ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into 
this 18th day of March, 1998, by and among MORRIS FLAMINGO-STEPHAN, INC., a 
Florida corporation, which is a wholly-owned subsidiary of The Stephan Co. 
("Buyer"), THE STEPHAN CO., a Florida corporation, ("Stephen"), 
MORRIS-FLAMINGO, L.P., a Georgia limited partnership ("Seller"), 
MORRIS-FLAMINGO BEAUTY PRODUCTS, INC., a Georgia corporation, which is the 
sole general partner of Seller ("MFB"), SHAHEEN & CO., INC., a Georgia 
corporation, which is the sole limited partner of Seller, ("SCI," and 
together with MFB, the "Partners"), and SHOUKY A. SHAHEEN, a Georgia 
resident ("Shaheen").

                           W I T N E S S E T H :

WHEREAS, Buyer desires to purchase, and Seller desires to sell, 
certain assets of Seller on the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual promises, agreements, 
and covenants hereinafter set forth, made and to be performed by the 
parties hereto, the parties hereto intending to be legally bound, agree as 
follows:

                                 ARTICLE 1.

SALE AND PURCHASE

1.1 The Business

The subject of this Agreement is Seller's grooming, hair care 
products distribution business and other products and assets more fully 
described on Schedule I .1 hereto ("Business").

1.2 Sale and Purchase of Assets

Subject to the terms and conditions of this Agreement, as of the 
Closing Date as defined in Article 4, Seller shall sell, assign, transfer 
and convey to Buyer, and Buyer shall purchase all of the assets utilized or 
necessary for the Business, including, without limitation, all those assets 
set forth on Schedule 1.1 hereto or described in Section 2.1 of this 
Agreement (the "Acquired Assets"). In consideration for the sale of the 
Acquired Assets, Buyer will pay Seller the Purchase Price as defined in 
Article 3 of this Agreement.

                                ARTICLE 2.
 
                           ASSETS AND LIABILITIES

2.1 The Acquired Assets

The Acquired Assets to be sold, assigned, conveyed and 
transferred by Seller to Buyer at Closing (as defined in Section 4.1 below) 
are all of the assets and properties associated, directly or indirectly, 
with, or which are utilized in or are necessary to, the Business, except 
for the Retained Assets, as defined in Section 2.2 of this Agreement, which 
Acquired Assets include, but are not limited to, the following:

(a) Fixed Assets and Tangible Personal Property.  All fixed assets of 
Seller, other than any Retained Assets, including, without limitation, all 
machinery, tools, vehicles, furniture, equipment and other tangible 
personal property of every kind and description that are owned by Seller, 
as of the Closing Date, all as listed on Schedule 2.1 (a), provided that, 
any other fixed assets and tangible personal property related to the 
Business that should have been included on such Schedule but was omitted 
from such Schedule shall be considered fixed assets and tangible personal 
property purchased by the Buyer hereunder.

(b) Inventories. All of Seller's inventories including, without 
limitation, racks on hand and inventories with respect to which vendors 
have drawn drafts under letters of credit as of the Closing Date even 
though such goods have not been received by Seller as of the Closing Date, 
all finished goods, work-in-process, spare parts, promotional items, raw 
materials, all packaging and all related supplies to any of the foregoing 
("Inventory"), all as listed on Schedule 2.1 (b), provided that, any other 
inventory related to the Business that should have been included on such 
Schedule but was omitted from such Schedule shall be considered Inventory 
purchased by the Buyer hereunder.

(c) Accounts Receivable. All of Seller's accounts receivables listed 
on Schedule 2. l(c) including any interest, claims and penalties thereon 
existing as of the Closing Date, provided that, any other accounts 
receivable related to the Business that should have been included on such 
Schedule but was omitted from such Schedule shall be considered accounts 
receivable purchased by the Buyer hereunder.

(d) Intangible Rights and Intellectual Property. All right, title and 
interest of Seller to the name "Morris-Flamingo" and all variations thereof 
as well as all fictitious business names, trade names, trademarks, 
trademark registrations and applications, service marks, service mark 
registrations and applications, copyrights, copyright registrations and 
applications, patents, patent rights, trade secrets, technical know-how and 
goodwill of Seller including also, all customer and supplier lists, and any 
customer and supplier records and histories, formulae, processes, licenses, 
computer software or systems that are proprietary to Seller together with 
any other intangibles owned by Seller or used in its Business, all as 
listed on Schedule 2.1 (d), provided that, any other intangible rights and 
intellectual property related to the Business that should have been 
included on such Schedule but was omitted from such Schedule shall be 
considered intangible rights and intellectual property purchased by the 
Buyer hereunder.

(e) Catalogs and Flyers. All of Seller's catalogs, flyers, brochures, 
artwork, materials, boards, transparencies, photos and related 
preparations.

(f) Books, Papers and Records. All books, papers, and records of 
Seller relating in any way or manner to the Acquired Assets and/or the 
Business, including, without limitation, all purchasing and sales records, 
vendor lists, and all accounting and financial records.

(g) Leases and Other Contracts. Except for the leasehold interests 
held by Seller and specifically excluded hereunder by Section 2.2, all of 
Seller's rights and interest in, to or under all facility leases, equipment 
leases, sales and purchase orders and other instruments, all other 
contracts or agreements related in any way or manner to the Acquired Assets 
or the Business, including without limitation, all equipment rental 
contracts under which Seller is the lessee, all as listed on Schedule 2.1 
(g), provided that, any other leases and other contracts related to the 
Business that should have been included on such Schedule but was omitted 
from such Schedule shall be considered leases and other contracts purchased 
by the Buyer hereunder.

(h) Prepaid Expenses. All prepaid expenses existing as of the Closing 
Date, including, without limitation, ad valorem taxes, insurance premiums, 
lease and rental payments, all as listed on Schedule 2.1 (h), provided 
that, any other prepaid expenses related to the Business that should have 
been included on such Schedule but was omitted from such Schedule shall be 
considered prepaid expenses purchased by the Buyer hereunder.

(i) Rights of Action. Except for the claims held by Seller and 
specifically excluded hereunder as reflected on Schedule 2. l(i) hereto, to 
the extent there are any, all of Seller's rights, claims, credits, causes 
of action or rights of act-off against third parties, relating to the 
Acquired Assets or the Business, including all unliquidated rights under 
manufacturers' and vendors' warranties.

(j) Cash. All of Seller's cash, certificates of deposits and all 
other cash equivalents, as of the Closing Date.

(k) Other Assets. All of Seller's other assets or inventories 
associated or used in connection with the Business as of the Closing Date, 
not otherwise specifically excluded by Section 2.2 of this Agreement, 
whether or not such assets were required to be set forth on a Schedule 
hereto but were omitted from such Schedule.

2.2 Assets Being Retained By Seller.

Seller shall retain (i) the real property owned by it and the 
structures, buildings, fixtures, and improvements located in Danville, 
Vermilion County, Illinois, together with all leasehold interests therein 
by which Seller is the lessor, all of which are more fully described on 
Schedule 2.2 and (ii) the claims reflected on Schedule 2.1(i) 
(collectively, the "Retained Assets"). Only those assets specifically set 
forth on Schedule 2.1(i) and on Schedule 2.2 shall be considered Retained 
Assets and be retained by Seller.

2.3 Payment of Fleet Capital Corporation Indebtedness at Closing.

At Closing, Buyer shall pay, in full, all of the indebtedness 
(i.e., unpaid principal and accrued interest, if any) owed by Seller to 
Fleet Capital Corporation f/k/a Shawmut Capital Corporation, ("Fleet 
Capital"), as successor-in-interest by assignment from Barclays Business 
Credit, Inc. ("Barclays"), as of, and including, the Closing Date, as 
evidenced by that certain Loan and Security Agreement, dated January 19, 
1990, as amended, and by that certain Secured Promissory Note, dated 
January 19, 1990, as amended and extended, between Morris-Flamingo, Inc., a 
Georgia Corporation ("MFI"), as borrower and Fleet Capital, as successor in 
interest to Barclays, as lender, which indebtedness is secured by a first 
lien security interest, mortgage, and encumbrance between Seller and Fleet 
Capital, all of which indebtedness was assumed by Seller under an Asset 
Purchase Agreement between Seller and MFI, made effective as of January 1, 
1992 (the "1992 Agreement") (the "Fleet Capital Indebtedness"). The Seller 
hereby represents that the indebtedness owed to Fleet Capital (including 
unpaid principal and accrued interest, if any) as of February 28, 1998 is 
$2,039,519.63.

2.4 Assumed Liabilities.

(a) As of the Closing Date, in addition to the Fleet Capital 
Indebtedness, Buyer will only assume trade accounts payable and such other 
notes payable, debts, and other liabilities accrued and which arose in the 
ordinary course of Seller's Business, as of, and including, the Closing 
Date ("Assumed Liabilities") specifically limited to, those liabilities 
which are set forth on Schedule 2.4(a). All liabilities not specifically 
set forth on Schedule 2.4(a) will not be considered to be an Assumed 
Liability hereunder, including without limitation any tax liability, and 
will not be assumed by Buyer.

(b) Major International Supply Promissory Note ("Major Note"). 
At Closing, Seller shall provide Buyer with (i) the original Major Note 
marked canceled and (ii) a written certification from Major International 
Supply, L.P., a Georgia limited partnership ("Major International Supply") 
that the Major Note has been paid in full prior to the Closing. Seller, its 
Partners and Shaheen also agree to jointly and severally indemnify Buyer 
and Stephan for any claims which may be made by either Cheung's Hair Beauty 
Supply Co., Ltd. or LePachu, Ltd., with respect to and in connection with 
the indebtedness owed to them by Major international Supply. At Closing, 
Seller shall provide Buyer with copies of Major International Supply's 
prior written notification to Cheung's Hair Beauty Supply Co., Ltd. and 
LePachu, Ltd., of the final adjustments made by Major International Supply 
to the indebtedness owed to them by Major International Supply together 
with evidence of the final payments made by Major International Supply to 
them in full satisfaction of this indebtedness.

                                ARTICLE 3.

THE PURCHASE PRICE

3.1 Purchase Price

(a) Subject to the adjustments provided for in Section 3.1(b) hereof, 
the purchase price ("Purchase Price") for the Acquired Assets and the 
Business shall be the total amount of the following:

(i) An amount of Stephan unregistered and restricted shares of common stock 
(the "Stephen Common Stock") having an aggregate Fair Market Value (as 
defined below) equal to $3,715,405.00; plus
(ii) The assumption and immediate payment of the Fleet Capital 
Indebtedness; plus
(iii) The assumption of Assumed Liabilities as finally determined as of the 
Closing Date.

