Exhibit 2.1



                          AGREEMENT AND PLAN OF MERGER


                            Dated as of July 21, 2004


                                      Among


                             FUSION ACQUISITION LLC


                                AHC MERGER, INC.


                                       And


                             AHC I ACQUISITION CORP.


<PAGE>


                                TABLE OF CONTENTS

                                                                         Page

ARTICLE I    THE MERGER....................................................2

     SECTION 1.01.   The Certificate of Designations Amendment and
                     the Merger............................................2

     SECTION 1.02.   Closing...............................................2

     SECTION 1.03.   Effective Time........................................2

     SECTION 1.04.   Effects of the Merger.................................2

     SECTION 1.05.   Certificate of Incorporation and By-laws..............3

     SECTION 1.06.   Directors.............................................3

     SECTION 1.07.   Officers..............................................3

ARTICLE II   EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
             CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
             AND THE COMPANY STOCK OPTIONS.................................3

     SECTION 2.01.   Effect on Capital Stock...............................3

     SECTION 2.02.   Exchange of Certificates..............................5

     SECTION 2.03.   Company Stock Options.................................7

     SECTION 2.04.   Closing Date and Post-Closing Merger
                     Consideration Adjustment..............................7

ARTICLE III  REPRESENTATIONS AND WARRANTIES OF THE COMPANY................10

     SECTION 3.01.   Organization, Standing and Corporate Power...........10

     SECTION 3.02.   Capital Structure....................................10

     SECTION 3.03.   Authority; Noncontravention..........................11

     SECTION 3.04.   Governmental Approvals...............................12

     SECTION 3.05.   Litigation...........................................12

     SECTION 3.06.   Compliance with Laws; Permits........................13

     SECTION 3.07.   Affiliate Transactions...............................13

     SECTION 3.08.   Subsidiaries.........................................14

     SECTION 3.09.   No Brokers...........................................14

     SECTION 3.10.   SEC Reports; Financial Statements....................14

     SECTION 3.11.   Undisclosed Liabilities..............................15


<PAGE>


                               TABLE OF CONTENTS
                                  (continued)

                                                                         Page

     SECTION 3.12.   Intellectual Property................................15

     SECTION 3.13.   Contracts and Commitments............................16

     SECTION 3.14.   Employee Benefits....................................16

     SECTION 3.15.   Absence of Certain Changes...........................18

     SECTION 3.16.   Taxes................................................21

     SECTION 3.17.   Insurance............................................23

     SECTION 3.18.   Environmental Matters................................24

     SECTION 3.19.   Real Property........................................25

     SECTION 3.20.   Labor Relations......................................27

     SECTION 3.21.   Inventories; Receivables; Payables...................27

     SECTION 3.22.   Customers, Suppliers and Sales Representatives.......28

     SECTION 3.23.   No Other Representations or Warranties...............28

ARTICLE IV   REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB......28

     SECTION 4.01.   Organization, Standing and Corporate Power...........28

     SECTION 4.02.   Authority; Noncontravention..........................28

     SECTION 4.03.   Governmental Approvals...............................29

     SECTION 4.04.   Litigation...........................................29

     SECTION 4.05.   Brokers and Other Advisors...........................30

     SECTION 4.06.   Interim Operations of Merger Sub.....................30

ARTICLE V    COVENANTS RELATING TO CONDUCT OF BUSINESS....................30

     SECTION 5.01.   Conduct of Business..................................30

ARTICLE VI   ADDITIONAL AGREEMENTS........................................33

     SECTION 6.01.   Section 262 Notice and Information Statement;
                     Section 228(e) Notice................................33

     SECTION 6.02.   Access to Information; Confidentiality...............33

     SECTION 6.03.   Efforts..............................................34

     SECTION 6.04.   Indemnification, Exculpation and Insurance...........34

     SECTION 6.05.   Cooperation..........................................35

     SECTION 6.06.   Fees and Expenses....................................36


                                       ii


<PAGE>


                                TABLE OF CONTENTS
                                   (continued)

                                                                         Page

     SECTION 6.07.   Public Announcements.................................37

     SECTION 6.08.   Stock Option Plan....................................37

     SECTION 6.09.   Further Assurances...................................37

     SECTION 6.10.   Termination of Affiliate Arrangements................37

     SECTION 6.11.   Equity Commitment....................................37

ARTICLE VII  CONDITIONS PRECEDENT.........................................37

     SECTION 7.01.   Conditions to Each Party's Obligation to
                     Effect the Merger....................................37

     SECTION 7.02.   Conditions to Obligations of Parent and
                     Merger Sub...........................................38

     SECTION 7.03.   Conditions to Obligations of the Company.............39

     SECTION 7.04.   Frustration of Closing Conditions....................39

     SECTION 7.05.   Documents to be Delivered by the Company.............39

     SECTION 7.06.   Documents to be Delivered by Parent and
                     Merger Sub...........................................39

ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER............................40

     SECTION 8.01.   Termination..........................................40

     SECTION 8.02.   Effect of Termination................................40

     SECTION 8.03.   Amendment............................................40

     SECTION 8.04.   Extension; Waiver....................................40

ARTICLE IX   GENERAL PROVISIONS...........................................41

     SECTION 9.01.   Nonsurvival..........................................41

     SECTION 9.02.   Remedies; Specific Enforcement.......................41

     SECTION 9.03.   Notices..............................................41

     SECTION 9.04.   Definitions..........................................43

     SECTION 9.05.   Interpretation.......................................44

     SECTION 9.06.   Counterparts.........................................44

     SECTION 9.07.   Entire Agreement; Third-Party Beneficiaries..........45

     SECTION 9.08.   Governing Law........................................45

     SECTION 9.09.   Assignment...........................................45

     SECTION 9.10.   Consent to Jurisdiction..............................45


                                      iii


<PAGE>


                               TABLE OF CONTENTS
                                   (continued)

                                                                         Page

     SECTION 9.11.   Waiver of Jury Trial.................................45

     SECTION 9.12.   No Recourse..........................................45

     SECTION 9.13.   Severability.........................................45

EXHIBIT A - Contribution Agreement
EXHIBIT B - Certificate of Designations Amendment


                                       iv


<PAGE>


                             Table of Defined Terms
                             ----------------------

Term                                                              Section
----                                                              -------

Affiliate......................................................   9.04(a)
Affiliate Agreement............................................   3.07
Agreement......................................................   Preamble
AKI............................................................   2.01(c)
Appraisal Shares...............................................   2.01(d)
Business Day...................................................   9.04(b)
Certificate....................................................   2.01(c)
Certificate of Designations....................................   1.01
Certificate of Designations Amendment..........................   1.01
Certificate of Merger..........................................   1.03
Closing........................................................   1.02
Closing Date...................................................   1.02
Closing Working Capital........................................   2.04(f)
Code...........................................................   2.02(f)
Company........................................................   Preamble
Company By-laws................................................   3.03(b)
Company Cash...................................................   2.01(c)
Company Certificate............................................   3.03(b)
Company Common Stock...........................................   2.01
Company Disclosure Schedule....................................   Article III
Company Indebtedness...........................................   2.01(c)
Company Preferred Stock........................................   1.01(a)
Company Real Property..........................................   3.19(a)
Company Stock Options..........................................   3.02
Company Stock Plan.............................................   2.03
Confidential Information.......................................   6.02(b)
Contract.......................................................   9.04(c)
Contribution Agreement.........................................   Recitals
Credit Facility................................................   2.01(c)
Debt Tender Offer..............................................   6.05
DGCL...........................................................   1.01
Effective Time.................................................   1.03
Environmental Claims...........................................   3.18(a)(v)
Environmental Laws.............................................   3.18(d)(i)
Environmental Liabilities......................................   3.18(d)(ii)
ERISA..........................................................   3.14(a)
Estimated Working Capital......................................   2.04(b)
Estimated Working Capital Statement............................   2.04(b)
Exchange Act...................................................   9.04(d)
Financial Statements...........................................   3.10(b)
Former Company Real Property...................................   3.18(d)(iii)
GAAP...........................................................   2.01(c)


<PAGE>


                            Table of Defined Terms
                             ----------------------

Term                                                              Section
----                                                              -------

Governmental Authority.........................................   9.04(e)
Hazardous Substances...........................................   3.18(d)(iv)
HSR Act........................................................   3.04
Independent Accounting Firm....................................   2.04(e)
Intellectual Property..........................................   3.12
IRS............................................................   3.16(b)
JHC............................................................   Preamble
Knowledge......................................................   9.04(f)
Laws...........................................................   3.03(b)
Leased Real Property...........................................   3.19(a)
Liens..........................................................   9.04(g)
Material Adverse Effect........................................   9.04(h)
Merger.........................................................   Recitals
Merger Consideration...........................................   2.01(c)
Merger Sub.....................................................   Preamble
Multi-Employer Plan............................................   3.14(d)
Objection Notice...............................................   2.04(d)
Objection Period...............................................   2.04(d)
Owned Real Property............................................   3.19(a)
Parent.........................................................   Preamble
Payment Fund...................................................   2.02(a)
Per Share Merger Consideration.................................   2.01(c)
Permits........................................................   3.06(b)
Permitted Exceptions...........................................   3.19(e)
person.........................................................   9.04(i)
PIK Notes......................................................   2.01(c)
Plans..........................................................   3.14(a)
Real Property Leases...........................................   3.19(a)
Restraints.....................................................   7.01(b)
SEC............................................................   3.10(a)
SEC Reports....................................................   3.10(a)
Section 262....................................................   2.01(d)
Securities Act.................................................   9.04(j)
Senior Notes...................................................   2.01(c)
Stockholder Approvals..........................................   Recitals
Stockholder Representative.....................................   2.04(a)
Subsidiary.....................................................   9.04(k)
Subsidiary Shares..............................................   3.08(b)
Surviving Corporation..........................................   1.01(b)
Surviving Corporation Representative...........................   2.04(a)
Target Working Capital.........................................   2.01(c)
Tax............................................................   3.16


                                       vi


<PAGE>


                             Table of Defined Terms
                             ----------------------

Term                                                              Section
----                                                              -------

Tax Returns....................................................   3.16
Title IV Plan..................................................   3.14(d)
Transaction Expenses...........................................   6.06
Transactions...................................................   Recitals
VHH............................................................   Recitals
VHH Merger Agreement...........................................   Recitals
WC Difference..................................................   2.04(g)
Working Capital................................................   2.04(f)
Working Capital Escrow Amount..................................   2.02(a)
Working Capital Statement......................................   2.04(c)


                                      vii


<PAGE>


                          AGREEMENT AND PLAN OF MERGER

     This AGREEMENT AND PLAN OF MERGER (this "Agreement"),  dated as of July 21,
2004, is among FUSION  ACQUISITION  LLC, a Delaware  limited  liability  company
("Parent"),  AHC  MERGER,  INC.,  a  Delaware  corporation  and  a  wholly-owned
Subsidiary of Parent  ("Merger  Sub"),  and AHC I ACQUISITION  CORP., a Delaware
corporation (the "Company").

     WHEREAS,  the Board of  Directors of each of Merger Sub and the Company has
approved  and  declared  advisable,  and the Board of  Directors  of Parent  has
approved,  this Agreement and the merger of Merger Sub with and into the Company
(the  "Merger"),  upon the terms and subject to the conditions set forth in this
Agreement.

     WHEREAS,  the Board of  Directors  of the Company has approved and declared
advisable  the  Certificate  of  Designations  Amendment  as defined and further
described below.

     WHEREAS,  the  holders of a majority of the  outstanding  shares of Company
Common  Stock and  Company  Preferred  Stock  have  executed  a written  consent
approving  and  adopting  this  Agreement,  and the holders of a majority of the
outstanding  shares of Company  Preferred  Stock have executed a written consent
approving  and  adopting  the   Certificate  of   Designations   Amendment  (the
"Stockholder Approvals").

     WHEREAS,  concurrently  herewith,  Parent  has  entered  into that  certain
Agreement and Plan of Merger, dated as of even date herewith,  among Parent, VHH
Merger,  Inc.  and Von Hoffmann  Holdings  Inc.  ("VHH"),  pursuant to which VHH
Merger, Inc. will merge with and into VHH (the "VHH Merger Agreement").

