes  and  techniques,  research  and  development  information,  drawings,
specifications,  designs, plans, proposals, technical data, copyrightable works,
financial and marketing plans and customer and supplier lists and  information),
(vii)  other  intellectual  property  rights  and  (viii)  copies  and  tangible
embodiments thereof (in whatever form or medium).

                  "Interest  Payment Date" shall have the same meaning as in the
Certificate.

                  "Investment"  as applied to any Person means (i) any direct or
indirect purchase or other acquisition by such Person of any notes, obligations,
instruments,  stock,  securities or ownership  interest  (including  partnership
interests and joint venture  interests) of any other Person and (ii) any capital
contribution by such Person to any other Person.

                  "I.R.C." means the Internal  Revenue Code of 1986, as amended,
and any  reference to any  particular  I.R.C.  section shall be  interpreted  to
include any revision of or successor to that section  regardless of how numbered
or classified.

                  "IRS" means the United States Internal Revenue Service.

                  "Junior  Securities"  shall  mean (i) any shares of the Voting
Common and the  nonvoting  common  stock of the  Company  and any other class or
series  of stock of the  Company  which,  by the  terms  of the  Certificate  of
Incorporation  of the  Company  or of the  instrument  by  which  the  Board  of
Directors  of  the  Company,  acting  pursuant  to  authority  granted  in  such
Certificate of  Incorporation,  shall fix the relative  rights,  preferences and
limitations thereof, shall be junior to the Series C Preferred in respect of the
right to receive  dividends  or to  participate  in any  distribution  of assets
(including but not limited to any  distribution of assets in connection with the
liquidation of the Company) other than by way of dividends, and (ii) any options
or  warrants  or similar  securities  or rights to acquire  from the Company any
securities described in clause (i) of this definition.

                  "Liens"  means  any  mortgage,   pledge,   security  interest,
encumbrance,  lien or charge of any kind  (including,  without  limitation,  any
conditional  sale or other  title  retention  agreement  or lease in the  nature
thereof),  any sale of  receivables  with  recourse  against  the  Company,  any
Subsidiary  or any  Affiliate,  any  filing  or  agreement  to file a  financing
statement as debtor  under the Uniform  Commercial  Code or any similar  statute
other than to  reflect  ownership  by a third  party of  property  leased to the
Company or any Subsidiaries under a lease which is not in the nature of a

                                     - 32 -

<PAGE>


conditional sale or title retention agreement, or any subordination  arrangement
in favor of another Person (other than any subordination arising in the ordinary
course of business).

                  "Officer's  Certificate"  means a  certificate  signed  by the
Company's president or its chief financial officer, stating that (i) the officer
signing such  certificate has made or has caused to be made such  investigations
as  are  necessary  in  order  to  permit  him to  verify  the  accuracy  of the
information set forth in such certificate and (ii) to the best of such officer's
knowledge,  such  certificate  does not misstate any material  fact and does not
omit to state any fact necessary to make the certificate not misleading.

                  "Person" means an individual, a partnership,  a corporation, a
limited liability  company,  an association,  a joint stock company,  a trust, a
joint venture,  an unincorporated  organization and a governmental entity or any
department, agency or political subdivision thereof.

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

                  "Purchase  Price" shall mean the price paid for the  Purchased
Securities identified on Schedule ___ hereto.

                  "Redemption  Price"  shall  have  the same  meaning  as in the
Certificate;  provided that the Repurchase  Date and Series C Payment Date shall
be a Redemption Date under the Certificate.

                  "Securities Act" means the Securities Act of 1933, as amended,
or any similar federal law then in force.

                  "Securities and Exchange Commission" includes any governmental
body or agency succeeding to the functions thereof.

                  "Securities Exchange Act" means the Securities Exchange Act of
1934, as amended, or any similar federal law then in force.

                  "Senior Credit Facility" means any note, debenture,  indenture
or instrument  governing  indebtedness  for borrowed  money of the  Corporation,
payment under which shall be senior to the Series C Preferred or Exchange Notes.

                  "Senior  Subordinated  Note  Indenture"  shall  have  the same
meaning as in the Certificate.