(b) The Purchase Price hereunder shall be adjusted downward on a 
dollar for dollar basis to the extent that, on or as of the Closing Date, 
the book value of the Acquired Assets minus (A) the amount of the Fleet 
Capital Indebtedness and (B) the amount of Assumed Liabilities, all of 
which shall be determined in accordance with generally accepted accounting 
principles ("GAAP"), as finally determined as of the Closing Date, is less 
than $1,234,405.00 ("Purchase Price Adjustment"). The determination of the 
Purchase Price Adjustment shall be made in accordance with the provisions 
of Sections 3.1(c) and 3.1(d) hereof.

(c) For purposes of determining the Purchase Price Adjustment, if 
any, required under Section 3. l (b) hereof, Seller shall prepare a balance 
sheet as of the Closing Date reflecting the book value of the Acquired 
Assets and the amount of the Fleet Capital Indebtedness together with the 
amount of Assumed Liabilities ("Closing Balance Sheet"). Seller shall 
prepare the Closing Balance Sheet in accordance with GAAP consistently 
applied. The Inventories shall be reflected on the Closing Balance Sheet 
based on Sellers perpetual inventory records as of the Closing Date. On 
December 31, 1997 a joint physical count of the Inventories was taken by 
Buyer and Seller (or by their representatives), and within thirty (30) days 
after the Closing, Seller shall provide Buyer with a reconciliation of the 
Inventories as counted on December 31, 1997 to the value of Inventories as 
reflected on Seller's perpetual inventory records as of the Closing Date. 
For purposes of the Closing, the value of Inventories shall be determined 
in accordance with Section 3.4(c) of this Agreement. On or before ninety 
(90) days after the Closing Date, Buyer shall provide Seller with any 
necessary adjustments required to be made to the Closing Balance Sheet to 
accurately reflect the book value of the Acquired Assets and the amount of 
the Fleet Capital Indebtedness together with the amount of Assumed 
Liabilities as of the Closing Date (the "Post Closing Balance Sheet"). The 
Post Closing Balance Sheet shall be prepared by Buyer in accordance with 
GAAP consistently applied. If it is determined by the Post Closing Balance 
Sheet as of the Closing Date that the excess of the book value of the 
Acquired Assets minus (A) the amount of the Fleet Capital Indebtedness and 
(B) the amount of the Assumed Liabilities is less than $1,234,405.00, then 
the Purchase Price shall be reduced, on a dollar for dollar basis, in 
accordance with the terms and provisions of the Escrow Agreement to be 
entered into by and among the parties to this Agreement, attached hereto as 
Exhibit A.

(d) The Closing Balance Sheet shall be provided in writing by Seller 
to Buyer at the Closing and the Post Closing Balance Sheet shall be 
provided in writing to Seller by Buyer within ninety (90) days after the 
Closing Date. Seller shall have the right to challenge within thirty (30) 
days after receipt of the Post Closing Balance Sheet, Buyer's determination 
of the Post Closing Balance Sheet. If either party challenges any of these 
amounts, then such other party shall provide the challenging party, in 
writing, with its determination of these amounts. Seller and Buyer shall 
attempt, in good faith, to resolve any differences. If Seller and Buyer are 
unable to resolve said differences within thirty (30) days of receipt of 
the other's determination of these amounts, any unagreed differences 
between Buyer and Seller's determination of these amounts shall be resolved 
by an arbitrator designated by the American Arbitration Association in 
Miami, Florida, with the cost of such arbitration to be equally borne by 
Buyer and Seller. If, after a final determination of the amounts, there is 
a Purchase Price Adjustment hereunder, there shall be released to Buyer 
from the Stephan Common Stock held in escrow pursuant to the Escrow 
Agreement an amount of Stephan Common Stock, as determined under the Escrow 
Agreement, to satisfy this Purchase Price Adjustment. If there is an 
insufficient amount of Stephan Common Stock held in escrow pursuant to the 
Escrow Agreement to satisfy this Purchase Price Adjustment, then an 
additional amount of Stephan Common Stock required to satisfy this Purchase 
Price Adjustment shall be paid from Seller to Buyer, in accordance with the 
provisions of Section 11.2(g) of this Agreement. Buyer agrees to issue 
additional shares of Stephan Common Stock to the Seller if the final 
determination of the Purchase Price Adjustment based on the Post Closing 
Balance Sheet is less than the Purchase Price Adjustment made at Closing 
based on the Closing Balance Sheet. In such event thirty percent (30%) of 
such additional shares of Stephan Common Stock shall be deposited with the 
Escrow Agent named in the Escrow Agreement. The issuance of such additional 
shares shall be based on the value as determined in accordance
with Section 3.2(a)(i) of this Agreement and such shares shall be issued by 
Buyer within fifteen (15) days of such final determination of the Post 
Closing Balance Sheet.

3.2 Payment of Purchase Price At Closing

	    (a) At Closing, Buyer shall pay the Purchase Price to Seller as 
follows:

    (i) The issuance to Seller of certificates for 307,058 shares of 
Stephan Common Stock which was calculated with such shares having an 
aggregate Fair Market Value (as hereinafter defined) equal to 
$3,715,405.00, (as adjusted in accordance with Paragraph 3.1 (a) of this 
Agreement) with thirty percent (30%) of such Stephan Common Stock to be 
deposited with the Escrow Agent named in the Escrow Agreement. For purposes 
hereof, "Fair Market Value" shall mean $11.00 for each share of Stephan 
Common Stock, subject to adjustment upward or downward of up to ten percent 
(10%) based on the average closing sales price of Stephan's common stock as 
reported by the American Stock Exchange for the twenty (20) trading days 
prior to the Closing Date; plus

    (ii) The payment by Buyer of the Fleet Capital Indebtedness; plus

    (iii) The assumption by Buyer of the Assumed Liabilities.

    (b) Each certificate for Stephan Common Stock issued to Seller as part 
of the Purchase Price shall bear the following legend:

"The securities represented by this certificate (i) have not been 
registered under the Securities Act of 1933, as amended, or under any state 
securities or other "blue sky" laws, and may not be sold, transferred or 
otherwise disposed of except in accordance with the terms thereof and 
unless registered with the Securities and Exchange Commission of the United 
States and the securities regulatory authorities of certain states, or 
based on the opinion of counsel reasonably satisfactory to the issuer, an 
exception from such registration is available and (ii) are subject to that 
certain Asset Purchase Agreement dated March 18, 1998, by and among Morris 
Flamingo-Stephan, Inc., The Stephan Co., Morris-Flamingo, L.P., 
Morris-Flamingo Beauty Products, Inc., Shaheen & Co., Inc., and Shouky A. 
Shaheen."

(c) Buyer and Seller agree that, at Closing, if the Closing Balance 
Sheet, as prepared by Seller, requires a Purchase Price Adjustment, then 
such Purchase Price Adjustment shall be made at Closing, subject, however, 
to an additional Purchase Price Adjustment, based on the Post Closing 
Balance Sheet as finally determined in accordance with Section 3.1(d) 
hereof. The satisfaction of such additional Purchase Price Adjustment shall 
be made in accordance with Section 3.1(d) hereof, based on the value as 
determined in accordance with Section 3.2(a)(i) of this Agreement for the 
Stephan Common Stock.

3.3 No Fractional Shares

If a fractional share shall result from the determination of the 
number of Stephan Common Stock required to be issued to Seller pursuant to 
Section 3.2 (a), then no certificate or scrip of any kind shall be issued 
by Buyer in respect of such fractional interest, but Seller shall be 
entitled to receive a cash payment equal to such fractional interest on the 
Closing Date.

3.4 Allocation of Purchase Price

The Purchase Price shall be allocated for tax purposes by the 
parties and the parties shall report the transactions contemplated by this 
Agreement in their tax returns as follows:

(a) Cash, certificates of deposit, and all cash equivalents 
shall equal the amount thereof transferred by Seller to Buyer as of the 
Closing Date;

(b) Accounts receivable shall have a value equal to the total of 
all such amounts owed to Seller on the Closing Date, less an allowance for 
doubtful accounts receivable, calculated according to GAAP.

(c) Inventories shall be determined as of the close of business 
on March 18, 1998 based on Seller's perpetual inventory records. The 
Inventories shall be reflected on an item by item basis, to be valued at 
first-in, first-out (FIFO) cost. After the total cost of the Inventories 
has been determined in accordance with the preceding sentence hereof, such 
amount shall then be reduced by the below inventory reserve adjustment. 
This inventory reserve adjustment shall be based on the following 
quantities of the Inventories and the following percentage reduction for 
such quantities:

Inventories                             Percentage Reduction
 
Over 4 Years Quantities On Hand              80.00%
Over 3 Years Quantities On Hand              75.00%
Over 2 Years Quantities On Hand              50.00%
Over 1 Year Quantities On Hand               25.00%
Over 6 Months Quantities On Hand              2.00%
All Other Inventories                         2.00%

As used herein, "Quantities" refer to units of Inventory sold by 
Seller during the calendar year 1997. At the Closing, Seller shall provide 
Buyer with its perpetual inventory records as of March 18, 1998.

 (d) (i) Furniture, fixtures, machinery, equipment and similar 
assets; (ii) catalogs, flyers, and similar assets and (iii) prepaid 
expenses shall have values based on the allocation of the Purchase Price to 
these items as made by Stephan, and as provided to Seller by Stephan 
following the Closing.

(e) The remainder of the Purchase Price shall be allocated to intangibles.



                               ARTICLE 4.

                               THE CLOSING

4.1 Place of Closing


The Closing of this transaction ("Closing") shall take place at 
a location mutually acceptable by Buyer and Seller.

4.2 Closing Date

The Closing Date shall be March 18, 1998, (the "Closing Date"), 
with the closing to commence at 10:00 a.m., or such other time and date as 
Buyer and Seller shall mutually agree.


                                ARTICLE 5.


REPRESENTATIONS AND WARRANTIES OF SELLER, ITS PARTNERS, AND
SHAHEEN

To induce Buyer and Stephan to enter into this Agreement, 
Seller, its Partners, and Shaheen, jointly and severally, make the 
following representations and warranties to Buyer and Stephan:

5.1 Organization, Standing and Power

Seller is a limited partnership duly organized, validly existing 
and in good standing under the laws of the state of the jurisdiction in 
which it is organized with full power and authority to own, lease and 
operate its properties and to carry on its business as presently conducted 
by it. Schedule 5.1 hereto sets forth all states and other jurisdictions in 
which the Seller is duly qualified and in good standing to conduct 
business. There are no other states or jurisdictions in which the character 
and location of the properties owned or leased by Seller, or the conduct of 
its business, make such qualification necessary. True and complete copies 
of Seller's Certificate of Limited Partnership and all amendments thereto 
have been furnished to Buyer.

5.2 Ownership

The ownership of Seller is shown on Schedule 5.2.

5.3 Interests in Other Entities

Seller does not (i) own, directly or indirectly, of record or 
beneficially, any shares of voting stock or other equity securities of any 
corporation, (ii) have any ownership interest, direct or indirect, of 
record or beneficially, in any unincorporated entity, or (iii) have any 
obligation, direct or indirect, present or contingent, to purchase or 
subscribe for any interest in, advance or loan monies to, or in any way 
make investments in, any person or entity, or to share any profits or 
capital investments in other persons or entities, or both.