     WHEREAS,  concurrently  herewith,  Parent  has  entered  into that  certain
Contribution  Agreement  among  Parent and Jostens  Holding  Corp.  ("JHC") (the
"Contribution  Agreement")  substantially in the form attached hereto as Exhibit
A.

     WHEREAS,  the transactions  contemplated by this Agreement,  the VHH Merger
Agreement and the Contribution  Agreement are collectively referred to herein as
the "Transactions").

     WHEREAS,  Parent,  Merger  Sub  and the  Company  desire  to  make  certain
representations,  warranties,  covenants and  agreements in connection  with the
Merger and also to prescribe various conditions to the Merger.

     NOW,  THEREFORE,  in  consideration  of  the  representations,  warranties,
covenants and agreements  contained in this Agreement,  the parties hereto agree
as follows:


                                       1


<PAGE>


                                    ARTICLE I

                                   THE MERGER

     SECTION 1.01  The Certificate of Designations Amendment and the Merger.

     (a)  Upon  the  terms  and  subject  to the  conditions  set  forth in this
Agreement,  as soon as is  reasonably  practicable  after the date  hereof,  the
Company  shall  file  with the  Secretary  of State of the State of  Delaware  a
Certificate  of  Amendment  to  the  Certificate  of  Designations,  Rights  and
Preferences  (the  "Certificate of  Designations")  of the 15% Senior  Preferred
Stock,  par value $0.01 per share, of the Company  ("Company  Preferred  Stock")
effecting the amendment to the Certificate of Designations  set forth on Exhibit
B hereto (such amendment,  the "Certificate of Designations  Amendment")  (which
Certificate of Amendment shall provide for the  effectiveness of the Certificate
of Designations Amendment upon the filing of such Certificate of Amendment).

     (b)  Upon  the  terms  and  subject  to the  conditions  set  forth in this
Agreement and in  accordance  with the General  Corporation  Law of the State of
Delaware (the  "DGCL"),  Merger Sub shall be merged with and into the Company at
the  Effective  Time.  Following  the  Effective  Time,  the separate  corporate
existence  of Merger Sub shall  cease,  and the  Company  shall  continue as the
surviving  corporation  in the Merger (the  "Surviving  Corporation")  and shall
succeed to and assume all the rights and obligations of Merger Sub in accordance
with the DGCL.

     SECTION 1.02 Closing.  The closing of the Merger (the  "Closing") will take
place at 10:00 a.m.  on a date to be  specified  by the  parties  (the  "Closing
Date"),  which shall be no later than the tenth day after satisfaction or waiver
of the conditions set forth in Article VII (other than those  conditions that by
their terms are to be satisfied at the Closing,  but subject to the satisfaction
or waiver of those  conditions),  at the offices of Weil,  Gotshal & Manges LLP,
767 Fifth  Avenue,  New York,  New York 10153,  unless  another date or place is
agreed to by the parties hereto.

     SECTION 1.03 Effective  Time.  Subject to the provisions of this Agreement,
as soon as practicable on the Closing Date, the parties shall file a certificate
of merger (the "Certificate of Merger") executed in accordance with the relevant
provisions of the DGCL and, as soon as practicable on or after the Closing Date,
shall make all other filings or recordings  required  under the DGCL. The Merger
shall become  effective at such time as the  Certificate of Merger is duly filed
with the  Secretary of State of the State of Delaware,  or at such other time as
Parent and the  Company  shall  agree and shall  specify in the  Certificate  of
Merger (the time the Merger becomes effective being the "Effective Time").

     SECTION 1.04  Effects of the Merger.  The Merger shall have the effects set
forth in Section 259 of the DGCL.


                                       2


<PAGE>


     SECTION 1.05 Certificate of Incorporation and By-laws.

     (a) The Certificate of Incorporation of the Surviving  Corporation shall be
the Certificate of Incorporation of the Company in effect  immediately  prior to
the Effective Time until  thereafter  changed or amended as provided therein and
by applicable Law.

     (b) The By-laws of the  Surviving  Corporation  shall be the By-laws of the
Company in effect  immediately  prior to the  Effective  Time  until  thereafter
changed or amended as provided therein and by applicable Law.

     SECTION 1.06 Directors.  The directors of Merger Sub  immediately  prior to
the Effective Time shall be the directors of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.

     SECTION 1.07 Officers. The officers of the Company immediately prior to the
Effective  Time shall be the officers of the  Surviving  Corporation,  until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.


                                   ARTICLE II

                EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
               CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
                         AND THE COMPANY STOCK OPTIONS

     SECTION 2.01 Effect on Capital Stock.  As of the Effective  Time, by virtue
of the Merger and without any action on the part of the holders of any shares of
common  stock,  par value  $0.01 per  share,  of the  Company  ("Company  Common
Stock"), any shares of Company Preferred Stock or any shares of capital stock of
Merger Sub:

     (a) Capital  Stock of Merger  Sub.  Each  issued and  outstanding  share of
capital  stock of Merger Sub shall be  converted  into and  become  one  validly
issued,  fully paid and nonassessable share of common stock, par value $0.01 per
share, of the Surviving Corporation.

     (b) Cancellation of Company Common Stock and Treasury Stock.  Each share of
Company Common Stock shall automatically be canceled and retired and shall cease
to exist, and no  consideration  shall be delivered in exchange  therefor.  Each
share  of  Company   Preferred   Stock  that  is  owned  by  the  Company  shall
automatically  be  canceled  and  retired  and  shall  cease  to  exist,  and no
consideration shall be delivered in exchange therefor.

     (c)  Conversion of Company  Preferred  Stock.  Each issued and  outstanding
share of Company  Preferred  Stock  other than the  Appraisal  Shares)  shall be
converted into the right to receive an amount in cash,  without interest,  equal
to the Merger Consideration divided by the number of shares of Company Preferred
Stock


                                       3


<PAGE>


issued and  outstanding  immediately  prior to the  Effective  Time  (other than
shares to be canceled in accordance with Section 2.01(b)) (the "Per Share Merger
Consideration").  At the Effective  Time,  all such shares of Company  Preferred
Stock shall no longer be  outstanding  and shall  automatically  be canceled and
retired  and  shall  cease to exist,  and each  holder  of a  certificate  which
immediately  prior to the Effective Time  represented any such shares of Company
Preferred  Stock  (each,  a  "Certificate")  shall cease to have any rights with
respect thereto,  except the right to receive the Per Share Merger Consideration
with  respect to such  shares.  The Merger  Consideration  to be received by any
holder of Company  Preferred  Stock will be reduced by any  outstanding  amounts
owing by such holder to the Company  pursuant to any loans or  advances,  to the
extent not repaid prior to the Closing Date.

          "Merger  Consideration" means an amount equal to (a) $250,000,000 plus
     (b) the  aggregate  amount of  Transaction  Expenses  actually  paid by the
     Company prior to the  determination of Company Cash minus (c) the aggregate
     amount of all Company  Indebtedness net of Company Cash minus (d) an amount
     not to exceed  $2,000,000 to be determined by the Board of Directors of the
     Company or a committee thereof for transaction success or retention bonuses
     to be paid to employees of the Company minus (e) a transaction advisory fee
     in the amount of  $2,000,000  to be paid to DLJ  Merchant  Banking II, Inc.
     minus (f) any  amount  payable  to  Renaissance  Brands LLC as set forth in
     Section 3.07(iii) of the Company  Disclosure  Schedule plus (g) the amount,
     if any, by which the  Closing  Working  Capital  exceeds  $16,292,000  (the
     "Target Working Capital") minus (h) the amount, if any, by which the Target
     Working Capital exceeds the Closing Working Capital.

          "Company Cash" means,  collectively,  the aggregate  amount held as of
     the close of business on the day immediately  preceding the Closing Date by
     the Company and its Subsidiaries in cash, cash equivalents and other liquid
     short-term investments,  minus any unpaid checks, drafts and wire transfers
     issued  on or  prior  to the  close  of  business  on the  day  immediately
     preceding the Closing Date.

          "Company  Indebtedness"  means,  collectively,  as  of  the  close  of
     business  on the  day  immediately  preceding  the  Closing  Date,  (i) all
     amounts,  including accrued but unpaid interest,  required to repay, redeem
     or  repurchase  (by tender  offer or  otherwise),  whether  prior to, at or
     following the Closing,  the Company's  Floating Rate Exchangeable PIK Notes
     due 2009  (the "PIK  Notes")  and AKI's  10.5%  Senior  Notes due 2008 (the
     "Senior  Notes"),  and all  costs and  expenses  arising  from or  relating
     thereto  including any  termination or prepayment  penalties,  repayment or
     redemption  premiums or consent  solicitation costs (including related fees
     and expenses of counsel, advisors, consultants,  investment bankers, dealer
     managers,  actuaries,  auditors and  accountants  in  connection  with such
     repayments,  redemptions or  repurchases,  including such tender offers and
     consent  solicitations),  and (ii) all amounts outstanding under the Credit
     Agreement,  dated December 18, 2001, among AKI, Inc. ("AKI"),  as borrower,
     Heller  Financial,  Inc.,  as agent,  issuing  lender  and a lender and the
     lenders party thereto, as amended (the "Credit Facility") and all costs and
     expenses arising from


                                       4


<PAGE>


     or relating  thereto,  including  any accrued and unpaid  interest  and any
     termination  or  prepayment  penalties,  (iii) any other  indebtedness  for
     borrowed money (including any notes,  bonds,  debentures,  drawn letters of
     credit or similar  instruments  or  obligations  but  excluding any undrawn
     letters of  credit)  of the  Company  outstanding,  in each case  including
     accrued and unpaid interest and any termination or prepayment  penalties or
     premiums  relating  thereto,  and (v) the amount of all  obligations of the
     Company  under  leases  required  to  be  capitalized  in  accordance  with
     generally  accepted  accounting  principles  in the United States as of the
     date hereof  ("GAAP") that would be required to be set forth as a liability
     on a balance sheet prepared in accordance with GAAP.

     (d) Appraisal  Rights.  Notwithstanding  anything in this  Agreement to the
contrary,  shares (the  "Appraisal  Shares") of Company Common Stock and Company
Preferred Stock issued and outstanding  immediately  prior to the Effective Time
that are held by any  holder who is  entitled  to demand  and  properly  demands
appraisal of such shares pursuant to, and who complies in all respects with, the
provisions  of Section  262 of the DGCL  ("Section  262")  shall be  entitled to
payment of the fair value of such shares in  accordance  with the  provisions of
Section 262. At the  Effective  Time,  all  Appraisal  Shares shall no longer be
outstanding and shall  automatically  be canceled and shall cease to exist,  and
each holder of  Appraisal  Shares  shall  cease to have any rights with  respect
thereto,  except the right to receive the fair value of such Appraisal Shares in
accordance with the provisions of Section 262. Notwithstanding the foregoing, if
any such holder shall fail to perfect or otherwise shall waive, withdraw or lose
the right to appraisal  under  Section 262 or a court of competent  jurisdiction
shall  determine  that such  holder is not  entitled  to the relief  provided by
Section  262,  then the right of such  holder to be paid the fair  value of such
holder's  Appraisal  Shares  under  Section 262 shall  cease and such  Appraisal
Shares shall be deemed to have been canceled and retired at the  Effective  Time
as provided in Section 2.01(b) or converted at the Effective Time as provided in
Section 2.01(c).  The Company shall serve prompt notice to Parent of any demands
for appraisal of any shares of Company Common Stock or Company  Preferred Stock,
and  Parent  shall  have  the  right  to  participate  in all  negotiations  and
proceedings  with respect to such  demands.  Prior to the  Effective  Time,  the
Company shall not, without the prior written consent of Parent, make any payment
with respect to, or settle or offer to settle, any such demands,  or agree to do
any of the foregoing.

     SECTION 2.02 Exchange of Certificates.