                  "Subsidiary"   means,   with   respect  to  any  Person,   any
corporation,  limited  liability  company,  partnership,  association  or  other
business  entity of which (i) if a  corporation,  a majority of the total voting
power of shares of stock  entitled  (without  regard  to the  occurrence  of any
contingency) to vote in the election of directors,  managers or trustees thereof
is at the time owned

                                     - 33 -
<PAGE>

or  controlled,  directly  or  indirectly,  by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar  ownership  interest  thereof is at the time
owned or  controlled,  directly  or  indirectly,  by any  Person  or one or more
Subsidiaries of that Person or a combination  thereof.  For purposes  hereof,  a
Person or Persons  shall be deemed to have a majority  ownership  interest  in a
limited liability company, partnership,  association or other business entity if
such  Person or  Persons  shall be  allocated  a majority  of limited  liability
company,  partnership,  association or other business  entity gains or losses or
shall be or control any  managing  director or general  partner of such  limited
liability company, partnership, association or other business entity

                  "Tagalong/Dragalong  Agreement" means the Amended and Restated
Tagalong/  Dragalong  Agreement by and between JWC Equity Funding,  Inc. and UBS
Capital LLC dated August 19, 1998.

                  "Voting Rights  Triggering  Event" shall have the same meaning
as in the Certificate.

                  "Warrant Shares" means (i) the Common Stock issued or issuable
upon  exercise of the Warrants and (ii) any Common Stock issued or issuable with
respect to the  securities  referred to above by way of stock  dividend or stock
split or in connection with a combination of shares,  recapitalization,  merger,
consolidation or other reorganization.

                  "Wholly-Owned Subsidiary" means, with respect to any Person, a
Subsidiary  of which all of the  outstanding  capital  stock or other  ownership
interests  are owned by such Person or another  Wholly-Owned  Subsidiary of such
Person.

         Section 9.  Miscellaneous.

                  9.01 Expenses.  The Company shall pay, (i) the reasonable fees
and expenses of one special counsel to the Purchasers arising in connection with
the  negotiation  and execution of this  Agreement and the  consummation  of the
transactions  contemplated  by this  Agreement  which  shall be  payable  at the
Closing or, if the Closing  does not occur for a reason other than a breach by a
Purchaser,  payable upon demand,  (ii) the  reasonable  fees and expenses of one
counsel to the  Purchasers  incurred  with respect to any  amendments or waivers
(whether  or not  the  same  become  effective)  under  or in  respect  of  this
Agreement,  the  agreements  contemplated  hereby to which the  Purchasers are a
party,  (iii)  stamp and other  taxes  which may be  payable  in  respect of the
execution  and  delivery  of  this  Agreement  or  the  issuance,   delivery  or
acquisition  of any shares of Purchased  Securities or any shares  issuable upon
exercise of the Warrants,  (iv) the reasonable  fees and expenses of one counsel
to the Purchasers incurred with respect to the enforcement of the rights granted
to the Purchasers under this Agreement in the event of a breach by the Company.

                  9.02  Remedies.   Any  Person  having  any  rights  under  any
provision  of  this   Agreement   shall  be  entitled  to  enforce  such  rights
specifically (without posting a bond or other

                                     - 34 -
<PAGE>

security),  to recover  damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law.

                  9.03  Legend.  Each  certificate  or  instrument  representing
Purchased  Securities  shall be  imprinted  with a legend in  substantially  the
following form:

         "The  securities   represented  by  this   certificate  have  not  been
         registered  under the Securities Act of 1933, as amended.  The transfer
         of the  securities  represented  by this  certificate is subject to the
         conditions specified in the Purchase Agreement,  dated as of October 9,
         1998 and as amended and modified from time to time,  between the issuer
         (the "Company") and certain investors.  A copy of such conditions shall
         be furnished by the Company to the holder  hereof upon written  request
         and without charge."

                  9.04  Consent to  Amendments.  Except as  otherwise  expressly
provided  herein,  (i) the provisions of this Agreement that are for the benefit
of the  Purchasers,  as  distinguished  from those  provisions  that are for the
benefit  of  Holders,  may be  amended  or waived  only with the  consent of the
Company, on the one hand, and the Purchasers and any of their Affiliates to whom
the Purchasers shall have transferred Purchased Securities or Exchange Notes, on
the other hand,  and (ii) the other  provisions of this Agreement may be amended
and the Company may take any action  herein  prohibited,  or omit to perform any
act herein required to be performed by it, only if the Company consented thereto
and has  obtained  the  written  consent  of the  Holders of at least 75% of the
outstanding Series C Preferred or Exchange Notes;  provided,  however,  that any
amendment to Section 3.05(v)(e) shall require the written consent of the Holders
of 100% of the outstanding Series C Preferred;  provided,  further, that at such
time as there is no Series C Preferred or Exchange Note outstanding,  all of the
provisions of this Agreement (other than Section 9.05, those representations and
warranties  that shall be surviving as of such time pursuant to Section 9.05 and
the   indemnification   obligations  under  Section  9.15  in  respect  of  such
representations  and  warranties)  shall  terminate.  No other course of dealing
between the Company and the holder of any Series C Preferred  or Exchange  Notes
or any delay in exercising any rights hereunder or under the Amended Certificate
of Designation shall operate as a waiver of any rights of any such holders.