5.4 Authority

The execution and delivery by MFB, on its own behalf and as the 
general partner of Seller, and by SCI of this Agreement and all of the 
agreements, Schedules, Exhibits, documents and instruments specifically 
provided hereunder to be executed and/or delivered by any or all of them 
(all of the foregoing, including this Agreement, being hereinafter 
sometimes collectively called the "Executed Agreements"), and the 
performance by Seller and its Partners (to the extent that they are parties 
thereto) of their respective obligations under the Executed Agreements, and 
the consummation of the transactions contemplated by the Executed 
Agreements, have been duly and validly authorized by all necessary 
corporate action on the part of MFB (on its own behalf and as the general 
partner of Seller) and SCI. Shaheen hereby individually represents and 
warrants that he is an individual over 21 years of age and is legally 
competent to enter into, execute and perform any of the Executed Agreements 
to which he is a party. The Executed Agreements are, or when executed and 
delivered by the delivering parties shall be, the valid and binding 
obligations of the delivering parties, enforceable in accordance with their 
respective terms, except to the extent that enforceability may be limited 
by the operation of bankruptcy, insolvency or similar laws. Neither the 
execution and delivery by MFB (on its own behalf and as the general partner 
of Seller), SCI or Shaheen (to the extent that they are parties thereto) of 
the Executed Agreements, nor the consummation of the transactions 
contemplated thereby, nor the performance by Seller, its Partners or 
Shaheen (to the extent that they are parties thereto) of their respective 
obligations under the Executed Agreements, shall (nor with the giving of 
notice or the lapse of time or both would) (i) other than as to Shaheen, 
conflict with or result in a breach of any provision of their respective 
Agreement of Limited Partnership, Certificates of Incorporation or By-Laws, 
(ii) give rise to a default, or any right of termination, cancellation or 
acceleration, or otherwise result in a loss of contractual benefits to 
Seller, under any of the terms, conditions or provisions of any note, bond, 
mortgage, indenture, license, agreement or other instrument or obligation 
to which Seller is a party or by which it or any of its properties or 
assets may be bound, (iii) violate any order, writ, injunction, decree, 
law, statute, rule or regulation applicable to Seller or any of its 
respective properties or assets, (iv) result in the creation or imposition 
of any lien, claim, restriction, charge or encumbrance upon any of the 
properties or assets of Seller, or (v) interfere with or otherwise 
adversely affect the ability of Seller to carry on the Business as now 
conducted. Seller has the right, power, legal capacity, and authority to 
enter into, and perform its obligations under this Agreement, and has 
obtained, or shall obtain before the Closing, the necessary approvals or 
consents of any persons necessary to the consummation of the asset purchase 
in connection with this Agreement, including, but not limited to, the 
consents of Scherer and Fligelman

5.5 Properties

Except as set forth on Schedule 5.5 hereto, Seller has good and 
marketable title to all of the properties and assets (real, personal and 
mixed, tangible and intangible) it purports to own or use, including those 
set forth on the Balance Sheet (as defined below) or thereafter acquired 
(except properties or assets sold or otherwise disposed of in the ordinary 
course of business subsequent to the date of the Balance Sheet), free and 
clear of all mortgages, liens, pledges, charges or encumbrances of any 
nature whatsoever. Except as set forth on Schedule 5. 5, such properties 
and assets are in good operating condition, normal wear and tear excepted, 
and are adequate for the purposes for which they are used. Schedule 5.5 
also contains an accurate list setting forth all (i) real property owned, 
leased (whether as lessor or lessee) or subject to contract or commitment 
of purchase or sale or lease (whether as lessor or lessee) by Seller and 
(ii) personal property leased by or to Seller or subject to a title 
retention or conditional sales agreement or other security device. All 
leases listed on Schedule 5.5 are valid, binding and enforceable in 
accordance with their terms, and are in full force and effect, except to 
the extent that enforceability may be limited by the operation of 
bankruptcy, insolvency or similar laws; there are no existing defaults by 
either party thereunder; no event of default has occurred which (whether 
with or without notice, lapse of time or both) would constitute a default 
by Seller thereunder; are in conformity with all laws including, without 
limitation for any real property leases, zoning or other building laws and 
all lessors under such leases have consented (where such consent is 
necessary) to the consummation of the transactions contemplated by this 
Agreement without requiring modification of the rights and obligations of 
Seller under such leases.

5.6 Financial Statements

Seller has delivered to Buyer true and complete copies of its 
audited balance sheets as of December 31, 1995 and 1996, and the related 
audited statements of income, retained earnings and cash flows for the 
fiscal years ended December 31, 1995 and 1996 and its unaudited balance 
sheet as of December 31, 1997 (the "Balance Sheet") and related unaudited 
statements of income, retained earnings and cash flows for the period ended 
December 31, 1997. Such financial statements, including the notes thereto, 
were prepared in accordance with GAAP applied on a consistent basis 
throughout the periods involved (except as may be otherwise expressly 
stated in said financial statements and notes thereto) and fairly present 
the financial position of Seller at the dates thereof and the results of 
its operations for the periods as indicated. The books and records of 
Seller are in all material respects complete and correct, have been 
maintained in accordance with good business practices, and accurately 
reflect the basis for the financial condition and results of operations of 
Seller as set forth in the financial statements referred to herein.

5.7 Absence of Undisclosed Liabilities and Solvency

(a) Seller does not have any liabilities or obligations, whether 
known, unknown, accrued, absolute, contingent or otherwise which have not 
been (i) in the case of liabilities and obligations of a type customarily 
reflected on the balance sheet of Seller, reflected on the Balance Sheet in 
accordance with GAAP, (ii) in the case of all other types of liabilities 
and obligations described on Schedule 5.7 hereto, or (iii) incurred, 
consistent with past practice, in the ordinary course of business since the 
date of the Balance Sheet and which are not material either individually or 
in the aggregate.

(b) Seller is solvent, having assets which at a fair valuation exceed 
its known liabilities and Seller is able to meet its debts as they mature 
and will not become insolvent as a result of the transactions contemplated 
by this Agreement.

5.8 Absence of Certain Chances

Except as and to the extent set forth on Schedule 5.8 hereto, 
since the date of the Balance Sheet, Seller has not:

(i) suffered any material adverse change in its working capital, condition 
(financial or otherwise), assets, liabilities, business, operations or 
prospects;

(ii) incurred any material liabilities or obligations except items incurred 
in the ordinary course of business and consistent with past practice, none 
of which exceeds $20,000.00 (counting obligations or liabilities arising 
from one transaction or a series of similar or related transactions, and 
all periodic installments or payments under any lease or other agreement 
providing for periodic installments or payments, as a single obligation or 
liability), or experienced any increase in, or change in any assumption 
underlying or methods of calculating, any bad debt, contingency or other 
reserves;

(iii) paid, discharged or satisfied any claim, liabilities or obligations 
(absolute, accrued, contingent or otherwise) other than the payment, 
discharge or satisfaction in the ordinary course of business and consistent 
with past practice of liabilities and obligations reflected or reserved 
against on the Balance Sheet or incurred in the ordinary course of business 
and consistent with past practice since the date of the Balance Sheet;

(iv) permitted or allowed any of its property or assets (real, personal or 
mixed, tangible or intangible) to be subjected to any mortgage, pledge, 
lien, security interest, encumbrance, restriction or charge of any kind, 
except those disclosed Pursuant to Section 5.8 hereof;

(v) written down the value of any inventory or written off as uncollectible 
any notes or accounts receivable, except for write-downs and write-offs in 
the ordinary course of business and in accordance with GAAP consistent with 
past practice none of which are material;

(vi) canceled any debts or waived any claims or rights of substantial 
value, or sold, transferred, or otherwise disposed of any of its properties 
or assets (real, personal or mixed, tangible or intangible), except in the 
ordinary course of business and consistent with past practice;

(vii) disposed of or permitted to lapse any rights to use any patent, 
trademark, trade name or copyright, or disposed of or disclosed (except as 
necessary in the conduct of its business) to any person any trade secret, 
formula, process or know-how;

(viii) granted any general increase in the compensation of officers or 
employees (including any such increase pursuant to any bonus, pension, 
profit-sharing or other plan or commitment) or any increase in the 
compensation payable or to become payable to any officer or employee, and, 
unless otherwise indicated on Schedule 5 8, no such increase is customary 
on a periodic basis or is required by agreement or understanding;

(ix) made any single capital expenditure or commitment (or a series of 
related capital expenditures or commitments) in excess of $20,000 00 for 
additions to property, plant, equipment or intangible assets or made 
aggregate capital expenditures and commitments in excess of $20,000 00 (on 
a consolidated basis) for additions to property, plant, equipment or 
intangible assets;

(x) declared, paid or set aside for payment any distributions to its 
partners;

(xi) made any change in any method of accounting or accounting practice;

(xii) paid, loaned or advanced any amount to, or sold, transferred or 
leased any properties or assets (real, personal or mixed, tangible or 
intangible) to, or entered into any agreement or arrangement with, any of 
its or any of its Partner's officers, directors, stockholders or employees 
or any "affiliate" or "associate" of any of its or any of its Partner's 
officers, directors, stockholders or employees (as such terms are defined 
in the rules and regulations of the Securities and Exchange Commission (the 
"SEC") under the Securities Act of 1933 (the "Securities Act")), except for
compensation to officers and employees at rates not materially exceeding 
the rates of compensation paid during the year ended December 31, 1997;

(xiii) delayed or failed to repay when due any material obligation of 
Seller;

(xiv) failed to operate the business of Seller in the ordinary course so as 
to preserve the Seller's business intact and to preserve the goodwill of 
Seller's suppliers, customers, distributors and other third parties having 
business relationships with Seller; and

(xv) agreed, whether in writing or otherwise, to take any action described 
in this Section unless such action is specifically excepted from this 
Section or described in Schedule 5.8.

5.9 Bankruptcy and Insolvency

No petition in bankruptcy (voluntary or otherwise), assignment 
for the benefit of creditors, or petition seeking reorganization or 
arrangement or other action under federal or state bankruptcy laws is 
pending on behalf of or against Seller. The assets of Seller, at fair 
market value, exceed its liabilities, immediately prior to the Closing 
Date. The sale of the Acquired Assets hereunder is not for the purpose of 
delaying or defrauding any creditors of Seller.

5.10 Tax Matters

(i) Seller has filed all Tax Returns (as defined below) that it was 
required to file. All such Tax Returns were correct and complete in all 
respects. All Taxes (as defined below) owed by Seller (whether or not shown 
on any tax Return) have been paid. Seller is not currently the beneficiary 
of any extension of time within which to file any Tax Return. No claim has 
ever been made by an authority in a jurisdiction where Seller does not file 
Tax Returns that it is or may be subject to taxation by that jurisdiction. 
There are no liens on any of the assets of Seller that arose in connection 
with any failure (or alleged failure) to pay any Tax.