     (a) At the Closing, Parent will contribute to the Surviving Corporation, by
wire transfer of immediately  available funds denominated in U.S. dollars to the
account designated in writing to Parent by the Company prior to the Closing,  an
amount  in cash  equal  to the  Merger  Consideration  determined  based  on the
Estimated  Working Capital  Statement  (such amount,  the "Payment  Fund").  The
Surviving Corporation shall, pursuant to irrevocable  instructions,  pay, at the
Closing,  the Merger  Consideration  payable to each holder of Company Preferred
Stock,  determined based upon the Estimated Working Capital Statement,  less the
Working  Capital Escrow Amount,  in accordance  with Section  2.01(c) out of the
Payment Fund. The Surviving  Corporation shall deposit  $5,000,000 (the "Working
Capital  Escrow  Amount")  with  an


                                       5


<PAGE>


escrow agent and pursuant to an escrow agreement,  each to be agreed upon by the
parties hereto, and any adjustment as determined  pursuant to Section 2.04 shall
be applied against the Working Capital Escrow Amount.

     (b) Exchange Procedures.  As soon as reasonably  practicable after the date
hereof,  the  Surviving  Corporation  shall  mail to each  holder of record of a
Certificate  (i) a form of letter  of  transmittal  (which  shall  specify  that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the  Certificates  to the Surviving  Corporation and
which shall be in such form (including representations and warranties) as Parent
and the Company may reasonably  agree to use) and (ii)  instructions  for use in
surrendering the Certificates in exchange for the Merger  Consideration.  At the
Effective  Time, the Surviving  Corporation  shall pay to each holder of Company
Preferred Stock that has delivered to the Surviving Corporation at the Closing a
Certificate and a Letter of Transmittal the amount of cash into which the shares
of Company  Preferred Stock formerly  represented by such Certificate shall have
been converted  pursuant to Section 2.01(c),  and the Certificate so surrendered
shall  forthwith be canceled.  In the event of a transfer of ownership of shares
of Company Preferred Stock that is not registered in the transfer records of the
Company,  the proper amount of cash may be paid in exchange therefor to a person
other than the person in whose name the Certificate so surrendered is registered
if such  Certificate  shall be properly  endorsed or otherwise be in proper form
for transfer and the person  requesting  such issuance shall pay any transfer or
other  taxes  required  by  reason of the  payment  to a person  other  than the
registered   holder  of  such   Certificate   or  establish  to  the  reasonable
satisfaction of the Surviving  Corporation that such tax has been paid or is not
applicable.  Until  surrendered as  contemplated by this Section  2.02(b),  each
Certificate  shall be deemed at any time after the  Effective  Time to represent
only the right to  receive  upon such  surrender  the Merger  Consideration.  No
interest  will be paid or will accrue on the cash payable upon  surrender of any
Certificate.

     (c) No Further  Ownership Rights in Company  Preferred Stock. All cash paid
upon the surrender of  Certificates in accordance with the terms of this ARTICLE
II shall be deemed to have been in full satisfaction of all rights pertaining to
the  shares  of  Company   Preferred  Stock   previously   represented  by  such
Certificates.  At the close of business on the day on which the  Effective  Time
occurs,  the stock transfer books of the Company shall be closed and there shall
be no further  registration  of  transfers  on the stock  transfer  books of the
Surviving Corporation of the shares of Company Common Stock or Company Preferred
Stock that were outstanding  immediately prior to the Effective Time. Subject to
Section  2.02(d),  if, at any time after the Effective  Time,  Certificates  are
presented to the Surviving  Corporation  for any reason,  they shall be canceled
and exchanged as provided in this ARTICLE II.

     (d) No Liability. None of Parent, Merger Sub or the Company shall be liable
to any person in respect of any cash delivered to a public official  pursuant to
any applicable abandoned property, escheat or similar Law.

     (e) Lost  Certificates.  If any Certificate shall have been lost, stolen or
destroyed,  upon the making of an affidavit of that fact by the person  claiming
such  Certificate  to be lost,  stolen or  destroyed  and,  if  required  by the
Surviving  Corporation,


                                       6


<PAGE>


the posting by such person of a bond in such reasonable  amount as the Surviving
Corporation  may direct as indemnity  against any  successful  claim that may be
made against it with respect to such Certificate, the Surviving Corporation will
issue in exchange  for such lost,  stolen or  destroyed  Certificate  the Merger
Consideration  to which such holder  would be entitled  pursuant to this ARTICLE
II.

     (f)  Withholding  Rights.  The Surviving  Corporation  shall be entitled to
deduct and withhold from the  consideration  otherwise  payable to any holder of
shares of Company Preferred Stock pursuant to this Agreement such amounts as may
be required  to be  deducted  and  withheld  with  respect to the making of such
payment under the Internal  Revenue Code of 1986,  as amended (the "Code"),  and
the rules and  regulations  promulgated  thereunder,  or under any  provision of
state or foreign  tax Law.  To the extent  that  amounts  are so withheld by the
Surviving Corporation, as the case may be, such withheld amounts will be treated
for all  purposes  of this  Agreement  as having  been paid to the holder of the
shares of  Company  Preferred  Stock in  respect  of which  such  deduction  and
withholding was made.

     SECTION 2.03 Company Stock Options. Each Company Stock Option granted under
the  Company's  1998 Stock Option Plan (the  "Company  Stock Plan")  outstanding
immediately  prior to the Effective Time shall be canceled and  extinguished and
no consideration will be paid thereon.

     SECTION 2.04 Closing Date and Post-Closing Merger Consideration Adjustment.
The Merger Consideration shall be subject to adjustment following the Closing as
follows:

     (a) DLJ  Merchant  Banking II, Inc.  shall serve as  representative  of the
stockholders   of  the  Company   (prior  to  the  Merger)   (the   "Stockholder
Representative")for  purposes of this Section 2.04 and the Company will be bound
by all actions taken by the Stockholder  Representative  in connection with this
Section  2.04.  In  performing   its  functions   hereunder,   the   Stockholder
Representative  will not be liable to the  Company  or the  stockholders  of the
Company in the absence of gross  negligence or willful  misconduct.  The parties
further agree that neither  Parent nor the Surviving  Corporation  shall owe any
indemnification  obligation to the Stockholder Representative under this Section
2.04.  Parent shall serve as  representative  of the Surviving  Corporation (the
"Surviving  Corporation  Representative")  for purposes of this Section 2.04 and
the  Surviving  Corporation  will be bound by all actions taken by the Surviving
Corporation  Representative  in connection with this Section 2.04. In performing
its functions hereunder,  the Surviving  Corporation  Representative will not be
liable  to the  Surviving  Corporation  or  the  stockholders  of the  Surviving
Corporation  in the  absence  of gross  negligence  or willful  misconduct.  The
parties  further  agree  that  the  Surviving  Corporation  shall  not  owe  any
indemnification  obligation to the Surviving  Corporation  Representative  under
this Section 2.04.

     (b) Not later than two (2) Business Days prior to the Closing Date, Company
management  and  Marc  Reisch  shall  agree on a  statement  setting  forth  the
estimated  Working  Capital of the Company as of the Closing  Date (but  without
giving


                                       7


<PAGE>


effect to the Closing) ("Estimated Working Capital"),  prepared in good faith in
accordance with GAAP applied consistently with the Company's past practices (the
"Estimated Working Capital Statement"). In the event Company management and Marc
Reisch cannot agree,  the Estimated  Working Capital shall be the average of the
Estimated Working Capital as determined by Company  management and as determined
by Marc Reisch and such  average  shall be reflected  as the  Estimated  Working
Capital on the Estimated Working Capital Statement.

     (c) The Surviving Corporation  Representative shall use its reasonable best
efforts to have prepared and delivered to the Stockholder Representative, within
30 days after the Closing Date, a statement  setting  forth the Closing  Working
Capital  (but  without  giving  effect to the  Closing)  (the  "Working  Capital
Statement"),  prepared in  accordance  with GAAP applied  consistently  with the
calculation and preparation of the Target Working Capital.

     (d) On or prior to the fifth Business Day after receipt by the  Stockholder
Representative of the Working Capital Statement (such  five-Business Day period,
the "Objection Period"),  the Stockholder  Representative may give the Surviving
Corporation  Representative a written notice (the "Objection Notice") stating in
reasonable detail its objections,  if any, to the Working Capital Statement. Any
Objection Notice shall specify in reasonable detail the dollar amount and nature
of any objection and the basis  therefor.  Except to the extent the  Stockholder
Representative makes a specific objection to a specific  determination set forth
on the Working Capital  Statement  pursuant to the Objection Notice delivered to
the  Surviving  Corporation  Representative  within the  Objection  Period,  the
Working  Capital  Statement  will be  conclusive  and  binding  upon the parties
hereto.

     (e) If the Stockholder Representative delivers a timely Objection Notice as
described in Section 2.04(c) above, then the Stockholder  Representative and the
Surviving  Corporation  Representative  will  negotiate in good faith to resolve
their  disputes  regarding the Working  Capital  Statement.  If the  Stockholder
Representative  and the  Surviving  Corporation  Representative  are  unable  to
resolve all disputes  regarding the Working Capital Statement on or prior to the
tenth Business Day after the Surviving Corporation  Representative's  receipt of
the Objection  Notice,  then the  Stockholder  Representative  and the Surviving
Corporation  Representative will retain the New York City office of KPMG LLP or,
if KPMG LLP is unable or unwilling to participate,  then such other  independent
accounting  firm as may be  mutually  agreed upon by the  Surviving  Corporation
Representative  and the  Stockholder  Representative  (KPMG  LLP or  such  other
independent  accounting firm, the "Independent  Accounting Firm") to resolve the
dispute as soon as practicable, and in any event within 20 days. The Stockholder
Representative and the Surviving  Corporation  Representative  shall provide the
Independent  Accounting Firm with necessary  documents as soon as possible after
its appointment, and the Independent Accounting Firm shall grant the Stockholder
Representative and the Surviving  Corporation  Representative the opportunity to
state their viewpoints.  Upon request by the Stockholder  Representative and the
Surviving  Corporation  Representative,  there  shall be a  hearing  before  the
Independent  Accounting Firm; provided,  however that the Independent Accounting
Firm shall not decide any


                                       8


<PAGE>


issues regarding the  interpretation  of this Agreement or the compliance of the
parties  with  their  obligations  under  this  Agreement,  in  particular,   in
connection  with this Section 2.04.  The scope of the disputes to be resolved by
the Independent  Public  Accounting Firm shall be limited to whether the Closing
Working  Capital as set forth on the Working  Capital  Statement was prepared in
accordance with GAAP and using accounting  principles consistent with those used
in the determination of the Target Working Capital and whether there were errors
of fact or mathematical errors in the Working Capital Statement. The Independent
Accounting  Firm  shall  render a  written  report as to the  resolution  of the
dispute and the resulting  computation of Closing Working  Capital.  The Closing
Working  Capital as determined by the Independent  Accounting Firm will,  absent
manifest  error,  be  conclusive  and binding  upon the parties  hereto and will
constitute the Closing Working Capital for all purposes of this Section 2.04. In
resolving any disputed item, the Independent  Accounting Firm (x) shall be bound
by the  provisions  of this  Section  2.04 and (y) may not assign a value to any
item greater  than the  greatest  value for such item claimed by either party or
less than the smallest  value for such item claimed by either  party.  The fees,
costs and  expenses  of the  Independent  Accounting  Firm shall be borne by the
Surviving Corporation.

     (f) If the  Working  Capital  of the  Company  as of the  Closing  Date (as
finally determined pursuant to this Section 2.04, the "Closing Working Capital")
exceeds the Estimated  Working Capital,  the Surviving  Corporation will pay, or
cause to be paid, in respect of each share of Company  Preferred  Stock that was
issued and outstanding  immediately prior to the Effective Time, an amount equal
to (i) the amount of such excess  plus the full  amount of the  Working  Capital
Escrow Amount  divided by (ii) the number of shares of Company  Preferred  Stock
(other than shares to be canceled in accordance with Section 2.01(b)) issued and
outstanding immediately prior to the Effective Time.

"Working  Capital"  means (i)  accounts  receivable,  net  inventories,  prepaid
expenses and other current assets (but excluding cash, cash  equivalents,  other
short-term  investments,  income taxes  receivable  and deferred  income taxes),
minus (ii)  accounts  payable and  accrued  expenses  (other  than income  taxes
payable and  deferred  income  taxes and  accrued  interest)  and other  current
liabilities (but excluding the current portion of long-term debt), determined in
accordance  with GAAP and to the  extent  consistent  with  GAAP  using the same
accounting  methods,  practices,  principles,  policies,  and  procedures,  with
consistent classification,  judgments and valuation and estimation methodologies
that were used in the preparation of the Target Working Capital.