                  9.05  Survival  of   Representations   and   Warranties.   All
representations and warranties  contained herein or made in writing by any party
in  connection  herewith  shall  survive  the  execution  and  delivery  of this
Agreement and the  consummation of the  transactions  contemplated  hereby for a
period of one (1) year  following the Closing,  regardless of any  investigation
made by any  Purchaser  or on its  behalf,  except that the  representations  in
Sections 5.05 (the first and second  sentences  and clause  (vi)(A) of the third
sentence  thereof),  5.10,  6.02,  6.03 (clause  (vi)(A)  only),  and 6.04 shall
survive until the expiration of the applicable statute of limitations.

                  9.06 Treatment of the Preferred Stock.  The Company  covenants
and agrees that (i) so long as federal  income tax laws prohibit a deduction for
distributions  made by the Company  with respect to  preferred  stock,  it shall
treat all  distributions  paid by it on the  Preferred  Stock as  non-deductible

                                     - 35 -
<PAGE>

dividends on all of its tax returns and (ii) it shall treat the Preferred  Stock
as preferred  stock in all of its  financial  statements  and other  reports and
shall treat all distributions  paid by it on the Preferred Stock as dividends on
preferred stock in such statements and reports.

                  9.07  Successors  and Assigns.  Except as otherwise  expressly
provided herein, all covenants and agreements  contained in this Agreement by or
on behalf of any of the  parties  hereto  shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto whether so expressed
or not;  provided,  however,  that no  provisions of this  Agreement,  including
without  limitation,  Sections  3.01 and 3.03  which are for the  benefit of any
Purchaser  as a  "Purchaser"  (as  opposed  to  provisions  for the  benefit  of
"Holders") under this Agreement shall be assignable  (other than by operation of
law);  and further  provided,  further,  that the covenants set forth in Section
3.02  shall be  assignable,  in whole but not in part,  by a  Purchaser  and its
Affiliates  to an assignee so long as such assignee  holds at least  one-quarter
(1/4) of the number of shares (subject to appropriate  adjustment to reflect any
split or  combination  of shares) of Series C Preferred  (or the  equivalent  in
principal amount of Exchange Notes) originally  purchased by such Purchaser.  In
addition,  and  whether  or not  any  express  assignment  has  been  made,  the
provisions of this Agreement which are for any  Purchaser's  benefit as a Holder
are also for the benefit of, and enforceable by, to the extent permitted herein,
any subsequent Holder.

                  9.08 Capital and Surplus; Special Reserves. The Company agrees
that the  capital of the  Company  (as such term is used in  Section  154 of the
General  Corporation  Law of Delaware) in respect of the Series C Preferred  and
Common Stock  (including  the Warrant  Shares),  purchased  or issuable,  issued
pursuant to this  Agreement  shall be equal to the  aggregate  par value of such
shares and that it shall not increase the capital of the Company with respect to
any shares of the  Company's  capital  stock at any time on or after the date of
this Agreement.

                  9.09 Severability.  Whenever possible,  each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable  law, but if any provision of this Agreement is held to be prohibited
by or invalid under  applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.

                  9.10   Counterparts.    This   Agreement   may   be   executed
simultaneously  in two or more  counterparts,  any one of which need not contain
the signatures of more than one party, but all such counterparts  taken together
shall constitute one and the same Agreement.

                  9.11  Descriptive  Headings;  Interpretation.  The descriptive
headings  of  this  Agreement  are  inserted  for  convenience  only  and do not
constitute a substantive part of this Agreement. The use of the word "including"
in this Agreement shall be by way of example rather than by limitation.

                  9.12 Governing Law. The corporate law of the State of Delaware
shall  govern  all issues  and  questions  concerning  the  relative  rights and
obligations of the Company and its stockholders.

                                     - 36 -
<PAGE>

All  other  issues  and  questions   concerning  the   construction,   validity,
enforcement and  interpretation of this Agreement and the exhibits and schedules
hereto shall be governed by, and construed in accordance  with,  the laws of the
State of Delaware, without giving effect to any choice of law or conflict of law
rules or  provisions  (whether  of the  State of  Delaware  or any  other  juris
diction) that would cause the application of the laws of any jurisdiction  other
than the State of Delaware.