(ii) Seller has withheld and paid all Taxes required to have been 
withheld and paid in connection with amounts paid or owing to any employee, 
independent contractor, creditor, stockholder, or other third party.

(iii) Seller does not expect any authority to assess any additional 
Taxes for any period for which Tax Returns have been filed. There is no 
dispute or claim concerning any Tax liability of Seller claimed or raised 
by any authority in writing. To the knowledge of Seller, no issue has 
arisen in any examination of Seller by any governmental authority that if 
raised with respect to any other period not so examined would, if upheld, 
result in a material deficiency for any other period not so examined. 
Seller has delivered to Buyer correct and complete copies of all federal 
income Tax Returns, examination reports, and statements of deficiencies 
assessed against or agreed to by any of Seller or its Partners (relating to 
Seller) since January 1, 1994.

(iv) Seller has not waived any statute of limitations in respect of 
Taxes or agreed to any extension of time with respect to a Tax assessment 
or deficiency.

(v) The unpaid Taxes of Seller did not, as of December 31, 1997, exceed 
the reserve for any tax liability set forth on the face of the Balance 
Sheet (rather than in any notes thereto). The provision for Taxes reflected 
on the books of account of Seller is adequate for all Taxes of Seller which 
have accrued since the date of the Balance Sheet.

(vi) For purposes of this Section 5.10 the following definitions shall 
apply:

"Tax" or "Taxes" means any federal, state, local or foreign income, gross 
receipts, license, payroll, employment, excise, severance, stamp, 
occupation, premium, windfall profits, customs duties, capital stock, 
franchise, profits, withholding, social security (or similar), 
unemployment, disability, real property, personal property, sales, use, 
transfer, registration, value added, alternative or add-on minimum, 
estimated, or other tax of any kind whatsoever, including any interest, 
penalty, or addition thereto, whether disputed or not.

"Tax Return" means any return, declaration, report, claim for refund, or 
information return or statement relating to Taxes, including any schedule 
or attachment thereto, and including any amendment thereof.

5.11 Certain Contracts

Schedule 5.11 hereto contains a complete and correct list of all 
contracts, commitments, obligations and undertakings, written or oral, to 
which Seller is a party or otherwise bound the dollar value of which 
exceeds $10,000.00 (collectively, the "Contracts"). Complete and correct 
copies of all Contracts, set forth on any of the Schedules attached hereto, 
including, without limitation, Schedule 5.11 have been, or, upon request, 
will be, furnished to Buyer, and except as expressly stated on Schedule 5. 
11, each of such Contracts is in full force and effect, no person or entity 
which is party thereto or otherwise bound thereby is, to the knowledge of 
Seller, in material default thereunder, and, to the knowledge of Seller, 
its Partners and/or Shaheen, no event, occurrence, condition or act exists 
which, with the giving of notice or the lapse or time or both, would give 
rise to a material default or right of cancellation thereunder, and to the 
knowledge of Seller, its Partners, and/or Shaheen, there have been no 
threatened cancellations thereof and there are no outstanding material 
disputes thereunder. Seller has not  received notice that any party to any 
of the Contracts intends to cancel or terminate any such Contracts or to 
exercise or not exercise any options under any of such Contracts. Seller is 
not a party to, nor are the Acquired Assets bound by, any agreement that is 
materially adverse to the Business, property, or financial condition of 
Seller.

5.12 Inventory

Schedule 2.1(b) sets forth a complete and accurate list of all 
Inventory as of the close of business on March 18, 1998, and Schedule 5.12 
sets forth a complete and accurate list of all Inventory as of December 31, 
1997. All Inventory set forth on either Schedule 2.1(b) or Schedule 5.12 
consists of items of a quality and quantity suitable and usable or saleable 
in the ordinary course of business for the purposes for which they are 
intended, are in good and merchantable condition except for obsolete 
materials, materials of below standard quality and not readily marketable 
items, all of which have been adequately reserved against on the books and 
records of Seller in accordance with Section 3.4(c) hereof. Inventory is 
stated at cost, subject to the reserve adjustment required by Section 
3.4(c) hereof. There has not been any significant adverse change in the 
quantity or quality of Inventories since the date of the Balance Sheet. The 
present quantity of Inventory is reasonable in the present circumstances of 
Seller's business and consistent with the average level of Seller's 
Inventory in the past twelve months.

5.13 Fixed Assets

Schedule 2.1(a) contains a true and complete list of all of the 
fixed assets owned by, in the possession of, or used by Seller in 
connection with the Business. Except as stated on Schedule 2.1(a) no fixed 
assets used by Seller in connection with the Business are held under any 
lease, security agreement, conditional sales contract, or other title 
retention or security arrangement.

5.14 Accounts Receivable

Schedule 2.1 (c) contains a true and complete list of the 
accounts receivable of Seller. The accounts receivable reflected on 
Schedule 2.1(c) and on the Balance Sheet, and all accounts receivable 
arising since the Balance Sheet date, which may not be included on Schedule 
2. l(c) or the Balance Sheet, represent bona fide claims of Seller against 
debtors for sales or services sold or performed and are good and 
collectible in the ordinary course of business at the aggregate amounts 
recorded on Schedule 2. l(c) or on such Balance Sheet or as reflected in 
the books of account of Seller, less the amount of the reserve for bad 
accounts reflected in said Balance Sheet or on the books of account of 
Seller (which reserve has been established on a basis consistent with past 
practice and in accordance with GAAP), and are not subject to any defenses, 
recoupments, counterclaims, disputes or rights of offset.

5.15 Insurance

Schedule 5.15 hereto contains a complete and correct list and 
summary description of all policies or binders of insurance in which Seller 
is an insured party, beneficiary or loss payable payee. Such policies are 
in full force and effect and provide the type and amount of coverage 
reasonably required for the business of Seller. No insurer has advised 
Seller, its Partners or Shaheen that it intends to reduce coverage, 
increase premiums or not renew any existing policy or binder. In the past 
five years no provider of insurance to Seller has failed to renew any 
policy or refused to grant any insurance coverage requested by Seller.

5.16 No Violation of Law

Seller is not engaged in any activity and is not omitting to 
take any action as a result of which Seller would be in violation of any 
law, rule, regulation, statute, order, injunction or decree, or any other 
requirement of any court or governmental or administrative body or agency, 
foreign or domestic (collectively, "Laws"), applicable to Seller or any of 
its properties, products, operations, businesses, pension or other employee 
benefit plans, labor practices, or employees, including, without 
limitation, the rules and regulations of the United States Food and Drug 
Administration and any similar governmental authority of any state or 
foreign entity, any laws, rules and regulations relating to air, water, 
solid or liquid waste disposal practices, health or safety practices 
advertising practices or hiring, promotion or retirement practices, the 
violation of which may result in a material and adverse effect on the 
business or condition (financial or otherwise) of Seller. Neither Seller 
nor its Partners or Shaheen have received any notice to the effect that, or 
otherwise been advised that, Seller is not in compliance with any Laws, and 
there are no existing circumstances which are reasonably likely to result 
in any violations of any Laws.

5.17 Litigation

Other than as set forth on Schedule 5.l7 hereto, there are no suits or 
actions, or administrative, arbitration or other proceedings or 
governmental investigations (collectively, "Actions"), pending or to the 
best knowledge of Seller, its Partners and/or Shaheen, threatened against 
or affecting, or which may affect, Seller or any of its properties, assets 
or businesses or the transactions contemplated hereby, nor does Seller, its 
Partners and/or Shaheen have knowledge of any reasonable basis for any such 
Actions. The Actions described on Schedule 5.17 do not materially and 
adversely affect, and/or will not materially and adversely affect, Seller 
or any of its properties, assets or businesses. There are no outstanding 
judgments, orders, stipulations, injunctions, decrees or awards against 
Seller which are not satisfied.

5.18 Intangible Rights and Intellectual Property

Schedule 2. l(d) hereto is a true and complete list of all 
licenses, computer software or systems that are proprietary to Seller, 
patents, copyrights, trademarks, trade names and business names, whether 
foreign or domestic, owned or used by Seller in the conduct of its business 
and all pending applications therefor (the "Intangible Rights and 
Intellectual Property"). All Intangible Rights and Intellectual Property 
listed on Schedule 2.1(d) have been, to the extent applicable and indicated 
on such Schedule, duly registered with or filed in or issued by the United 
States Patent and Trademark Office or such other government entity or 
foreign government entity as indicated in such Schedule and such 
registrations and filings remain in full force and effect. Except as set 
forth on Schedule 2.1 (d) no other party other than Seller, including its 
Partners or Shaheen (other than as a result of their ownership of Seller), 
has any ownership or other interest in any of the Intangible Rights and 
Intellectual Property. To the knowledge of Seller, its Partners and 
Shaheen, none of the Intangible Rights and Intellectual Property is being 
infringed upon by, or infringes, any licenses, patents, copyrights, 
trademarks or other intellectual property rights of any other person or 
entity nor have any of them received any notice or other communication of 
any alleged or actual infringement by Seller of the rights or others.

5.19 Right to Use Name

Seller has the right to use its name and any fictitious business 
names as presently used and this right is not subject to any pending or, to 
the best of Seller's knowledge, threatened challenge. To the best of 
Seller's knowledge, its name is not used by any other person or business in 
any state in which it conducts business.

5.20 Suppliers and Customers

Seller has received no oral or written complaints with respect 
to its supply, purchase, sale, distribution, sales representative or 
similar agreements necessary for the normal operation of the business or 
any notice from any customer that it intends to return any inventory of 
Seller other than in customary amounts in the ordinary course of business. 
Schedule 5.20 hereto contains a true and complete list of all of Seller's 
significant suppliers and customers . Seller has received no notice stating 
that (i) any supplier or customer expects to materially reduce its business 
with Seller by reason of the transactions contemplated by this agreement or 
for any other reason whatsoever or (ii) any supplier named on Schedule 5.20 
has any intention to increase supply costs, adversely change any other 
terms of supply arrangements or significantly increase the delivery time of 
any supplies. Seller has no agreement or understanding with any customer 
that upon return of any products to Seller that such customer will be 
entitled to a credit for any amount other than the invoice price of the 
products so returned, and there is no standard in the industry of Seller 
for customers to obtain credits in excess of such amounts.

5.21 Approvals

Seller has obtained and there remain in effect, all governmental 
and administrative consents, permits, appointments, approvals, licenses, 
certificates and franchises necessary for the operation of its business as 
presently conducted by it, and the continued operation thereof on 
substantially the same basis following the Closing Date.

5.22 Governmental Authorizations; Third Party Consents

Except as set forth on Schedule 5.22 hereto, no approval, 
consent, compliance, exemption, authorization or other action by, or notice 
to or filing with, any governmental authority or any other person or 
entity, and no lapse of a waiting period, is necessary or required to be 
obtained by Seller, its Partners or Shaheen in connection with the 
execution, delivery or performance by any of them, of this Agreement or the 
transactions contemplated hereby.