     (g) If the  Closing  Working  Capital  is less than the  Estimated  Working
Capital (the "WC  Difference")  the amount of the WC Difference shall reduce the
Working  Capital Escrow Amount and such  difference  shall be paid by the escrow
agent out of the Working Capital Escrow Amount to the Surviving Corporation, and
if any amount is remaining in the Working  Capital  Escrow Account after payment
of the WC Difference to the Surviving Corporation, the escrow agent shall pay an
amount equal to (i) such  remaining  amount divided by (ii) the number of shares
of Company  Preferred Stock (other than shares to be canceled in accordance with
Section 2.01(b)) issued and outstanding  immediately prior to the Effective Time
in  respect  of each share of Company


                                       9


<PAGE>


Preferred  Stock.  In no event shall the Merger  Consideration  be reduced by an
amount in excess of the Working Capital Escrow Amount.

     (h) All  payment  under  this  Section  2.04  shall be made in  immediately
available  funds.  No  interest  shall be payable  with  respect to the  Working
Capital  Escrow  Amount or any other  amounts  payable  pursuant to this Section
2.04.

     (i) Any amount to be paid  pursuant to this Section 2.04 will be treated as
an adjustment to the Merger  Consideration  for all purposes  (including for Tax
purposes), unless a contrary treatment is required by applicable Law.


                                  ARTICLE III

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     Except as disclosed in the disclosure  schedule delivered by the Company to
Parent  prior  to the  execution  of this  Agreement  (the  "Company  Disclosure
Schedule"),  the  Company  represents  and  warrants to Parent and Merger Sub as
follows:

     SECTION  3.01.  Organization,  Standing and  Corporate  Power.  Each of the
Company and its Subsidiaries is a corporation or limited liability  company,  as
the case may be, duly organized, validly existing and in good standing under the
Laws of the jurisdiction in which it is incorporated or formed,  as the case may
be, and has all requisite  corporate or limited liability  company,  as the case
may be, power and authority to own,  lease and operate its properties and assets
and to carry on its business as now being conducted. The Company and each of its
Subsidiaries  is duly  qualified  to do  business  and in good  standing  in the
jurisdictions  where the  nature of the  property  owned or leased by it, or the
nature of the  business  conducted by it,  makes such  qualification  necessary,
except where the failure to be so in good standing or to have such qualification
would not reasonably be likely to have a Material  Adverse  Effect.  The Company
has made available, or will make available to Parent and Merger Sub prior to the
Closing Date, true and complete copies of (i) the  certificates of incorporation
and by-laws (or equivalent  governing  instruments),  as currently in effect, of
the Company and each  Subsidiary,  (ii) the minute  books of the Company and, to
the extent in  existence,  each  Subsidiary  covering  the period  beginning  no
earlier  than  January  1, 2001,  and (iii) to the extent in the  Company or any
Subsidiary's  possession,  stock certificate books and stock transfer ledgers of
the Company and its Subsidiaries since January 1, 2001.

     SECTION  3.02.  Capital  Structure.  The  authorized  capital  stock of the
Company  consists of 200,000 shares of Company Common Stock and 50,000 shares of
Company Preferred Stock. As of the date hereof, (a) 161,111.11 shares of Company
Common Stock are issued and  outstanding,  (b) no shares of Company Common Stock
are held by the Company in its  treasury,  (c) 16,500  shares of Company  Common
Stock are  reserved for issuance  upon the  exercise of  outstanding  options to
purchase  shares of Company  Common Stock  granted  under the Company Stock Plan
("Company Stock Options")),  (d) 20,311.11 shares of Company Preferred Stock are
issued and outstanding and (e) no shares of Company  Preferred Stock are held by
the Company in its treasury.


                                       10


<PAGE>


Except as set forth above in this Section 3.02, as of the date hereof, no shares
of capital stock or other voting securities of the Company are issued,  reserved
for issuance or  outstanding.  Section 3.02 of the Company  Disclosure  Schedule
sets forth a complete  and  accurate  schedule,  as of the date  hereof,  of all
holders of record of the issued and outstanding capital stock of the Company and
all holders of Company Stock Options and Warrants.  Except as set forth above in
this Section 3.02,  there are no authorized or  outstanding  stock  appreciation
rights,  phantom stock, profit participation rights, rights to receive shares of
Company  Common  Stock or  Company  Preferred  Stock,  as the case may be,  on a
deferred  basis or other  rights that are linked to the value of Company  Common
Stock or Company  Preferred Stock, as the case may be, granted under the Company
Stock Plan or otherwise by the Company. There are no bonds, debentures, notes or
other indebtedness of the Company having the right to vote (or convertible into,
or  exchangeable  for,  securities  having the right to vote) on any  matters on
which  stockholders of the Company may vote. All  outstanding  shares of capital
stock of the Company: (i) have been duly authorized and validly issued; (ii) are
fully paid and  non-assessable;  and (iii) were not issued in  violation  of, or
subject to, any preemptive,  subscription or other similar rights of any person.
Except as set forth above in this Section 3.02 or in Section 3.02 of the Company
Disclosure  Schedule,  (i)  there  are not  issued,  reserved  for  issuance  or
outstanding  as of the date hereof (A) any  securities  of the Company or any of
its  Subsidiaries  convertible  into,  exchangeable or exercisable for shares of
capital stock or equity securities of the Company or any of its Subsidiaries, or
(B) any subscriptions,  warrants, calls, options, rights, commitments,  proxies,
voting trusts,  arrangements or undertakings of any kind to which the Company or
any of its  Subsidiaries is a party or by which any of them is bound  obligating
the  Company or any of its  Subsidiaries  to issue,  sell,  transfer,  redeem or
otherwise  acquire,  dispose or vote any shares of capital stock or other equity
securities of the Company or any of its Subsidiaries and (ii) the Company is not
a party to or bound by any agreement or commitment pursuant to which the Company
is or could be required to register any securities under the Securities Act.

     SECTION 3.03. Authority; Noncontravention.

     (a) The Company has all requisite  corporate power and authority to execute
and  deliver  this  Agreement,   including  the  Stockholder  Approval,  and  to
consummate the  transactions  contemplated by this Agreement.  The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the  transactions  contemplated  by this  Agreement  have been duly and  validly
authorized by all necessary corporate action on the part of the Company,  and no
other  corporate  proceedings  on the  part  of the  Company  are  necessary  to
authorize this Agreement or to consummate the transactions  contemplated hereby.
This Agreement has been duly executed and delivered by the Company and, assuming
the due  authorization,  execution  and  delivery  by each of the other  parties
hereto,  constitutes  a legal,  valid and  binding  obligation  of the  Company,
enforceable  against  the  Company  in  accordance  with its terms  (subject  to
applicable bankruptcy,  insolvency,  moratorium, or other similar Laws affecting
creditors'  rights  generally and general  equitable  principles  (regardless of
whether such enforceability is considered in a proceeding in equity or at law)).


                                     11


<PAGE>


     (b) The execution,  performance  and delivery of this Agreement do not, and
the consummation of the Merger and the other  transactions  contemplated by this
Agreement and compliance with the provisions of this Agreement will not, require
any  consent,  approval  or  notice  under,  conflict  with,  or  result  in any
violation,  termination,  suspension  or breach of, or default  (with or without
notice or lapse of time or both) under,  or give rise to a right of termination,
suspension,  cancellation  or acceleration of any obligation or to the loss of a
benefit under, (i) the Company's  Certificate of Incorporation,  as amended (the
"Company  Certificate"),   the  Company's  By-laws,  as  amended  (the  "Company
By-laws"), or the organizational documents of any Subsidiary, (ii) except as set
forth in Section 3.03 of the Company Disclosure Schedule,  any Contract to which
the  Company  or any of its  Subsidiaries  is a party  or (iii)  subject  to the
governmental filings and other matters referred to in Section 3.04, any statute,
law,  rule,  regulation,  order  or  ordinance  of  any  Governmental  Authority
(collectively,  "Laws")  applicable  to the Company or any of its  Subsidiaries,
other than, in the case of clauses (ii) and (iii),  with respect to matters that
are not reasonably likely to (A) result in a Material Adverse Effect, (B) impair
the ability of the Company to perform its  obligations  under this  Agreement in
any  material  respect  or (C) delay in any  material  respect  or  prevent  the
consummation of any of the transactions contemplated by this Agreement.

     SECTION  3.04.  Governmental  Approvals.  No  consent,  approval,  order or
authorization  of, action by or in respect of, or  registration,  declaration or
filing with,  any  Governmental  Authority is required by or with respect to the
Company or any of its Subsidiaries in connection with the execution and delivery
of this  Agreement  by the  Company or the  consummation  by the  Company of the
Merger or the other transactions contemplated by this Agreement,  except for (a)
the filing of a premerger  notification and report form by the Company,  and the
expiration or termination of all waiting  periods,  under the  Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the regulations  promulgated
thereunder (the "HSR Act"), or any other applicable  filings and approvals under
similar foreign antitrust Laws, (b) the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware and  appropriate  documents with
the relevant authorities of other states in which the Company is qualified to do
business,  (c) such filings as may be required by applicable state securities or
"blue sky" laws or state takeover laws, (d) consents, approvals, authorizations,
declarations  or filings  set forth in Section  3.04 of the  Company  Disclosure
Schedule  and  (e)  consents,   approvals,  orders,   authorizations,   actions,
registrations,  declarations or filings that, if not obtained or made, would not
reasonably be expected to (A) result in a Material  Adverse  Effect,  (B) impair
the ability of the Company to perform its  obligations  under this  Agreement in
any  material  respect  or (C) delay in any  material  respect  or  prevent  the
consummation of any of the transactions contemplated by this Agreement.

     SECTION  3.05.  Litigation.  Except as set forth in the SEC  Reports  filed
prior to the date hereof, or in Section 3.05 of the Company Disclosure Schedule:
(i) there is no claim,  suit, action,  arbitration,  investigation or proceeding
pending or, to the Knowledge of the Company,  threatened  against the Company or
any of its Subsidiaries which if adversely determined would,  individually or in
the  aggregate,  reasonably  be  expected  to result in  damages  payable by the
Company or any Subsidiary in excess of $250,000 or injunctive relief against the
Company or any of its  Subsidiaries,  or that


                                       12


<PAGE>


would  materially and adversely  affect the ability of the Company to consummate
the transactions  contemplated  hereby or which seeks to enjoin the consummation
of the transactions contemplated hereby; and (ii) there is no judgment,  decree,
award,  injunction,  rule or order of any  Governmental  Authority or arbitrator
outstanding against the Company or any of its Subsidiaries that would reasonably
be expected to  materially  and  adversely  affect the ability of the Company to
consummate the transactions contemplated hereby.

     SECTION 3.06. Compliance with Laws; Permits.

     (a)  Except as set  forth in  Section  3.06(a)  of the  Company  Disclosure
Schedule,  the  conduct  of  the  business  by  the  Company  and  each  of  its
Subsidiaries  since  January 1, 2001 has not  violated or breached  and does not
currently  violate or breach (and no event has occurred which with notice or the
lapse of time,  or both,  would  constitute  a violation  or breach of) any Laws
applicable  to  the  Company  or  any  of  its  Subsidiaries,  their  respective
properties or other assets,  except for  violations  and breaches which have not
given and would not reasonably be expected to give rise to a material liability.
Except as set forth in the SEC Reports  filed prior to the date hereof or as set
forth in  Section  3.06(a)  of the  Company  Disclosure  Schedule,  there are no
unresolved  notices of  deficiency  or charges of violation  with respect to the
matters  covered by this  Section  3.06(a)  brought or, to the  Knowledge of the
Company,  threatened  or pending  against the Company  which have given or would
reasonably be expected to give rise to a material liability.