                  9.13 Notices. All notices,  demands or other communications to
be given or delivered  under or by reason of the  provisions  of this  Agreement
shall be in  writing  and  shall be deemed to have  been  given  when  delivered
personally  to the  recipient,  sent to the  recipient  by  reputable  overnight
courier  service  (charges  prepaid) or mailed to the  recipient by certified or
registered mail,  return receipt  requested and postage  prepaid.  Such notices,
demands and other  communications shall be sent to each Purchaser at the address
indicated  on the  Schedule  of  Purchasers  and to the  Company at the  address
indicated below:

                                    Desa Holdings Corporation
                                    c/o J. W. Childs Associates, L.P.
                                    One Federal Street, 21st Floor
                                    Boston, MA  02110
                                    Attention:  President

or to such  other  address  or to the  attention  of such  other  person  as the
recipient party has specified by prior written notice to the sending party.

                  9.14  No  Strict   Construction.   The  parties   hereto  have
participated  jointly in the negotiation and drafting of this Agreement.  In the
event an  ambiguity  or  question  of  intent  or  interpretation  arises,  this
Agreement shall be construed as if drafted jointly by the parties hereto, and no
presumption or burden of proof shall arise favoring or disfavoring  any party by
virtue of the authorship of any of the provisions of this Agreement.

                  9.15     Indemnification.

                  (i)  Sellers'   Indemnification.   In   consideration  of  the
         Purchasers' execution and delivery of this Agreement and purchasing the
         Purchased  Securities  hereunder,  each  Seller,  as to  itself,  shall
         defend,  protect,  indemnify and hold harmless each  Purchaser and each
         other  holder  of  Purchased  Securities  and  all of  their  officers,
         directors,  employees and agents (including,  without limitation, those
         retained in  connection  with the  transactions  contem  plated by this
         Agreement)  (collectively,  the "Indemnitees") from and against any and
         all actions, causes of action, suits, claims, losses, costs, penalties,
         fees,  liabilities  and damages,  and expenses in connection  therewith
         (irrespective  of whether any such  Indemnitee is a party to the action
         for  which   indemnification   hereunder  is  sought),   and  including
         reasonable  fees and  disbursements  of one counsel  (the  "Indemnified
         Liabilities"),  incurred by the Indem nitees or any of them as a result
         of, or arising out of, or relating any breach of any

                                     - 37 -
<PAGE>

         representation  made by such Seller  hereunder  in respect of which the
         Indemnitee shall have given notice to such Seller.

                  (ii) The Company's  Indemnification.  In  consideration of the
         Purchasers'  execution  and delivery of this  Agreement and  purchasing
         the  Purchased  Securities  hereunder  and  in  addition  to all of the
         Company's other  obligations  under this  Agreement,  the Company shall
         defend,  protect,  indemnify and hold harmless each  Purchaser and each
         other  holder  of  Purchased  Securities  and  all of  their  officers,
         directors,  employees and agents (including,  without limitation, those
         retained  in  connection  with the  transactions  contemplated  by this
         Agreement)  (collectively,  the "Indemnitees") from and against any and
         all actions, causes of action, suits, claims, losses, costs, penalties,
         fees,  liabilities  and damages,  and expenses in connection  therewith
         (irrespective  of whether any such  Indemnitee is a party to the action
         for  which   indemnification   hereunder  is  sought),   and  including
         reasonable  fees and  disbursements  of one counsel  (the  "Indemnified
         Liabilities"),  incurred by the  Indemnitees or any of them as a result
         of, or arising out of, or relating any breach of any  representation or
         covenant  made  by the  Company  hereunder  in  respect  of  which  the
         Indemnitee shall have given notice to the Company.

                  (iii) Notice of Claims. If an Indemnitee  believes that it has
         suffered or incurred  any  Indemnified  Liability,  it shall notify the
         indemnifying  party  promptly in writing,  and in any event  within any
         applicable  time period  specified  in Section  9.05,  describing  such
         Indemnified Liability, all with reasonable particularity and containing
         a reference  to the  provisions  of this  Agreement in respect of which
         such Indemnified  Liability shall have occurred. If any legal action is
         instituted by a third party with respect to which an Indemnitee intends
         to claim any liability or expense as Indemnified  Liability  under this
         Section,  such Indemnitee shall promptly notify the indemnifying  party
         of such legal action.