5.23 Employee Arrangements: ERISA

Except as reflected on Schedule 5.23 hereto, Seller has (i) no 
union, collective bargaining, employment, management, severance or 
consulting agreements to which Seller is a party or otherwise bound which 
are not terminable, pursuant to their respective terms, by Seller without 
penalty or further obligation on 30 days notice or less, (ii) no 
compensation plans, bonus plans, deferred compensation agreements, pension 
and retirement plans, profit-sharing plans, stock purchase and stock option 
plans and/or (iii) no employee benefits plans established or maintained by 
Seller which are qualified for federal income tax exemption under Sections 
401 and 501 of the Internal Revenue Code of 1986, as amended, (the "Code"). 
All charges for vacation time have been accrued on the Balance Sheet in 
accordance with GAAP.

5.24 Environmental Matters

No Hazardous Material (as defined below) has been discharged, 
dumped, spilled, leaked, migrated, disposed of, or released at, on or under 
any properties which the Seller (i) currently owns, leases, occupies or 
operates or (ii) previously owned, leased, occupied or operated during such 
period of ownership, lease, occupation or operation. Seller has neither 
knowledge nor reason to believe or suspect, that any such discharge, 
dumping, spillage, leakage, disposal or release occurred before or after 
the Seller took title to, or possession or operation of, any of such 
properties, or that any such Hazardous Materials are migrating or have 
migrated off of such properties in subsurface soils, groundwater or surface 
waters. For purposes of this Section, "Hazardous Materials" means any 
pollutant, contaminant, hazardous, radioactive or toxic substance, 
material, constituent or waste, or any other waste, substance, chemical or 
material regulated under any environmental law of any jurisdiction, 
including (1) petroleum, crude oil and any fractions thereof, (2) natural 
gas, synthetic gas and any mixtures thereof, (3) asbestos and/or 
asbestos-containing material, (4) radon and (5) polychlorinated biphenyls 
("PCBs"), or materials or fluids containing PCBs.

5.25 Bank Accounts and Powers of Attorney

Schedule 5.25 hereto contains a complete and correct list 
showing (i) the name of each bank in which Seller has an account or safe 
deposit box and the names of all persons authorized to sign or draw thereon 
or have access thereto, and (ii) the names of all persons, if any, holding 
powers of attorney from Seller.

5.26 Certain Business Matters

Except as set forth on Schedule 5.26 hereto, (i) Seller is not a 
party to or bound by any distributorship, dealership, sales agency, 
franchise or similar agreement which relates to the sale or distribution of 
its products and services, (ii) Seller does not have any sole-source 
supplier of significant goods or services (other than utilities) with 
respect to which practical alternatives sources are not available on 
comparable terms and conditions and (iii) there are not pending, and to 
Seller's, its Partner's and/or Shaheen's knowledge, there are not 
threatened, any labor negotiations involving or affecting Seller, and to 
Seller's, its Partners' and Shaheen's knowledge, no organizing activities 
involving union representation exist in respect of any of its employees. 
Schedule 5.26 also sets forth any product warranties given to third parties 
by Seller and except for the product warranties described in Schedule 5.26 
Seller neither gives nor is bound by any express warranties relating to its 
products or services. To Seller's, its Partners' or Shaheen's knowledge, 
there has been no assertion of any breach of product warranties which could 
have a material adverse effect on the business or condition (financial or 
otherwise) of Seller and, to Seller's, its Partners' or Shaheen's 
knowledge, there are no problems or potential problems with respect to any 
product sold by Seller whether relating to its safety, efficacy, life or 
otherwise. Seller is not a party to or bound by any agreement which limits 
its freedom to compete in any line of business or with any person. Except 
as set forth on Schedule 5.26, Seller is not a party to or bound by any 
agreement or involved in any transaction in which any principal of Seller 
or any officer, director or stockholder of its Partners, or any affiliate 
or associate (as defined under the Securities Act) of any such person has, 
or had when made, a direct or indirect material interest.

5.27 Computer System

Except as disclosed on Schedule 5.27, all computer hardware and 
software and related materials used by Seller in the performance of 
Seller's business (collectively, the "Computer System") are in good working 
order and condition, and Seller has not experienced any significant defects 
in design, workmanship or material. The Computer System has the performance 
capabilities, characteristics and functions necessary for the conduct of 
Seller's business. The use of the Computer System by Seller (including any 
software modifications) (i) does not and has not violated or infringed upon 
and will not violate or infringe upon the rights of any third parties and 
(ii) does not and has not resulted and will not result in the termination 
of any maintenance, service or support agreement relating to any part of 
the Computer System or any reduction in the services provided to Seller, 
warranties available to Seller or rights of Seller thereunder. Consummation 
of the transactions contemplated hereby will not impair, preclude or 
increase the cost of the Buyer's use of the Computer System.

5.28 Purchase Commitments and Outstanding Bids

As of February 28, 1998, the aggregate of all accepted and unfulfilled 
orders for the sale of merchandise entered into by Seller is, in the 
aggregate, at least $21,946.00 and the aggregate of all orders or 
commitments for the purchase of supplies by Seller does not exceed 
$699,154.00, all of which orders and commitments were made in the ordinary 
course of business. As of the date of this Agreement, there are no claims 
against Seller to return merchandise by reason of alleged overshipments, 
defective merchandise or otherwise, or of merchandise in the hands of 
customers under an understanding that such merchandise would be returnable, 
other than claims made in the ordinary course of business or for which 
reasonable reserves have been taken on the Balance Sheet. To the knowledge 
of Seller, its Partners and/or Shaheen, no outstanding purchase or lease 
commitment of Seller was knowingly made at any price in excess of the then 
current market price.

5.29 Absence of Certain Business Practices

Neither Seller nor its Partners and/or Shaheen, nor any of their 
respective officers, directors, employees and/or agents have engaged in any 
activities in the operation of the Seller's business which are prohibited 
under United States federal, transnational, state, local or foreign 
statutes or laws, including, without limitation, (i) knowingly soliciting 
or receiving any remuneration (including any kickback, bribe, illegal gift, 
gratuity, rebate or other similar benefit), directly or indirectly, overtly 
or covertly, in cash or in kind or offering to pay such remuneration (a) in 
return for referring an individual to a person for the furnishing, or 
arranging for the furnishing, of any item or service or (b) in return for 
purchasing, leasing, or ordering or arranging for or recommending 
purchasing, leasing, or ordering any good, facility, service, or item, or 
(ii) knowingly selling any products or providing any services to any 
customers who are engaged or involved in any illegal practices or 
activities.

5.30 Investment Intent

Each entity or person receiving Stephan Common Stock hereunder 
is an "accredited investor" as such term is defined in Rule 501 in 
Regulation D under the Securities Act and has such knowledge and experience 
in financial and business matters and is capable of evaluating the merits 
and risks of an investment in the Stephan Common Stock. Each entity or 
person receiving Stephan Common Stock hereunder acknowledges that Buyer and 
Stephan have made available to each such person or entity the opportunity 
to ask questions of and receive satisfactory answers from Buyer and Stephan 
concerning Buyer and Stephan. All such questions have been answered to the 
satisfaction of each entity or person receiving Stephan Common Stock 
hereunder. In addition each entity or person receiving Stephan Common Stock 
further acknowledges receipt of all filings made by Stephan with the SEC 
since (and including) the filing of Stephan's latest annual report on Form 
10-K with the SEC. Shares of Stephan's Common Stock issued or to be issued 
hereunder are being acquired by each entity or person receiving Stephan 
Common Stock hereunder for such person or entity's own account, for 
investment and not with a view to, or for resale in connection with, any 
distribution of such shares within the meaning of the Securities Act.

5.31 Sale or Disposition of Stephan Common Stock

Seller, its Partners and Shaheen represent and warrant that they 
will not sell or otherwise dispose of any Stephan Common Stock except 
pursuant to: (i) a registration of the Shares under the Securities Act; 
(ii) compliance with the provisions of Rule 144 promulgated under the 
Securities Act, as it now exists or may hereafter be amended; or (iii) such 
other exemption from registration that may be applicable to such 
transaction.

5.32 Brokers

Except as set forth on Schedule 5.32, no agent, broker, person 
or firm acting on behalf of the Seller, its Partners or Shaheen, or under 
authority of any of the foregoing is or shall be entitled to a fee or 
brokerage commission or other like payment in connection with the 
transactions contemplated hereby from the Seller, its Partners or Shaheen.

5.33 Disclosure

No representation or warranty made by Seller, its Partners 
and/or Shaheen in any of the Executed Agreements contains or will contain 
any untrue statement of a material fact or omits or will omit to state a 
material fact necessary in order to make the statements therein not 
misleading.

                            ARTICLE 6.

          REPRESENTATIONS AND WARRANTIES OF BUYER AND STEPHAN

To induce Seller, its Partners, and Shaheen to enter into this 
Agreement, Buyer and Stephan make the following representations and 
warranties to Seller its Partners, and Shaheen:

6.1 Organization, Good Standing and Qualification

Buyer and Stephan are corporations duly organized, validly 
existing, and in good standing under the laws of Florida.

6.2 Due Authorization

The execution and delivery of this Agreement by Buyer and 
Stephan, and the performance by Buyer and Stephan of their obligations 
hereunder, have been or by the Closing Date will have been duly authorized 
by all requisite corporate action on the part of Buyer and Stephan, and no 
other corporate or shareholder authorization or approval is required for 
Buyer and Stephan to enter into this Agreement or to perform their 
obligations hereunder. This Agreement constitutes a valid and binding 
obligation of Buyer and Stephan enforceable in accordance with its terms, 
subject to the effects of bankruptcy, insolvency, fraudulent conveyance, 
moratorium, reorganization, or similar laws affecting creditors' rights and 
to general equitable principles.

6.3 Approvals and Consents

No consent, authorization, or waiver by or filing with any 
governmental agency or any person not a party to this Agreement is required 
in connection with the execution or performance of this Agreement by Buyer 
or Stephan or the consummation by Buyer and Stephan of the transactions 
contemplated hereby which have not been obtained by Buyer and Stephan, or 
as of the Closing will not have been obtained by Buyer and Stephan.


6.4 Disclosure

No representation or warranty made by Buyer or Stephan in any of 
the Executed Agreements contains or will contain any untrue statement of a 
material fact or omit or will omit to state a material fact necessary in 
order to make the statement therein not misleading.

                                ARTICLE 7.