     (b) Except as  disclosed  in  Section  3.06(b)  of the  Company  Disclosure
Schedule,  each of the Company and its  Subsidiaries  have obtained all permits,
licenses,   authorizations,   grants,  consents,  certificates,   registrations,
qualifications,   variances,   exemptions,   orders,   franchises,   exceptions,
identification and registration numbers, approvals or orders of any Governmental
Authority  necessary to own, lease and to operate its properties or otherwise to
carry  on each of  their  respective  businesses  as it is now  being  conducted
(collectively,  the  "Permits"),  except  those  the  absence  of which  has not
materially  impaired and would not  reasonably be expected to materially  impair
the ability of the Company and its  Subsidiaries to conduct their  businesses as
currently  conducted.  Neither  the  Company  nor  any of its  Subsidiaries  has
received  any notice or claim  pertaining  to the  failure to obtain any Permit,
except for any such notice or claim that has not given and would not  reasonably
be expected to give rise to a material liability.

     SECTION  3.07.  Affiliate  Transactions.  Except  as  disclosed  in the SEC
Reports  filed prior to the date  hereof or as set forth in Section  3.07 of the
Company Disclosure Schedule, none of the Company or any of its Subsidiaries is a
party to any Contract with any (i) officer,  director or employee of the Company
or any of its  Subsidiaries,  (ii) record or beneficial owner of five percent or
more of the  capital  stock  of the  Company,  or  (iii)  affiliate  of any such
officer,  director  or record  or  beneficial  owner of the  Company  (each,  an
"Affiliate Agreement"),  except any transaction on arm's length terms and in the
ordinary  course of business  consistent  with past practice with respect to the
officers  and  directors  of the Company  and its  Subsidiaries,  including  the
payment of


                                       13


<PAGE>


customary  directors  fees and expenses.  Except as described in Section 3.07 of
the Company Disclosure Schedule,  neither the Company nor any Subsidiary has any
loans receivable from any affiliate of the Company or from any director, officer
or employee of the Company or any Subsidiary.

     SECTION 3.08. Subsidiaries.

     (a) Except as set forth in the SEC  Reports  filed prior to the date hereof
or Section 3.08 of the Company  Disclosure  Schedule,  the Company does not own,
directly or indirectly, any shares of capital stock or any other equity interest
in any person, domestic or foreign.

     (b) All of the outstanding  shares of capital stock or equity  interests of
each of its  Subsidiaries  that are owned by the Company or any other Subsidiary
of the Company (collectively, the "Subsidiary Shares") have been duly authorized
and are validly  issued,  fully paid and  non-assessable  and were not issued in
violation  of  any  preemptive  rights  or  comparable  rights.   There  are  no
irrevocable proxies or similar obligations with respect to any of the Subsidiary
Shares. There are no securities convertible into,  exchangeable for, or carrying
the right to acquire,  equity  securities  (or  securities  convertible  into or
exchangeable   for  equity   securities)   of  any  of  its   Subsidiaries,   or
subscriptions, warrants, options, calls, convertible securities, registration or
other rights or other  arrangements or commitments  obligating any Subsidiary to
issue,  transfer  or dispose of any of its equity  securities  or any  ownership
interest therein.

     (c) Except as disclosed in Section 3.08 of the Company Disclosure Schedule,
the Company owns the  Subsidiary  Shares free and clear of any Liens.  Except as
disclosed in Section 3.08 of the Company Disclosure  Schedule,  the Company owns
and has full  voting  power  over  all of the  equity  interests  of each of its
Subsidiaries.  No stock appreciation rights, phantom stock, profit participation
or other similar  rights with respect to any  Subsidiary or any capital stock of
any Subsidiary are authorized or outstanding.

     SECTION  3.09.  No  Brokers.  Except  as set forth in  Section  3.09 of the
Company  Disclosure  Schedule,  neither the  Company nor any of its  officers or
directors has employed any investment  banker,  business  consultant,  financial
advisor,  broker or finder in connection with the  transactions  contemplated by
this Agreement,  or obligated the Company or any of the  Subsidiaries to pay any
investment  banking,  business  consultancy,  financial  advisory,  brokerage or
finders' fees or commissions in connection  with the  transactions  contemplated
hereby.  The amount of such fees payable pursuant to the items listed in Section
3.09 of the Company Disclosure  Schedule and the terms related thereto have been
previously and accurately disclosed in writing to Parent.

     SECTION 3.10. SEC Reports; Financial Statements.

     (a) The Company and its  Subsidiaries  have filed with the U.S.  Securities
and Exchange Commission (the "SEC") all periodic reports required to be filed by
the  Company  or any  Subsidiary  with the SEC from and  after  January  1, 2001


                                       14


<PAGE>


(collectively, and in each case including all exhibits and schedules thereto and
documents incorporated by reference therein, the "SEC Reports").  As of its date
of filing,  each SEC Report  complied in all material  respects with  applicable
requirements  of the  Exchange  Act and the  rules and  regulations  promulgated
thereunder,  and none of such SEC Reports  contained  any untrue  statement of a
material  fact or omitted to state a material fact required or necessary to make
the statements made therein, in light of the circumstances under which they were
made, not misleading.

     (b) Each of the  consolidated  financial  statements  (including  the notes
thereto)  included  in the SEC  Reports  filed  prior  to the date  hereof  (the
"Financial  Statements"):  (i) complied as to form in all material respects with
applicable  accounting  requirements  and the published rules and regulations of
the SEC with respect  thereto,  (ii) were prepared in accordance  with GAAP on a
consistent  basis during the periods involved (except as may be indicated in the
notes  thereto);  and (iii) present fairly in all material  respects,  as of its
respective date and for the period set forth therein, the consolidated financial
position,  results  of  operations  or cash  flows,  as the case may be,  of the
Company  and  its  Subsidiaries  (subject,  in the  case  of  unaudited  interim
financial  statements,  to exceptions  permitted by Form 10-Q under the Exchange
Act).

     SECTION 3.11. Undisclosed  Liabilities.  Except for the liabilities (i) set
forth on,  reflected  in,  reserved  against or otherwise  described in the most
recent  Financial  Statements  (ii) set  forth in  Section  3.11 of the  Company
Disclosure  Schedule or (iii)  liabilities  incurred in the  ordinary  course of
business   consistent   with  past  practice  since  December  31,  2003  or  as
contemplated by this  Agreement,  neither the Company nor any Subsidiary has any
material  indebtedness,  obligation or liability of any kind,  whether absolute,
accrued, contingent or otherwise and whether due or to become due, that would be
required to be reflected on a balance  sheet  prepared in  accordance  with GAAP
consistently  applied in order for such balance  sheet to present  fairly in all
material  respects the  consolidated  financial  position of the Company and its
Subsidiaries.

     SECTION 3.12. Intellectual Property. Except as set forth in Section 3.12 of
the Company Disclosure Schedule,  the Company or one of its Subsidiaries owns or
possess adequate rights to use all material  patents,  trademarks,  trade names,
inventions,  processes,  designs,  formulas,  know-how  and  other  intellectual
property rights (collectively "Intellectual Property") necessary for the conduct
of the  business of the Company and its  Subsidiaries  as  presently  conducted.
Except as set forth in Section 3.12 of the Company Disclosure Schedule,  neither
the Company nor any of its Subsidiaries has received any written notice, nor, to
the  Knowledge  of the  Company,  has  the  Company  or any of its  Subsidiaries
received since January 1, 2003 any written claim that any Intellectual  Property
owned  or  used  by the  Company  or any of its  Subsidiaries  infringes  in any
material  respect on similar  rights owned or alleged to be owned by others.  To
the  Knowledge  of the  Company,  neither  the  execution  and  delivery of this
Agreement,  nor the  transactions  contemplated  hereby,  nor the conduct of the
business as currently  conducted,  will materially  conflict with or result in a
material  breach of the terms,  conditions  or  provisions  of, or  constitute a
material default under, any contract relating to the Intellectual  Property that
is material to the Company and its Subsidiaries,


                                       15


<PAGE>


taken as a whole,  under  which the  Company or any of its  Subsidiaries  or any
employees  or  officers  of the  Company  or any of  its  Subsidiaries  are  now
obligated.

     SECTION  3.13.  Contracts  and  Commitments.  Section  3.13 of the  Company
Disclosure Schedule lists, as of the date hereof: (i) all Contracts to which the
Company or any of its  Subsidiaries  is  currently a party or by which it or any
such Subsidiary is currently  bound which require  payments to be made in excess
of $500,000 per fiscal year and are not  terminable by the Company or any of its
Subsidiaries  on less than sixty (60) days' notice,  (ii) all Contracts to which
the  Company  or any of its  Subsidiaries  is a party  and which (x) in the year
ended December 31, 2003 generated, or (y) are expected to generate in any fiscal
year  thereafter,  revenues in excess of $500,000;  (iii) all agreements  which,
individually  or in the aggregate,  provide for, or relate to, the incurrence by
the Company or any Subsidiary of indebtedness for borrowed money in an aggregate
amount greater than $250,000; (iv) all guaranties of any indebtedness of persons
other than the Company or any Subsidiary which  individually or in the aggregate
exceed  $250,000;  (v) all agreements  that limit (or would limit after the date
hereof) the ability of the Company or any of its  Subsidiaries to compete in any
material  manner  in any line of  business  or in a  geographic  area;  (vi) all
material partnership,  limited liability company, joint venture or other similar
agreements;  (vii) all Affiliate Agreements and (viii) all employment agreements
with  employees  of the  Company  or any  Subsidiary  which  provide  for annual
compensation  (salary  and  bonus)  in  excess  of  $100,000  or  which  are not
terminable by the Company or a Subsidiary  within six (6) months without penalty
or premium.

     SECTION 3.14. Employee Benefits.

     (a) Each of the Company and its  Subsidiaries has complied since January 1,
2001,  and currently is in compliance  with,  the  applicable  provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), the Code,
and all other applicable laws with respect to each compensation or benefit plan,
agreement,  policy, practice, program, or arrangement (whether or not subject to
ERISA)  maintained by the Company or any of its  Subsidiaries for the benefit of
any employee, former employee, independent contractor or director of the Company
or any of its Subsidiaries  (including any employment agreements or any pension,
savings,  profit-sharing,  bonus,  medical,  insurance,  disability,  severance,
executive compensation,  fringe benefit,  incentive,  stock option,  performance
pay, loan or loan guarantee,  plant closing,  change of control, stock option or
other equity based or deferred compensation plans) (collectively,  the "Plans"),
except  where  such  noncompliance  has not given and  would not  reasonably  be
expected to give rise to a material liability.

     (b) The Company has  provided or made  available to Parent and Merger Sub a
current,  accurate and complete copy of each Plan and, to the extent applicable,
summary  plan  descriptions,  Forms 5500 for the last three years and  actuarial
reports.  Section  3.14(b) of the Company  Disclosure  Schedule is a correct and
complete list of all of the Plans.


                                       16


<PAGE>


     (c) Each Plan  intended  to  qualify  under  Section  401 of the Code is so
qualified  and each trust  maintained  pursuant  thereto is exempt from  federal
income  taxation  under  Section 501 of the Code,  and nothing has occurred with
respect  to the  operation  of such  Plans  which  would  cause the loss of such
qualification  or exemption or the imposition of any  liability,  penalty or tax
under  ERISA or the  Code,  and,  with  respect  to any such  Plan for  which an
application  for a  determination  letter is pending,  to the  Knowledge  of the
Company,  there are no facts that would  reasonably be expected to result in the
non-issuance of such determination letter.

     (d)  Except as set  forth in  Section  3.14(d)  of the  Company  Disclosure
Schedule,  neither the Company,  any of its Subsidiaries nor any ERISA Affiliate
has since January 1, 2001  maintained,  adopted or  established,  contributed or
been required to contribute to, or otherwise participated in or been required to
participate  in, any  employee  benefit  plan or other  program  or  arrangement
subject to Title IV of ERISA  (including any employee pension or welfare benefit
plan to which  more  than one  unaffiliated  employer  contributes  and which is
maintained  pursuant  to  one  or  more  collective   bargaining  agreements  (a
"Multi-Employer  Plan")) or any plan  otherwise  subject to the minimum  funding
standards  of  Section  302 of ERISA or  Section  412 of the Code (a  "Title  IV
Plan").  The Company has no liability  (contingent  or otherwise)  under Section
4069 of ERISA by reason of a transfer of an underfunded Title IV Plan.

     (e)  Except as set  forth in  Section  3.14(e)  of the  Company  Disclosure
Schedule,  no Plan  provides  any health or  medical  benefits  (whether  or not
insured) with respect to current or former employees of the Company beyond their
retirement or other termination of service with the Company (other than coverage
mandated by Section 4980B of the Code or applicable law).