                  (iv) Defense of Third Party  Claims.  The  indemnifying  party
         shall have the right to conduct and control, through counsel of its own
         choosing,  reasonably  acceptable to the  Indemnitees,  any third party
         legal action or other claim,  but any Indemnitee  may, at its election,
         participate  in the  defense  thereof  at its sole  cost  and  expense;
         provided,  however, that if the indemnifying party shall fail to defend
         any such legal action or other claim,  then the Indemnitees may defend,
         through  counsel  of their own  choosing,  such  legal  action or other
         claim, and (so long as it gives the indemnifying  party at least thirty
         (30)  days'  written  notice  of the terms of any  proposed  settlement
         thereof  and  permits  the  indemnifying  party to then  undertake  the
         defense  thereof)  settle  such  legal  action or other  claim,  and to
         recover from the indemnifying party the amount of such settlement or of
         any  judgment  and  any  other  Indemnified   Liabilities  incurred  in
         connection  therewith.  The indemnifying  party shall not compromise or
         settle any such legal action or other claim  without the prior  written
         consent of the  Indemnitee,  which  consent  shall not be  unreasonably
         withheld.

                                     - 38 -
<PAGE>
         IN WITNESS WHEREOF,  the parties hereto have executed this Agreement on
the date first written above.

                                  DESA HOLDINGS CORPORATION


                                  By  /s/___________________________

                                  Its ______________________________     

                                  JWC EQUITY FUNDING, INC.


                                                 

                                  By  /s/___________________________         
                                                                      
                                  Its ______________________________

                                  UBS CAPITAL LLC
                                  
                                  By  /s/___________________________  
                                                                             
                                  Its ______________________________  
                                                          

                                  JACKSON NATIONAL LIFE INSURANCE
                                  COMPANY

                                  By:  PPM America, Inc., as attorney in fact,
                                       on behalf of Jackson National Life
                                       Insurance Company


                                       By  /s/___________________________     
                                                                           
                                       Its ______________________________     
                                       
                                  OLD HICKORY FUND I, LLC

                                  By:  PPM America, Inc., its manager


                                       By  /s/___________________________ 
                                                                          
                                       Its ______________________________ 
                                           
                                  RELIASTAR FINANCIAL CORP.


                                  By  /s/___________________________          
                                                                      
                                  Its ______________________________          
                                  
                                     - 39 -

<PAGE>
<TABLE>
<CAPTION>

                                                 SCHEDULE OF PURCHASERS AND SELLERS

                                                                                                                 
                                                                             SELLERS
                           ------------------------------------------------------------------------------------------------------- 
                                         JWC Equity Funding, Inc.                               UBS Capital LLC
                           ----------------------------------------------------  -------------------------------------------------

                                                           Warrants                                          Warrants              
                                                              to                                               to
                             Shares of     Shares of       Purchase               Shares of   Shares of      Purchase 
                              Voting       Series C        Warrant    Purchase     Voting     Series C       Warrant      Purchase 
PURCHASERS                    Common       Preferred        Shares     Price       Common     Preferred       Shares       Price
-------------------------  -----------    ----------     -----------  ---------  ----------  -----------    -----------   -------- 
<S>                        <C>           <C>            <C>                    <C>           <C>           <C>

Jackson National Life                                         
Insurance Company, PPM                                                                                                             
America, Inc., as attorney                                                                                                         
in fact, on behalf of                                                                                                              
Jackson National Life                                                                                                              
Insurance Company           369,424.716    9,600.34202   143,568.402            100,581.284   2,613.83358    39,088.598

Old Hickory Fund I,                                                                          
LLC, PPM America, Inc.,                                                                                                            
its manager                   5,625.402      146.19810     2,186.652              1,531.598      39.80377       595.348

ReliaStar Financial Corp.   126,961.794    3,930.00000    58,771.578             34,567.206   1,070.00000    16,001.422

</TABLE>




                                                               - 40 -

<PAGE>



                                LIST OF EXHIBITS


Exhibit A - Warrants

Exhibit B - Amended Stockholders Agreement

Exhibit C - Preferred Tagalong Agreement

Exhibit D - Sullivan & Worcester LLP Opinion

Exhibit E - Amendment to the Company's Charter


                    [Exhibits have not been
                    included and are available upon request]


                                     - 41 -

<PAGE>


                          LIST OF DISCLOSURE SCHEDULES


                    [Disclosure schedules have not been
                    included and are available upon request]

                                     - 42 -