SURVIVAL OF REPRESENTATIONS AND WARRANTIES

All representations, warranties, and obligations made by the 
parties to each other shall survive the Closing and delivery of the Stephan 
Common Stock under this Agreement, except to the extent otherwise provided 
in this Agreement or otherwise specifically waived in writing by the 
parties. Without limiting the foregoing, all representations, warranties, 
and obligations by Seller, its Partners and Shaheen and by Buyer and 
Stephan shall survive the Closing for a period of two (2) years after the 
Closing Date, except for breaches with respect to (i) Seller's and its 
Partners' authority to enter into and the binding effect of this Agreement, 
(ii) the good and marketable title to the Acquired Assets; (iii) all 
employee benefit plans, which were established or maintained by Seller to 
be qualified for federal income tax exemption under Sections 401 and 501 of 
the Internal Revenue Code of 1986, as amended, being in compliance with 
ERISA and other related federal income tax laws and Treasury regulations; 
(iv) the timely filing of true and correct tax returns, and the timely 
payment of all taxes; and (v) Seller's compliance with all applicable 
federal, state and local laws and regulations. Each of (i) and (ii) hereof 
shall survive indefinitely after the Closing Date, and each of (iii), (iv) 
and (v) shall survive up to the applicable statute of limitations.

                              ARTICLE 8.

                 SELLER'S OBLIGATIONS BEFORE CLOSING

Seller covenants that, except as otherwise agreed to in writing 
by Buyer and Stephan, from the date of this Agreement until the Closing:

8.1 Buyer's and Stephan's Access to Premises and Information

Buyer, Stephan and their counsel, accountants, and other 
representatives and agents shall be entitled to have reasonable access 
during normal business hours to all of Seller's properties, books, 
accounts, records, contracts, and documents of or relating to the Acquired 
Assets or the Business for the purpose of conducting Buyer's and Stephan's 
due diligence review, provided, that any due diligence review conducted by 
Buyer or Stephan or any representative of Buyer or Stephan shall not affect 
any of the representations and warranties made by Seller, its Partners or 
Shaheen hereunder. Seller shall furnish or cause to be furnished to Buyer, 
Stephan and their representatives all data and information concerning the 
business, finances, and properties of Seller that may reasonably be 
requested, and Buyer and Stephan and/or their representatives shall have 
the right to make copies thereof and excerpts therefrom.

8.2 Conduct of Business in Ordinary Course

Seller shall carry on its Business diligently and in 
substantially the same manner as it previously has been carried on, and 
Seller shall not make or institute any material change in the character of 
the Business or any unusual or novel methods of purchase, sale, lease, 
management, accounting or operation that will vary materially from the 
methods used by Seller as of the date of this Agreement, and shall not 
incur any additional Fleet Capital Indebtedness other than accrued 
interest.

8.3 Preservation of Business and Relationships

Seller shall use its best efforts to preserve its business 
organization intact, to keep available its present employees, and to 
preserve its present relationships with suppliers, customers, and others 
having business relationships with it. Seller shall maintain all of the 
Acquired Assets in good repair, order, and condition, except for normal 
wear and tear.

8.4 Maintenance of Insurance

Seller shall continue to carry its existing insurance, subject to 
variations in amounts required by the ordinary operations of its business.

8.5 Employees and Compensation

Seller shall not do, or agree to do, any of the following acts: 
(i) grant any increase in salaries payable or to become payable to any 
employee, sales agent or representative, (ii) increase benefits payable to 
any employee, sales agent, or representative under any bonus or pension 
plan or other contract or commitment, or (iii) adopt any new pension, 
welfare, benefit or severance plan. Seller shall permit Buyer and Stephan, 
in coordination with Seller, to contact its employees at reasonable times 
for the purpose of discussing with such employees prospective employment by 
Buyer.

8.6 New Transactions

Seller shall not do or agree to do any of the following acts: 
(i) enter into any contract, commitment, or transaction not in the usual 
and ordinary course of its business or which is inconsistent with Seller's 
past practice; (ii) enter into any contract, commitment, or transaction in 
the usual and ordinary course of business involving an amount exceeding 
$20,000.00 (iii) make any capital expenditures in excess of $15,000.00 for 
any single item or $20,000.00 in the aggregate, or enter into any leases of 
capital equipment or property under which the annual lease charge is in 
excess of $15,000.00; (iv) sell, dispose, or lease of any capital assets; 
or (v) incur any indebtedness, other than current trade payables, ordinary 
in nature and amount, incurred in the ordinary course of its business and 
consistent with past practices, or (vi) enter into any agreements or 
transaction with any person or entity who or which is an associate or an 
affiliate of Seller, its Partners or Shaheen.

	8.7	Distributions or Dividends

     Seller shall not make any cash distributions or dividend type payments 
to any of its Partners.

8.8 Advise Buyer and Stephan of Adverse Change

Seller shall promptly advise Buyer and Stephan of (i) the 
occurrence of any material adverse change in Seller's financial condition 
or in the results of its operations; (ii) the occurrence of any other event 
or condition that materially and adversely affects the Acquired Assets or 
the Seller's Business; or (iii) the imposition of any lien, pledge, or 
encumbrance on any of the Acquired Assets. Seller shall promptly notify 
Buyer and Stephan of: (A) any notice or other communication from any person 
alleging that the consent of such person is or may be required in 
connection with the transactions contemplated by this Agreement; (B) any 
notice or other communication from any governmental or regulatory agency or 
authority in connection with the transactions contemplated by this 
Agreement; (C) any actions, suits, claims, investigations or proceedings 
commenced or, to its knowledge threatened against, relating to or involving 
or otherwise affecting Seller, the Acquired Assets or the Business that, if 
pending on the date of this Agreement, would have been required to have 
been disclosed pursuant to Section 5.17 or that relate to the consummation 
of the transactions contemplated by this Agreement; (D) the damage or 
destruction of any Acquired Asset or part thereof; or (E) any Acquired 
Asset or part thereof becoming the subject of any proceeding or, to the 
best knowledge of Seller, threatened proceeding for the taking thereof or 
any part thereof or of any right relating thereto by condemnation, eminent 
domain or other similar governmental action.

8.9 Representations and Warranties True at Closing

Seller, its Partners and Shaheen shall assure that all of their 
representations and warranties set forth in this Agreement and in any 
written statements delivered to Buyer and Stephan by them under this 
Agreement are true and correct as of the date of this Agreement and shall 
be true and correct as of the Closing Date, as if made on those dates and 
that all conditions precedent to Closing shall have been met.

                              ARTICLE 9.

CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND STEPHAN

The obligations of Buyer and Stephan to consummate the 
transactions contemplated by this Agreement shall be subject to the 
satisfaction, on or before the Closing, of each of the following 
conditions, any of which may be waived by Buyer or Stephan:

9.1 Accuracy of Representations and Warranties

The representations and warranties of Seller, its Partners and 
Shaheen set forth in this Agreement shall be or shall have been true and 
correct in all respects (i) as of the date of this Agreement, and (ii) as 
of the Closing Date.

9.2 Seller's, its Partners' and Shaheen's Performances

Seller, its Partners and Shaheen shall have performed, 
satisfied, and complied with all covenants, agreements, and conditions 
required by this Agreement to be performed or complied with by Seller, its 
Partners and Shaheen on or before the Closing.

9.3 Absence of Litigation

No action, suit, or proceeding before any court or any 
governmental body or authority, pertaining to the transactions contemplated 
by this Agreement or to their consummation, shall have been instituted or 
threatened on or before the Closing.

9.4 Consents

All necessary agreements and consents of any party to the 
consummation of the transactions contemplated by this Agreement set forth 
on Schedule 5.22 shall have been obtained by Seller and delivered to Buyer 
and Stephan.

9.5 Approval of Documentation

The form and substance of all certificates, instruments, 
opinions, and other documents delivered to Buyer and Stephan under this 
Agreement, shall be satisfactory in all reasonable respects to Buyer and 
Stephan and their counsel.

9.6 Partners' and Shaheen's Certificate

Buyer shall have received a certificate, executed by the 
Partners and Shaheen, dated as of the Closing Date, in form and substance 
satisfactory to Buyer and its counsel, certifying that the conditions 
specified in Sections 9.1, 9.2, 9.3, 9.4 and 9.7 have been satisfied.

9.7 Partner Approval

The execution and delivery of this Agreement by Seller, and the 
performance of its covenants and obligations under it, shall have been duly 
authorized by all necessary partner action, and Buyer shall have received 
copies of all resolutions pertaining to that authorization, certified by 
the General Partner of Seller.

9.8 Due Diligence

Buyer and Stephan shall have completed their legal and financial 
due diligence review of Seller.

9.9 Opinion of Seller's Counsel

Buyer shall have received an opinion of Merritt & Tenney, LLP, 
counsel to Seller, dated as of the Closing, substantially in the form set 
forth as Exhibit B hereto.

9.10 Termination of Notes Payable

If Buyer issues any new notes payable or other written evidence 
of indebtedness in payment of any of Seller's creditors, any existing notes 
payable or other written evidences of indebtedness owed by Seller shall be 
canceled and such canceled notes payable or other written evidences of 
indebtedness shall be delivered to Buyer.

9.11 UCC Termination Statement

Stephan and Buyer shall have received UCC-Termination Statements from Fleet
Capital.

9.12 Escrow Agreement

Buyer and Stephan shall have received a fully executed copy of 
the Escrow Agreement substantially in the form set forth as Exhibit A 
hereto.

9.13 No Loss or Damage

There shall have been no loss or damage to any of Seller's assets 
in excess of $5,000.00, whether or not covered by insurance, and no 
material adverse change in the business or financial condition of Seller.

9.14 Bill of Sale and Assignment

Buyer shall have received a Bill of Sale and Assignment for the 
Acquired Assets duly executed by Seller and in substantially the form of 
Exhibit C hereto, and other good and sufficient instruments of transfer and 
conveyance in form and substance reasonably satisfactory to Buyer and its 
counsel (e.g., documents necessary for the transfer of the vehicles).

9.15 Sublease in California

Buyer and Seller shall have entered into a sublease for the 
premises described on Schedule 2.1(g) as Item 2, with the prior approval of 
Oro Construction Company.

9.16 Good Standing Certificate

Buyer shall have received a Certificate (s) of good standing of 
Seller dated within ten ( 10) days before the Closing, issued by the 
Secretaries of State of the jurisdictions in which Seller is qualified to 
transact business.

                              ARTICLE 10.

CONDITIONS PRECEDENT TO SELLER'S, ITS PARTNERS', AND SHAHEEN'S
                             PERFORMANCES

The obligations of Seller, to consummate the transactions 
contemplated by this Agreement shall be subject to the satisfaction, on or 
before the Closing, of each of the following conditions:

10.1 Accuracy of Representations and Warranties

The representations and warranties of Buyer and Stephan set forth 
in this Agreement shall be true and correct in all respects (i) as of the 
date of this Agreement; and (ii) as of the Closing Date.

10.2 Buyer's and Stephan's Performances

Buyer and Stephan shall have performed, satisfied, and complied 
with all covenants, agreements, and conditions required by this Agreement 
to be performed or complied with by Buyer and Stephan on or before the 
Closing.

10.3 Corporate Approval

The execution and delivery of this Agreement by Buyer and 
Stephan, and the performance of their covenants and obligations under it, 
shall have been duly authorized by all necessary corporate action.