     (f)  Except as set  forth in  Section  3.14(f)  of the  Company  Disclosure
Schedule,  neither the  Company nor any of its  Subsidiaries  has  incurred  any
withdrawal  liability with respect to any Title IV Plan that is a Multi-Employer
Plan. The Company and itsz  subsidiaries have not during the preceding six years
had any obligation or liability (contingent or otherwise) with respect to a Plan
which is described in Section 4(b)(4), 4063 or 4064 of ERISA.

     (g) No audit or investigation by any governmental  authority is pending or,
to the  Knowledge  of the  Company,  threatened,  nor has any  reportable  event
(within the meaning of Section 4043 of ERISA) (other than an event for which the
30-day notice period is waived),  prohibited  transaction (within the meaning of
Section  4975 of the Code or Section 406 of ERISA) or breach of  fiduciary  duty
occurred  with respect to any Plan has given or would  reasonably be expected to
give rise to a material liability.

     (h) All  benefits due under each Plan have been timely paid and there is no
lawsuit or claim, other than routine  uncontested  claims for benefits,  pending
or,  to the  Knowledge  of the  Company,  threatened  against  any  Plan  or the
fiduciaries  of any such plan or otherwise  involving or  pertaining to any such
Plan that has given or would be  reasonably  expected to give rise to a material
liability.


                                       17


<PAGE>


     (i)  Except as set  forth in  Section  3.14(i)  of the  Company  Disclosure
Schedule,  neither  the  execution  and  delivery  of  this  Agreement  nor  the
consummation  of the  transactions  contemplated  hereby  will (i) result in any
payment  becoming  due to any  employee  (current,  former  or  retired)  of the
Company,  (ii) increase any benefits  otherwise  payable  under any Plan,  (iii)
result  in the  acceleration  of the  time of  payment  or  vesting  of any such
benefits  under any Plan or (iv)  constitute a "change in control" as defined in
any Plan.

     (j) No civil or criminal action brought pursuant to the provisions of Title
I,  Subtitle B, Part 5 of ERISA is pending or, to the  Knowledge of the Company,
threatened  against any  fiduciary  of any Plan,  and, to the  Knowledge  of the
Company,  none of the Plans nor any  fiduciary  thereof  has been the  direct or
indirect subject of an audit investigation or examination by any governmental or
quasi-governmental agency that has given or would be reasonably expected to give
rise to a material liability.

     (k)  Except as set  forth in  Section  3.14(k)  of the  Company  Disclosure
Schedule,  no agreement,  commitment or obligation on the part of the Company or
any of its Subsidiaries exists to increase materially any benefit under any Plan
or to adopt any new Plan.

     (l) No  Plan  has any  material  unfunded  accrued  benefits  that  are not
reflected  in the SEC Reports  filed prior to the date hereof.  No  "accumulated
funding  deficiency"  as defined in Section 412 of the Code,  has been  incurred
with respect to any Title IV Plan subject to Section 412 of the Code, whether or
not waived, and remains outstanding.  The Company has not incurred, and does not
reasonably  expect to incur (A) any liability under Title IV of ERISA arising in
connection with the termination  of, or a complete or partial  withdrawal  from,
any Title IV Plan or (B) any  liability  under  Section 4971 of the Code that in
either case could become a liability of the Company after the Closing Date.

     (m) The Company has  provided to Parent and Merger Sub with respect to each
Plan described in Section 3(2) of ERISA (other than a Multi-Employer Plan), each
other  Plan  that  provides  for the  deferral  of  compensation,  and each Plan
disclosed on Section 3.14(e) of the Company Disclosure Schedule, true, accurate,
and complete copies of each such Plan's most recent financial statements and all
other financial  information  requested by Parent and Merger Sub with respect to
such Plans. Since the date to which such financial  information  relates,  there
has been no material  amendment or  modification  to any such Plan or any of the
financial statements so provided.

     SECTION 3.15. Absence of Certain Changes.

     (a) Except as set forth in the SEC  Reports  filed prior to the date hereof
or to the extent set forth in Section 3.15 of the Company  Disclosure  Schedule,
since December 31, 2003,  except in connection with this Agreement,  the Company
and its  Subsidiaries  have  conducted  their  business in the  ordinary  course
consistent with past practice and there has not been:


                                       18


<PAGE>


          (i) any change,  condition,  event or occurrence that has had or would
     reasonably be expected to have a Material Adverse Effect;

          (ii) any  declaration,  setting  aside or payment of any  dividend  or
     other distribution in respect of any shares of capital stock of the Company
     or any  repurchase,  redemption or other  acquisition by the Company or any
     Subsidiary of any outstanding  shares of capital stock or other  securities
     of, or other ownership interest in, the Company or any Subsidiary;

          (iii)  any  split,  combination  or  reclassification  of  any  of the
     Company's  or  any  Subsidiary's  capital  stock  or  any  issuance  or the
     authorization  of any  issuance of any other  securities  in respect of, in
     lieu of or in substitution for shares of its capital stock;

          (iv) (A) any granting by the Company or any of its Subsidiaries to any
     executive  officer  or other  key  employee  of the  Company  or any of its
     Subsidiaries of any increase in  compensation,  except for normal increases
     in the  ordinary  course of business  consistent  with past  practice or as
     required under employment  agreements in effect as of the date hereof which
     have  previously  been provided or made available to Parent and Merger Sub,
     (B) any  granting  by the  Company or any of its  Subsidiaries  to any such
     executive  officer of any increase in severance or termination  pay, except
     as was required under any employment,  severance or termination  agreements
     in effect as of the date hereof which have previously been provided or made
     available  to Parent and Merger Sub or (C) any entry by the  Company or any
     of its Subsidiaries into any employment, severance or termination agreement
     with any such executive  officer except in the ordinary  course of business
     consistent with past practice;

          (v) any material damage, destruction or loss to any material property,
     whether or not covered by insurance;

          (vi)  except  insofar as may have been  disclosed  in the SEC  Reports
     filed  prior to the date  hereof  or  required  by a  change  in GAAP,  any
     significant  change in accounting  methods,  principles  or practices  (for
     financial accounting or tax purposes);

          (vii) any making or revocation of any Tax elections or any  settlement
     or compromises of any federal, state, foreign or local Tax liability or any
     waivers or  extensions  of the  statute of  limitations  in respect of such
     Taxes where the amount of such Taxes subject to  settlement,  compromise or
     waiver or extension of the statute of  limitations is greater than $125,000
     individually or $250,000 in the aggregate;

          (viii) any entry by the  Company or any of its  Subsidiaries  into any
     material transaction or Contract;


                                       19


<PAGE>


          (ix) any  failure  to pay and  discharge  current  liabilities  in the
     ordinary  course of business  consistent  with past practice except where a
     liability  is  disputed  in good faith by  appropriate  proceedings  or any
     significant  change that is adverse to the Company in policies or practices
     with respect to the  collection  of accounts  receivable  or the payment of
     sales representative draws;

          (x) any  making of loans,  advances  or capital  contributions  to, or
     investments  in, any person  (other than by the Company in any wholly owned
     Subsidiary  of the Company or by any  Subsidiary of the Company in a wholly
     owned  Subsidiary  of the Company or other than advances by the Company and
     its Subsidiaries  made to sales  representatives  in the ordinary course of
     business) in excess of $250,000 in the  aggregate or payment of any fees or
     expenses to any of the  Company's  stockholders  or any Affiliate of any of
     such  stockholders,  except as required under any  management  agreement in
     effect as of the date hereof  which has  previously  been  provided or made
     available to Parent and Merger Sub;

          (xi) the  incurrence  of a Lien on any of its  assets  with a value in
     excess of $125,000,  except for any Lien that is a Permitted Exception,  or
     acquisition of any assets or sale, assignment,  transfer, conveyance, lease
     or other disposition of any assets of the Company or any Subsidiary, except
     for assets  acquired or sold,  assigned,  transferred  conveyed,  leased or
     otherwise  disposed of (A) in the  ordinary  course of business  consistent
     with past  practice and (B) other  indebtedness  for  borrowed  money in an
     amount not in excess of $250,000 in the aggregate;

          (xii) any  incurrence  of any  indebtedness  for borrowed  money in an
     amount in excess of $250,000 in the aggregate;

          (xiii)  any  cancellation  or  compromise  of any  debt  or  claim  or
     amendment, cancellation, termination,  relinquishment, waiver or release of
     any Contract or right except in the ordinary  course of business and which,
     in the aggregate, would not be material to the Company and its Subsidiaries
     taken as a whole;

          (xiv) any  material  delay in making any  capital  expenditure  for an
     approved  capital  project as set forth in the Company's  draft fiscal 2005
     budget  provided to Parent or the making or  commitment to make any capital
     expenditures  or capital  additions or betterments  materially in excess of
     amounts for such  purposes  set forth in the  Company's  draft  fiscal 2005
     budget provided to Parent;

          (xv) any grant of any  material  license or  sublicense  of any rights
     under or with respect to any Intellectual Property;


                                       20


<PAGE>


          (xvi) any institution or settlement of any material legal proceeding;

          (xvii)  any   acceleration  of  any  options  or  other   equity-based
     compensation granted to any director, officer, employee or other person;

          (xviii) other than in connection with the transactions contemplated by
     this   Agreement,   any  adopted  or  proposed   material   change  in  the
     organizational documents of the Company or any of its Subsidiaries; or

          (xix) any agreement to do anything set forth in this Section 3.15.

     SECTION 3.16.  Taxes.  "Tax" or "Taxes" shall mean (i) all federal,  state,
local or foreign taxes, duties, fees, premiums, assessments, imposts, levies and
governmental impositions of any kind, including, but not limited to, those on or
measured by or referred to as income, franchise,  profits, gross receipts, goods
and  services,  capital,  ad  valorem,  advance,  corporation,   custom  duties,
alternative  or add-on  minimum  taxes,  estimated,  environmental,  disability,
registration,  value added,  sales,  use,  service,  real or personal  property,
capital stock,  license,  payroll,  withholding,  employment,  social  security,
workers'   compensation,    unemployment   compensation,   utility,   severance,
production, excise, stamp, occupation,  premiums, windfall profits, transfer and
gains taxes, and (ii) any interest,  penalties and additions to tax imposed with
respect thereto;  and "Tax Returns" shall mean returns,  reports and information
statements,  including any schedule or attachment thereto, with respect to Taxes
required to be filed with the Internal Revenue Service or any other governmental
or taxing  authority or agency,  domestic,  state,  local or foreign,  including
consolidated,  combined and unitary Tax returns.  Except as set forth in Section
3.16 of the Company Disclosure Schedule:

     (a)  Each  of the  Company  and  its  Subsidiaries  and  any  consolidated,
combined,  unitary or  aggregate  group for Tax purposes of which the Company or
any of its Subsidiaries is or has been a member has timely filed or caused to be
filed  (or  will  file  or  cause  to be  filed)  with  the  appropriate  taxing
authorities  in all  jurisdictions  in which such Tax returns are required to be
filed all income Tax  Returns,  and all other Tax  Returns  which,  if  properly
prepared  and filed,  would  involve  more than an  immaterial  amount of Taxes,
required to be filed by it (taking into account  applicable  extension  periods)
for all taxable or  reporting  periods  ending on or before the Closing Date and
has paid all Taxes  required to be paid and has made  adequate  provision on its
financial statements in accordance with GAAP for all Taxes which are not yet due
and payable. All such Tax Returns are true, correct and complete in all material
respects,  and there are no liens on any of the assets of the  Company or any of
its Subsidiaries  that arose in connection with any failure (or alleged failure)
to pay any Tax. The Company and its  Subsidiaries  have complied in all material
respects with all applicable laws, rules and regulations relating to the payment
and  withholding  of Taxes and have duly and timely  withheld and collected from
employee  salaries,  wages and other compensation and from all other amounts and
have paid over to the appropriate  taxing authorities all amounts required to be
so withheld and paid over for all periods under all applicable laws.


                                       21


<PAGE>


     (b) Neither the Company nor any of its  Subsidiaries  has (i) been notified
in writing  that any Tax Return is  currently  under audit by the United  States
Internal  Revenue Service  ("IRS")or any state or local taxing authority or that
it intends to conduct such an audit and no action, suit, investigation, claim or
assessment is pending or, to the Knowledge of the Company, proposed with respect
to any Taxes; (ii) made any agreement for the extension of time or the waiver of
the statute of  limitations  for the  assessment,  collection  or payment of any
Taxes;  (iii) been notified in writing that any material  claim for unpaid Taxes
has become a lien or encumbrance of any kind against the property of the Company
or any of its  Subsidiaries  or is being asserted  against the Company or any of
its Subsidiaries; or (iv) executed any power of attorney with respect to any Tax
matter that is currently in force.

     (c)  Neither  the  Company nor any of its  Subsidiaries  has  incurred  any
liability for Taxes as a result of Section 1.1502-6 of the Treasury  Regulations
or any  comparable  provision  of state,  local or foreign  law (other than as a
result of being in a group of which  the  Company  is the  common  parent).  The
Company  is not a USRPHC  and was not a USRPHC on any  "determination  date" (as
defined in Section 1.897-2(c) of the Treasury  Regulations) that occurred in the
five-year period preceding the Closing Date.

     (d) No claim has been made by a taxing  authority in a  jurisdiction  where
the Company or any of its  Subsidiaries  does not file Tax Returns to the effect
that such entity is or may be subject to taxation by that jurisdiction.

     (e) Parent and Merger  Sub have been  provided  or given  access to (i) all
income Tax Returns of the Company and its  Subsidiaries  for all taxable periods
ending on or after  December  31, 1999 and (ii) all United  States and  Canadian
federal revenue agents' reports and other similar reports  relating to the audit
or  examination of the Tax Returns of the Company and its  Subsidiaries  for all
taxable  periods  ending on or after December 31, 1999. No issue has been raised
by a domestic  or  federal,  state,  local or foreign  taxing  authority  in any
current  or prior  examination,  which,  by  application  of the same or similar
principles,  could reasonably be expected to result in a proposed deficiency for
any subsequent taxable period.

     (f)  Neither  the  Company  nor  any  other  person  (including  any of its
Subsidiaries) on behalf of the Company or any of its Subsidiaries has (i) agreed
to or are  required to make any  adjustments  pursuant to Section  481(a) of the
Code or any  similar  provision  of state,  local or foreign  law by reason of a
change in accounting  method or has any Knowledge  that the IRS has proposed any
such adjustment or change in accounting  method, or has any application  pending
with any taxing  authority  requesting  permission for any changes in accounting
methods that relate to the business or  operations  of the Company or any of its
Subsidiaries,  or (ii) filed a consent pursuant to Section 341(f) of the Code or
agreed to have  Section  341(f)(2)  of the Code  apply to the  disposition  of a
subsection  (f) asset (as such term is defined  in  Section  341(f) of the Code)
owned by the Company or any of its Subsidiaries.


                                       22


<PAGE>


     (g) No  property  owned by the  Company or any of its  Subsidiaries  (i) is
property required to be treated as being owned by another person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended
and in effect  immediately prior to the enactment of the Tax Reform Act of 1986,
(ii)  constitutes  "tax-exempt  use  property"  within  the  meaning  of Section
168(h)(1) of the Code or (iii) is "tax-exempt bond financed property" within the
meaning of Section 168(g) of the Code.

     (h) Neither the Company nor any of its  Subsidiaries  is a party to (i) any
tax  sharing,  or similar  agreement  or  arrangement  (whether or not  written)
pursuant to which they will have any  obligation  to make any payment  after the
Closing,  (ii) any  agreement  that  could  obligate  it to make any  payment in
connection with the transactions contemplated by this Agreement that will not be
deductible by the Company or any of its  Subsidiaries  by reason of Section 280G
of the Code, (iii) a closing  agreement  pursuant to Section 7121 of the Code or
any predecessor  provision thereof or any similar  provision of state,  local or
foreign  law with  respect to the Company or any of its  Subsidiaries  involving
more than $50,000 of Taxes or (iv) otherwise  bound by any private letter ruling
of the  IRS or  comparable  rulings  or  guidance  issued  by any  other  taxing
authority.  The  Company has  provided to Parent and Merger Sub all  information
that is necessary in order to accurately  determine the applicability of Section
280G of the Code to the  contractual  arrangements  between  the  Company or its
Subsidiaries and their respective employees.

     (i) Neither the Company  nor any of its  Subsidiaries  (i) has  constituted
either a "distributing  corporation" or a "controlled  corporation"  (within the
meaning  of  Section  355(a)(1)(A)  of the  Code)  in a  distribution  of  stock
qualifying for tax-free  treatment  under Section 355 of the Code (x) in the two
years prior to the date of this Agreement or (y) in a  distribution  which could
otherwise  constitute  part of a "plan"  or  "series  of  related  transactions"
(within  the  meaning of  Section  355(e) of the Code) in  conjunction  with the
transactions  contemplated  by this  Agreement or (ii) is or was a member of any
consolidated,  combined,  unitary or affiliated group of corporations that filed
or was required to file a  consolidated,  combined or unitary Tax Return,  other
than the group of which it is now a member.

     SECTION 3.17. Insurance. All insurance policies to which the Company or any
Subsidiary is a party or that provide coverage to the Company, any Subsidiary or
any  director  or officer of the  foregoing:  (i) are  valid,  outstanding,  and
enforceable;  (ii) are  issued  by an  insurer  that is  financially  sound  and
reputable; and (iii) taken together, provide adequate insurance coverage for the
assets and the  operations  of the  Company and its  Subsidiaries  for all risks
normally insured against by a person carrying on the same business or businesses
as the Company and its Subsidiaries.  Except as set forth in Section 3.17 of the
Company Disclosure Schedule, neither the Company nor any Subsidiary has received
any notice of premature cancellation or termination with respect to any existing
material insurance policy of the Company or any Subsidiary.


                                       23


<PAGE>


     SECTION 3.18. Environmental Matters.

     (a) Except for such  matters that are  disclosed  in the SEC Reports  filed
prior to the date hereof or Section 3.18 of the Company Disclosure Schedule, and
for such matters as have not resulted  and would not  reasonably  be expected to
result in the  Company  or the  Subsidiaries  incurring  material  Environmental
Liabilities:  (i)  the  assets,  Company  Real  Property,  Former  Company  Real
Property,  businesses and operations of the Company and its Subsidiaries are and
have been in compliance with applicable Environmental Laws; (ii) the Company and
its Subsidiaries have obtained and, as currently operating, are and have been in
compliance  with all  Permits  necessary  under  any  Environmental  Law for the
conduct of the business and  operations of the Company and its  Subsidiaries  in
the  manner now  conducted;  (iii) all  Hazardous  Substances  generated  at the
Company Real Property or Former Company Real Property or in connection  with any
operations of the Company have been transported and otherwise  handled,  treated
and disposed of in compliance  with all applicable  Environmental  Laws and in a
manner  that does not result in  liability  under  Environmental  Laws;  (iv) no
Hazardous  Substances  have been disposed of or otherwise  released,  handled or
stored by the  Company on the  Company  Real  Property  or Former  Company  Real
Property on which the Company's  business is or has been  conducted or elsewhere
in  violation  of  applicable  Environmental  Laws  or in a  manner  that  would
reasonably  be  expected  to  result  in  the  Company  incurring  Environmental
Liabilities  and (v) neither the  Company  nor any  Subsidiary  nor any of their
respective  assets,  Company  Real  Property,   Former  Company  Real  Property,
businesses or operations  has received or is subject to any  outstanding  order,
decree, judgment, complaint,  agreement, claim, citation, notice, investigation,
inquiry or proceeding  indicating that the Company or any of its Subsidiaries is
or may be (a) liable for a violation of any  Environmental Law or (b) liable for
any  Environmental   Liabilities  (including,   without  limitation,   any  such
Environmental  Liabilities  incurred in  connection  with being  designated as a
"potentially  responsible  party"  pursuant to the  Comprehensive  Environmental
Response,   Compensation   and  Liability  Act  or  any  analogous   state  law)
(collectively, "Environmental Claims"), and, to the Knowledge of the Company, no
such Environmental Claims are threatened).

     (b) Copies of all "Phase I" or "Phase II"  environmental  site  assessments
reports,  asbestos reports,  compliance audits,  reports to senior management or
similar  reports  in the  possession  or  control  of the  Company or any of the
Subsidiaries  containing material  information  concerning  environmental issues
that  could  affect  the  Company  or any of the  Subsidiaries  at any  property
currently or formerly owned or leased by the Company or any of the Subsidiaries,
or at any other location for which the Company or any of the Subsidiaries may be
liable, have been made available to Purchaser.

     (c) The  transactions  contemplated  by this  Agreement  do not involve any
property in  Connecticut  or New Jersey that would require  notification  to any
Governmental  Authority with  jurisdiction over the environment and the possible
obligation  to   investigate   or  remediate  such  property  under  either  the
Connecticut Transfer Act or the New Jersey Industrial Site Recovery Act.


                                       24


<PAGE>


     (d) Definitions. For purposes of this Agreement, the terms below shall have
the following respective meanings:

          (i)  "Environmental  Laws"  shall  mean  any law  (including,  without
     limitation,  common law), regulation,  ordinance,  guideline, code, decree,
     judgment,  order,  permit or  authorization  or other  legally  enforceable
     requirement of any Governmental  Authority relating to toxic torts,  worker
     or  public  safety  or  health  and the  indoor  and  outdoor  environment,
     including,   without  limitation,   pollution,   contamination,   Hazardous
     Substances,  cleanup,  regulation and protection of the air, water or soils
     in the indoor or outdoor environment.

          (ii)   "Environmental   Liabilities"   shall  mean  all   liabilities,
     responsibilities,   damages,  penalties,  obligations  or  clean-up  costs,
     response,  remedial and removal costs,  investigation and feasibility study
     costs,  capital costs,  operation and maintenance costs,  losses,  punitive
     damages, property damages, natural resource damages, consequential damages,
     treble  damages,   costs  and  expenses  (including  all  reasonable  fees,
     disbursements  and expenses of counsel,  experts and  consultants),  fines,
     sanctions  and  interest  incurred  as a result of or related to any claim,
     suit, action,  investigation,  proceeding or demand by any person, assessed
     or levied  pursuant  to any  Environmental  Law or in  connection  with any
     release of a Hazardous  Substance  whether on, at, in, under, from or about
     or in the vicinity of any real or personal property.

          (iii) "Former  Company Real Property"  shall mean any real property in
     which the Company or the Subsidiaries previously held, but no
                  longer holds, any legal, beneficial, equitable or leasehold
                  interest.

          (iv)  "Hazardous  Substances"  shall mean any  material,  substance or
     waste classified, characterized or regulated as hazardous, toxic, pollutant
     or contaminant under any Environmental Law, including,  but not limited to,
     petroleum products,  asbestos,  radioactive material, or hazardous or toxic
     substances or wastes that pose a hazard to the health or safety of persons.

     (e)  Notwithstanding  anything  to  the  contrary,  any  representation  or
warranty  contained in this  Section  3.18 that  relates to Former  Company Real
Property  shall only apply to Former  Company Real  Property  during the periods
such  real  property  was  owned or  operated  by the  Company  or by any of its
Subsidiaries.

     SECTION 3.19. Real Property.

     (a) Section  3.19(a) of the Company  Disclosure  Schedule  sets forth (i) a
complete  list of all real  property  owned (the "Owned Real  Property")  by the
Company or any of its Subsidiaries and (ii) a complete list of all real property
leased (the "Leased Real Property"  and,  together with the Owned Real Property,
the "Company Real


                                       25


<PAGE>


Property") by the Company or any of its  Subsidiaries.  A true and complete copy
of each material lease with all amendments and modifications (the "Real Property
Leases") has been delivered or made available to Parent.

     (b)  Except as set  forth in  Section  3.19(b)  of the  Company  Disclosure
Schedule,  the  Company,  or one or more of its  Subsidiaries,  has (i) good and
marketable fee simple title to each of the Owned Real Properties, free and clear
of all Liens except for the Permitted Exceptions, and (ii) has a valid leasehold
interest in the Leased Real Property, free and clear of all Liens except for the
Permitted Exceptions.