10.4 Absence of Litigation

No action, suit, or proceeding before any court or any 
governmental body or authority, pertaining to the transaction contemplated 
by this Agreement or to its consummation, shall have been instituted or 
threatened on or before the Closing.

10.5 Officer's Certificate

Seller shall have received a certificate, executed by an 
executive officer of Buyer and Stephan, where applicable, dated as of the 
Closing, in form and substance satisfactory to Seller and its counsel, 
certifying that the conditions specified in Sections 10.1, ]0.2, 10.3 and 
10.4 have been satisfied.

10.6 Approval of Documentation

The form and substance of all certificates, instruments, 
opinions, and other documents delivered to Seller, its Partners and Shaheen 
under this Agreement, shall be satisfactory in all reasonable respects to 
Seller, its Partners, Shaheen and their counsel.

10.7 Stephan Common Stock

Seller shall have received a certificate for Stephan Common Stock 
representing seventy percent (70%) of the Purchase Price, as determined 
pursuant to Section 3.1 hereof.

10.8 Escrow Agent

Escrow Agent shall have received a certificate for Stephan Common 
Stock representing the remaining thirty percent (30%) of the Purchase 
Price, together with an executed copy of the Escrow Agreement.

10.9 Escrow Agreement

Seller shall have received a fully executed copy of the Escrow 
Agreement. substantially in the form set forth as Exhibit A hereto.

10.10 Lease

Seller shall have received a Lease Agreement substantially in the 
form annexed to this Agreement as Exhibit D.

                              ARTICLE 11.

OBLIGATIONS AFTER THE CLOSING DATE

11.1 Change of Name

Seller, the Partners and Shaheen agree that after the Closing 
they shall not use or employ in any manner directly or indirectly the name 
"Morris-Flamingo", or any variation thereof, and that Seller, the Partners 
and Shaheen will immediately take and cause to be taken all necessary 
action by himself, its Partners, and owners, as applicable, and any other 
required persons to change their name by the Closing to a name approved by 
Buyer.

11.2 Indemnification by Seller, its Partners, and Shaheen

Seller, its Partners, and Shaheen agree to indemnify and defend 
Buyer, Stephan, and their respective affiliates, officers, directors, 
employees and agents and hold each of them harmless after the Closing Date, 
and agrees to pay and reimburse such aforementioned entities and/or 
persons, (net of the proceeds of insurance, if any) against and in respect 
of:

(a) All liabilities and obligations of, or claims, of Seller 
other than the Fleet Capital Indebtedness and the Assumed Liabilities 
including, without limitation, any claims which may be made by either 
Cheung's Hair Beauty Supply Co., Ltd. or LePachu, Ltd. with respect to the 
Major Note under the provisions of Section 2.4 hereof;

(b) Any and all damages, losses, deficiencies, costs, and 
expenses, including without limitation, interest, penalties and reasonable 
attorneys' fees, ("Losses"), arising out of or resulting from any 
misrepresentation, inaccuracy in, breach or alleged breach of any 
representation or warranty, or breach or alleged breach or nonfulfillment 
of any obligation, agreement or covenant on the part of Seller, its 
Partners or Shaheen under this Agreement or from any misrepresentation in, 
omission from, or occasioned by any certificate or other document furnished 
to Buyer or Stephan under this Agreement whether in respect of a third 
party action or otherwise;

(c) Any and all actions, suits, proceedings, demands, 
assessments, judgements, costs, and reasonable legal and other reasonable 
expenses incident to any of the foregoing.

(d) Any losses, claims or reasonable expenses incurred by 
Stephan in connection with any information or omissions provided by Seller, 
its Partners, or Shaheen in any registration statement pursuant to Article 
12 hereof.

(e) Any and all Losses arising in connection with the ownership 
or use of the Acquired Assets (including, without limitation, any Losses 
attributable to product liability or warranty claims, and pending 
litigation, but excluding any losses incurred by Buyer as a result of the 
sale or other disposition of any Acquired Assets by Buyer after the Closing 
Date or resulting from the actions or inactions of Buyer), or resulting 
from or arising out of any liability or obligation of the Seller (other 
than, after the Closing Date, the Fleet Capital Indebtedness and the 
Assumed Liabilities) or any of its affiliates, prior to the Closing Date, 
whether in respect of a third-party action or otherwise. In regard to any 
union contract or collective bargaining agreement, Seller shall be 
responsible for all obligations prior to the Closing Date. As of the 
Closing Date, Buyer shall be responsible for any union contract or 
collective bargaining agreement obligations arising or occurring thereunder 
on or after the Closing Date.

(f) Notwithstanding the foregoing, Seller, its Partners and 
Shaheen shall not indemnify Buyer and Stephan for any such indemnification 
obligations until such obligations, excluding any reasonable attorneys' 
fees actually incurred by Buyer and Stephan and excluding any claims which 
may be made by either Cheung's Hair Beauty Supply Co., Ltd. or Lepachu, 
Ltd. with respect to and in connection with the indebtedness owed to them 
by Major International Supply, equal or exceed $50,000.00 in the aggregate, 
in which case such indemnification obligations of Seller, its Partners and 
Shaheen shall include all such indemnification obligations including such 
$50,000.00 amount actually incurred by Buyer and Stephan, and provided 
further, that all such indemnification obligations of Seller's Partners and 
Shaheen shall in all events be limited to the Stephan Common Stock or the 
proceeds from the sale thereof received by Seller, its Partners or Shaheen 
as the Purchase Price hereunder. The reasonable attorneys' fees actually 
incurred by Buyer and Stephan and any claims which may be made by either 
Cheung's Hair Beauty Supply Co., Ltd. or Lepachu, Ltd. with respect to and 
in connection with the indebtedness owed to them by Major International 
Supply shall be indemnified regardless of the $50,000.00 amount.

 (g)To provide Buyer and Stephan with partial security for 
Seller's, its Partners', and Shaheen's indemnification obligations 
hereunder, as well as to adjust the Purchase Price downward on a dollar for 
dollar basis as provided for in Section 3.1 (c) hereof, Seller, its 
Partners, and Shaheen shall execute an Escrow Agreement substantially in 
the form attached hereto as Exhibit A, with thirty percent (30%) of the 
Stephan Common Stock issued at Closing to be held in escrow and disposed of 
as provided for in the Escrow Agreement. If, and to the extent that, there 
may be insufficient Escrow Property (as defined in the Escrow Agreement) to 
satisfy any indemnification obligations hereunder, the Seller shall, at its 
option, either satisfy such Loss by the payment of cash to Buyer or by the 
satisfaction of such Loss with Stephan Common Stock. For purposes of any 
such payments made by Seller with Stephan Common Stock, the Stephan Common 
Stock shall be valued at $11.00, subject to adjustment upward or downward 
of up to ten percent ( 10%) based on the average closing sales price of 
Stephan's Common Stock as reported by the American Stock Exchange for the 
twenty (20) trading days prior to the Closing Date.

(h) The procedure for seeking indemnification shall be as follows:

Buyer and Stephan agree that promptly upon receipt by either of 
them of notice of any demand, assertion, claim, action or proceeding, 
judicial or otherwise with respect to any matter as to which Seller, its 
Partners and Shaheen have agreed to indemnify Buyer and Stephan, Buyer and 
Stephan shall give prompt notice thereof in writing to the Seller, its 
Partners and Shaheen, together with the statement of such information 
respecting such demand, assertion, claim, action or proceeding as Buyer and 
Stephan shall then have; provided, however, that Seller, its Partners and 
Shaheen shall not be relieved of liability hereunder for failure by the 
Buyer and Stephan to give prompt written notice, unless Seller, its 
Partners and Shaheen are materially prejudiced by such failure, in which 
case Seller, its Partners and Shaheen shall not be liable for any indemnity 
under this Agreement to the extent so prejudiced. If Seller, its Partners 
and Shaheen acknowledge full responsibility under this Agreement, Seller, 
its Partners and Shaheen shall contest and defend by all appropriate legal 
or other proceedings any demand, assertion, claim, action or proceeding 
with respect to which they have been called upon to indemnify the Buyer and 
Stephan under the provisions of this Agreement; provided, however, that:

(i) notice of intention to contest and defend shall be delivered to the 
Buyer and Stephan within fifteen (15) calendar days from the receipt by 
Seller, its Partners and Shaheen of notice of the assertion of such 
demand, assertion, claim, action or proceeding;

(ii) Seller, its Partners and Shaheen shall pay all costs and expenses of 
such contest, including all attorneys' and accountants' fees, and the 
cost of any bond required by law to be posted in connection with such 
contest;

(iii) such contest shall be conducted by reputable attorneys employed by 
Seller, its Partners and Shaheen (with the reasonable approval of the 
Buyer and Stephan) at Seller's, its Partners' and Shaheen's sole cost 
and expense, but Buyer and Stephan shall have the right to participate 
in such proceedings and to be represented by attorneys of its own 
choosing, at its own cost and expense;

(iv) if, after such opportunity, Seller, its Partners and Shaheen do not 
elect to assume the defense in any such proceeding, then Stephan and/or 
Buyer may contest and defend against such asserted claim or liability 
in such manner as it may deem appropriate, including settling such 
claim, and Seller, its Partners and Shaheen shall (A) be bound by the 
results obtained by Buyer and Stephan, including any out-of-court 
settlement or compromise and (B) pay all of Stephan's and/or Buyer's 
costs and expenses (including reasonable legal fees) in defending such 
matter;

(v) Seller, its Partners and Shaheen will not settle any claim without the 
prior written consent of Buyer and Stephan, unless the settlement 
contains a complete and unconditional release of the Buyer and Stephan, 
and the settlement does not involve the imposition of any nonmonetary 
relief on Buyer and Stephan.

11.3 Retention of Shares or Proceeds

Seller, its Partners, and Shaheen covenant that during the two 
(2) years following the Closing Date, they shall hold the Stephan Common 
Stock or the proceeds from the sale of any Stephan Common Stock. During 
this two (2) years, Seller may distribute some or all of such Stephan 
Common Stock solely to its Partners or Shaheen to be held by its Partners 
and Shaheen, in accordance with their ownership interests in Seller or with 
respect to Shaheen, according to his ownership of MFB.

11.4 Access to Records

For a four (4) year period from and after the Closing Date, 
Buyer shall retain all books and records received from Seller, including, 
but not limited to, the books and records referred to in Section 2.1(f) of 
this Agreement. Buyer shall allow Seller, its Partners, and Shaheen, their 
counsel, accountants and other representatives and agents, reasonable 
access to such books and records which Seller, its Partners and Shaheen, 
their counsel, accountants and other representatives and agents may 
reasonably require to comply with their obligations under this Agreement 
and the law (e.g., audit of Seller's income tax or sales tax returns by 
federal or state agencies). Seller agrees to provide Buyer with fifteen 
(15) days prior written request for access to such books and records. Such 
request shall contain the specific books and records which are needed by 
Seller together with the reasons why Seller needs access to such books and 
records. Buyer's consent to such request shall not be unreasonably 
withheld. In the event that Seller is required by Buyer or is otherwise 
required to have access to such books and records upon Buyer's business 
premises, then such access must be during normal business hours without 
unreasonable interference with Buyer's employees. Such access must also be 
concluded within a reasonable time period and all costs which may be 
incurred by Buyer in granting such access to Seller shall be the 
responsibility of Seller.

11.5 Deposits of Checks

Seller shall cooperate with Buyer in making all necessary 
arrangements so that checks, wire transfers and/or other payments on the 
accounts receivable shown on Schedule 2.1 (c) may be deposited into Buyer's 
bank accounts without endorsement by Seller.

                              ARTICLE 12.

                          REGISTRATION RIGHTS

12.1 Request for Registration

Notwithstanding Seller's, its Partners', and Shaheen's 
(hereinafter in this Article 12 referred to as "Holders") present 
intentions to acquire the Stephan Common Stock for the purpose of 
investment, as set forth in this Agreement, Stephan shall prepare and file 
a registration statement, under the Securities Act with respect to all of 
the Stephan Common Stock then owned by Holders, as and when such filing is 
requested by Holders; provided, however, that such request shall not be 
made by Holders before one (I ) year from the Closing Date. Stephan shall 
use its best efforts to make the registration statement effective as 
promptly as practicable, including, without limitation, filing 
post-effective amendments, appropriate qualifications under applicable blue 
sky or other state securities laws, and appropriate compliance with the 
Securities Act. Stephan shall not be obligated to effect, or to take any 
action to effect any such registration pursuant to this Section 12.1 after 
Stephan has initiated one such registration pursuant to this Section 12.1 
(counting for these purposes only registrations which have been declared or 
ordered effective). For purpose of this Section 12.1, Holders shall have 
three (3) years, commencing one (1) year from the Closing Date, within 
which to exercise their rights to request such registration but if 
registration of all of the Shares has not occurred by the end of such three 
(3) years, then Stephan agrees to register all of the unregistered Shares 
immediately upon the expiration of such three (3) years. Notwithstanding 
anything to the contrary set forth herein, Stephan shall not be required to 
register the Stephan Common Stock if in the opinion of counsel to Stephan 
the disposition of the Stephan Common Stock is exempt from the registration 
and prospectus requirements of the Act.

12.2 Inclusion of Shares in Registration

If, within three (3) years after the Closing Date, Stephan files 
a registration statement under the Securities Act, covering a sale by 
Stephan of its common stock (other than a registration statement or a form 
that does not permit the inclusion of shares by its securities holders), 
Stephan shall mail to each Holder (at Holder's address in the Stephan's 
share transfer records) written notice of its intent to file such 
registration statement. If a Holder delivers a written request to Stephan, 
within twenty (20) days after the mailing of the notice, setting forth the 
number of shares of Stephan Common Stock Holder desires to include in such 
registration, Stephan agrees to use its best efforts to include those 
shares of Stephan Common Stock of each such Holder in the registration 
statement and related underwriting arrangements; provided, however, that 
Stephan shall not be so obligated if, in the opinion of counsel for 
Stephan, the disposition of such shares requested to be included in such 
registration is exempt from the registration and prospectus requirements of 
the Act. Each Holder agrees that, if the offering by Stephan is 
underwritten, Holder's shares of Stephan Common Stock are to be 
underwritten by the same underwriter or underwriters on the same basis as 
the other shares of Stephan Common Stock included. If, in spite of 
reasonable efforts of Stephan, the inclusion of all of the shares of 
Stephan Common Stock that each Holder intends to sell shall not be 
acceptable to the managing underwriter or underwriters of the offering, 
Stephan may limit or eliminate the number of shares of Stephan Common Stock 
of each Holder to be sold. If the offering is not completed within ninety 
(90) days after the effective date of the registration statement, Stephan 
shall be entitled to register any unsold portion of the shares of Stephan 
Common Stock. The manner and conduct of any registration, including the 
contents of the registration statement and of any underwriting or other 
related agreements, shall be entirely in the control and discretion of 
Stephan. Each Holder agrees to cooperate with Stephan in the preparation 
and filing of any registration statement prepared and filed under this 
Section 12.2. Each Holder shall make the customary agreements, 
representations, warranties, and indemnifications to the underwriters in 
any offering with respect to any Stephan Common Stock included at such 
Holder's request.

12.3 Expenses of Registration

All expenses of every kind relating to the preparation and filing 
of all registration statements, amendments, supplements, prospectuses, and 
other documents under this Article 12 shall be paid by Stephan, including 
all costs and expenses, ordinarily incurred in connection with the public 
offering of securities, including, without limitation, printing costs and 
fees and expenses of counsel and accountants for Stephan. However, the 
expenses payable by Stephan shall not include the fees and expenses of 
counsel of the selling Holders or underwriting discounts, commissions or 
expenses, which are customarily incurred by Holders in such transactions, 
which shall be the responsibility of Holders.

12.4 Additional Request for Registration and Extension of Time

If Stephan and/or the underwriters limit the Stephan Common 
Stock which Holders desire to register in exercising either their request 
for registration under Section 12.1 hereof or their "piggyback" rights 
under Sections 12.2 hereof, then Holders shall be entitled to an additional 
request for registration under Section 12.1 hereof, and the three (3) years 
as specified in Sections 12.1 and 12.2 hereof shall be extended by six (6) 
months, if, and only if, any such limitation is imposed by Stephan and/or 
the underwriters during the last six (6) months of the applicable periods 
of Section 12.1 or 12.2.

12.5 Information by Holder; Indemnification

Each Holder shall furnish to Stephan such information regarding 
such Holder as Stephan may reasonably request in writing and as shall be 
reasonably required in connection with any registration, qualification, or 
compliance referred to in this Article 12. Each Holder agrees to indemnify 
Stephan for any omissions or misstatements in information provided to 
Stephan, and Stephan agrees to indemnify each Holder for any omissions or 
misstatements made in connection with any registration, qualification, or 
compliance referred to in this Article 12 and relating to the registration 
of Stephan Common Stock except insofar as such omissions or misstatements 
are caused by or relate to the information provided to Stephan by each 
Holder.

                             ARTICLE 13.

GENERAL

13.1 Cooperation

From and after the Closing, Seller and Buyer shall cooperate 
fully with each other to the end that the Acquired Assets (and all other 
assets relating to the Business) and title thereto shall be fully and 
effectively transferred to and conveyed to Buyer. Such cooperation shall 
include execution and delivery of such further instruments, consents, 
notices, acknowledgments, applications and other documents, as may be 
reasonably requested by either party hereto.

13.2 Bulk Sales

The transactions contemplated herein shall be consummated 
without compliance with the bulk sales laws of any of the states in which 
Seller is located. Seller, its Partners and Shaheen shall indemnify and 
hold Buyer harmless from any and all losses arising as a result of any 
non-compliance with any bulk sales law unless such losses arise from 
Buyer's failure to pay obligations Buyer has assumed under this Agreement.

13.3 No Third Party Beneficiaries

Nothing contained in this Agreement shall be construed to confer 
upon or give to any person or entity other than the parties hereto and 
their successors and assigns, any rights or remedies under or by reason of 
this Agreement.

13.4 Notices

All notices, requests, demands, and other communications under 
this Agreement shall be in writing and shall be deemed to have been duly 
given on the date of service if served personally on the party to whom 
notice is to be given, or on the third day after mailing to the party to 
whom notice is to be given, by first class mail registered or certified, 
postage prepaid, and properly addressed and via facsimile as follows:

Seller or Partners:           Shouky A. Shaheen
                              3715 Northside Parkway
                              300 Northcreek, Suite 710
                              Atlanta, Georgia 30327  
                              fax: (404) 266- 1725


With copy to:                 Michael W. Rushing 
                              Merritt & Tenney LLP  
                              200 Galleria Parkway, N W.
                              Suite 500 
                              Atlanta, Georgia 30339-3151 
                              fax: (770) 952-0028

 
Buyer:                        Frank F. Ferola, Sr. 
                              The Stephan Co. 
                              1850 West McNab Road
                              Fort Lauderdale, Florida 33309 
                              fax: (954) 971-9903
    

With copy to:                 Stephen A. Ollendorff, Esq.
                              Hertzog, Calamari & Gleason 
                              lOO Park Avenue 
                              23rd Floor 
                              New York, New York 10017-5582 
                              fax: (212) 213-1199

13.5 Binding Effect

This Agreement shall be binding upon and inure to the benefit of 
the parties hereto, and their respective successors, assigns, heirs, 
executors and personal representatives.

13.6 Entire Agreement; Modification; Waiver

This Agreement and the schedules and exhibits attached to this 
Agreement set forth the entire agreement of the parties hereto with respect 
to the matters contained herein and no prior or contemporaneous agreement 
or understanding, oral or written, pertaining to any such matter shall be 
effective for any purpose. No supplement, modification or amendment to this 
Agreement shall be binding unless executed in writing by all of the parties 
hereto. No waiver of any of the provisions of this Agreement shall be 
deemed, or shall constitute, any waiver of any other provision, whether or 
not similar, nor shall any waiver constitute a continuing waiver. No waiver 
shall be binding unless executed in writing by the party making the waiver.

13.7 Expenses

Each of the parties shall pay all costs and expenses incurred or 
to be incurred by it in negotiating and preparing this Agreement and in 
closing and carrying out the transactions contemplated by this Agreement.

13.8 Construction

This Agreement shall be governed by and construed in accordance 
with the laws of the State of Florida, and the parties hereby agree that 
exclusive jurisdiction as to any and all claims or causes of action shall 
be in the State of Florida.

13.9 Brokerage

The parties acknowledge that Croft & Bender, LLC, 4200 Northside 
Parkway, N.W.- Building 7-A, Atlanta, Georgia 30327 was a procuring cause 
of this transaction, and Seller shall pay to Croft & Bender, LLC, an 
investment banking fee in connection with this transaction by separate 
agreement between Seller and Croft & Bender, LLC. Neither Buyer nor Stephan 
engaged a broker in this transaction. Seller agrees to indemnify and hold 
harmless Buyer and Stephan from and against any claims made by Croft & 
Bender, LLC which may arise in connection with the separate brokerage 
agreement between Seller and Croft & Bender, LLC, or claims of any other 
broker or finder.

13.10 Assignment

This Agreement may not be assigned by any party, by operation of 
law or otherwise, without the prior written consent of all other parties to 
this Agreement.

13.11 Counterparts

This Agreement may be executed in any number of counterparts, 
each of which shall be an original, but all of which shall constitute one 
instrument.

13.12 Headings

The subject headings of the articles and sections of this 
Agreement are for purposes of convenience only, and shall not affect the 
construction or interpretation of any of its provisions.

IN WITNESS WHEREOF, this Asset Purchase Agreement has been 
executed by the parties hereto as of the date first above written.