     (c) With respect to the Real Property  Leases,  (i) neither the Company nor
any of its  Subsidiaries  has sent or received a written notice that, and is not
aware that, any party to a Real Property Lease has materially  breached or is in
material default of any of its obligations  thereunder,  which breach or default
remains uncured and no event has occurred that, with the giving of notice or the
passage of time or both,  would  constitute such a breach or default  thereunder
and (ii) all  material  covenants  to be  performed by the Company or any of its
Subsidiaries  or, to the Knowledge of the Company,  any landlord  under any Real
Property Lease have been performed in all material respects.

     (d) Each of the Company and its  Subsidiaries has the right to use the Real
Property, subject to the Permitted Exceptions and such other exceptions as would
not  materially  effect the use  thereof,  in the manner and for the purposes as
each is currently being used.

     (e) "Permitted Exceptions" means (i) all defects, exceptions, restrictions,
easements, covenants, reservations, encroachments, utility agreements, rights of
way and  encumbrances  disclosed in policies of title  insurance which have been
made  available  to Parent  and  which  have not had,  nor  would be  reasonably
expected to have,  with respect to any material  property of the Company and its
Subsidiaries,  taken as a whole,  a material  adverse  effect on the use of such
affected  property;   (ii)  Liens  for  current  taxes,   assessments  or  other
governmental  charges not yet  delinquent  or the amount or validity of which is
being  contested  in  good  faith  by  appropriate   proceedings   (provided  an
appropriate  reserve is  established  therefor on the most recent  balance sheet
included in the SEC Reports  filed prior to the date hereof in  accordance  with
GAAP);  (iii)  landlord's,  warehouseman's,   mechanics',  carriers',  workers',
repairers'  and similar  Liens  arising or incurred  in the  ordinary  course of
business in respect of obligations  which are not yet due or which are bonded or
which are being contested in good faith and by appropriate proceedings (provided
any required  reserves with respect  thereto are  maintained on the books of the
Company or such Subsidiary,  as the case may be, in accordance with GAAP);  (iv)
zoning,  entitlement  and other land use and  environmental  regulations  by any
Governmental  Authority,  the  violation  of  which  has not had,  nor  would be
reasonably expected to have with respect to any material property of the Company
and its  Subsidiaries,  taken as a whole,  a  material  adverse  effect  on such
property;   (v)  such  other   imperfections  in  title,   charges,   easements,
restrictions,  covenants,  reservations,  encroachments,  utility agreements and
encumbrances  which do not  materially  detract from the value of or  materially
interfere  with the  present  use of any


                                       26


<PAGE>


property  subject  thereto or  affected  thereby;  and (vi) Liens  securing  any
financings disclosed in the Financial Statements.

     SECTION 3.20. Labor  Relations.  Except as set forth in Section 3.20 of the
Company  Disclosure  Schedule:  (i) neither the Company nor any  Subsidiary is a
party to any collective bargaining or other labor contract;  (ii) since December
31, 2003,  there has not been,  and there  presently is no unfair labor practice
charge or complaint  pending or, to the  knowledge  of the  Company,  threatened
against the Company or any Subsidiary which, if adversely  determined,  would be
reasonably  likely to give rise to a Material  Adverse  Effect;  and (iii) since
December 31, 2003,  there has not been, and there  presently is no labor strike,
slowdown, work stoppage, lockout or other labor controversy in effect or, to the
knowledge of the Company, threatened against the Company or any Subsidiary which
would be reasonably likely to have a Material Adverse Effect.

     SECTION 3.21. Inventories; Receivables; Payables.

     (a) The  inventories  of the Company and its  Subsidiaries  are in good and
marketable condition in all material respects,  and are saleable in all material
respects in the  ordinary  course of  business  consistent  with past  practice,
except for shorts, obsolete or otherwise unusable inventory,  for which adequate
reserves have been  reflected in the Financial  Statements,  in accordance  with
GAAP consistently applied.

     (b) All accounts receivable, including salespersons overdrafts representing
receivables for sales representative draws paid in excess of earned commissions,
of the Company and its  Subsidiaries  reflected in the Financial  Statements are
good and collectible in all material respects at the aggregate  recorded amounts
thereof,  net of any  applicable  reserve  for  returns,  doubtful  accounts  or
uncollectible  amounts reflected  thereon,  which reserves are adequate and were
calculated in a manner consistent with past practice and in accordance with GAAP
consistently  applied.  All accounts  receivable arising after December 31, 2003
are good and  collectible  in all material  respects at the  aggregate  recorded
amounts thereof, net of any applicable reserve for returns, doubtful accounts or
uncollectible  amounts reflected  thereon,  which reserves are adequate and were
calculated in a manner consistent with past practice and in accordance with GAAP
consistently  applied and, since December 31, 2003,  neither the Company nor any
of its Subsidiaries has made any significant change in its policies or practices
regarding collection of its accounts receivable.

     (c) All accounts,  commission  and other trade  payables of the Company and
its Subsidiaries reflected in the Financial Statements or arising after December
31,  2003 are the result of bona fide  transactions  in the  ordinary  course of
business  consistent  with  past  practice  in all  material  respects  and were
calculated in a manner consistent with past practice and in accordance with GAAP
consistently  applied and neither  the Company nor any of its  Subsidiaries  has
adversely  changed  its  policies  or  practices  regarding  the  payment of its
accounts, commission and other trade payables since December 31, 2003.


                                       27


<PAGE>


     SECTION 3.22. Customers, Suppliers and Sales Representatives.  Section 3.22
of the Company  Disclosure  Schedule  sets forth a list (for the Company and its
Subsidiaries  taken as a whole) of: (i) the thirty (30)  largest  customers  who
represented the largest  sources of revenue to the Company and its  Subsidiaries
based upon the Company's consolidated revenues during the fiscal year ended June
30,  2004;  (ii) each  supplier  from whom the Company  purchased  greater  than
$1,250,000  of goods during the fiscal year ended June 30, 2004;  and (iii) each
independent  sales  representative  for whom net  commissions  were greater than
$125,000  during the fiscal  year  ended June 30,  2004.  Except as set forth in
Section 3.22 of the Company  Disclosure  Schedule,  since June 30, 2004,  to the
Knowledge of the Company,  there has not been any material adverse change in the
business  relationship  of the Company and its  Subsidiaries  with any customer,
supplier  or  sales  representative  listed  on  Section  3.22  of  the  Company
Disclosure Schedule.

     SECTION  3.23.  No Other  Representations  or  Warranties.  Except  for the
representations and warranties contained in this ARTICLE III (as modified by the
Company  Disclosure  Schedule),  the Company and its  Subsidiaries are making no
representation or warranty whatsoever,  express or implied,  including,  but not
limited  to,  any  implied   warranty  or   representation   as  to   condition,
merchantability  or  suitability  as to any of the  properties  or assets of the
Company or any of its Subsidiaries and that except for the  representations  and
warranties  contained herein,  Parent takes the Company and its Subsidiaries "as
is" and "where is." It is understood that any projections  provided or addressed
to Parent are not and shall not be deemed to be or to include representations or
warranties of the Company or its Subsidiaries.


                                   ARTICLE IV

             REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

     SECTION 4.01.  Organization,  Standing and Corporate Power.  Each of Parent
and Merger Sub is duly  organized,  validly  existing and in good standing under
the Laws of the  jurisdiction in which it is formed or incorporated  and has all
requisite   corporate  power  and  authority  to  enter  into  and  perform  its
obligations under this Agreement.

     SECTION 4.02. Authority; Noncontravention.

     (a) Each of Parent and Merger Sub has all requisite  power and authority to
execute  and  deliver  this  Agreement  and  to  consummate   the   transactions
contemplated by this Agreement. The execution and delivery of this Agreement and
the  consummation of the  transactions  contemplated by this Agreement have been
duly authorized by all necessary action on the part of Parent and Merger Sub and
no other  proceedings  on the part of  Parent  or Merger  Sub are  necessary  to
authorize this Agreement or to consummate the transactions  contemplated hereby.
This  Agreement  has been duly  executed and  delivered by Parent and Merger Sub
and,  assuming  the due  authorization,  execution  and delivery by the Company,
constitutes  a legal,  valid and  binding  obligation  of Parent  and Merger Sub
enforceable  against Parent and Merger Sub


                                       28


<PAGE>


in  accordance  with its terms  (subject to applicable  bankruptcy,  insolvency,
moratorium,  or other similar Laws  affecting  creditors'  rights  generally and
general  equitable  principles  (regardless  of whether such  enforceability  is
considered in a proceeding in equity or at law)).

     (b) The execution,  performance  and delivery of this Agreement do not, and
the consummation of the Merger and the other  transactions  contemplated by this
Agreement and compliance with the provisions of this Agreement will not, require
any  consent,  approval  or  notice  under,  conflict  with,  or  result  in any
violation,  termination,  suspension  or breach of, or default  (with or without
notice or lapse of time or both) under,  or give rise to a right of termination,
suspension,  cancellation  or acceleration of any obligation or to the loss of a
benefit under,  or result in the creation of any Lien upon any of the properties
or other assets of Parent or Merger Sub under (i) the  organizational  documents
of each of Parent and Merger Sub, (ii) any material  Contract to which Parent or
Merger Sub is a party or any of their  respective  properties or other assets is
subject or (iii) subject to the governmental  filings and other matters referred
to in  Section  4.03,  any Law  applicable  to  Parent  or  Merger  Sub or their
respective  properties or other assets,  other than, in the case of clauses (ii)
and (iii),  with respect to matters that are not reasonably likely to impair the
ability of each of Parent and Merger Sub to perform its  obligations  under this
Agreement  in any material  respect or delay in any material  respect or prevent
the consummation of any of the transactions contemplated by this Agreement.

     (c)  Parent,  as the sole  stockholder  of Merger  Sub,  has  adopted  this
Agreement,  and such adoption is the only action of the members of Parent and of
any  class  or  series  of the  capital  stock  of  Merger  Sub or any of  their
respective  Affiliates  necessary  to  adopt  this  Agreement  and  approve  the
transactions contemplated hereby.

     SECTION  4.03.  Governmental  Approvals.  No  consent,  approval,  order or
authorization  of, action by or in respect of, or  registration,  declaration or
filing with, any Governmental Authority is required by or with respect to Parent
or Merger Sub in connection with the execution and delivery of this Agreement by
Parent and Merger Sub or the consummation by Parent and Merger Sub of the Merger
or the other  transactions  contemplated by this  Agreement,  except for (a) the
filing of a premerger notification and report form by Parent, and the expiration
or termination of all waiting periods,  under the HSR Act, (b) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware,  (c)
such filings as may be required by  applicable  state  securities  or "blue sky"
laws or state  takeover  laws and (d) any consents,  approvals,  authorizations,
declarations or filings that, if not obtained or made, are not reasonably likely
to  impair  the  ability  of  each of  Parent  and  Merger  Sub to  perform  its
obligations  under  this  Agreement  in any  material  respect  or  delay in any
material  respect  or  prevent  the  consummation  of the  Merger  or the  other
transactions contemplated by this Agreement.

     SECTION  4.04.  Litigation.   There  is  no  claim,  suit,  action,  audit,
arbitration, investigation or proceeding pending or, to the Knowledge of Parent,
threatened against Parent or any of its Affiliates which if adversely determined
would,  individually  or in the aggregate,  materially and adversely  affect the
ability of each of


                                       29


<PAGE>


Parent and Merger Sub to perform  its  obligations  hereunder  or which seeks to
enjoin the consummation of the transactions  contemplated  hereby,  nor is there
any  judgment,  decree,  award,  injunction,  rule or order of any  Governmental
Authority or arbitrator outstanding against Parent or any of its Affiliates that
would  reasonably be expected to materially and adversely  affect the ability of
each of Parent and Merger Sub to perform its obligations hereunder.

     SECTION 4.05. Brokers and Other Advisors. Neither Parent nor Merger Sub has
incurred any obligation or liability,  contingent or otherwise,  for brokers' or
finders' fees or commissions.

     SECTION  4.06.  Interim  Operations  of Merger  Sub.  Merger Sub was formed
solely for the purpose of engaging in the transactions  contemplated hereby, has
engaged in no other business activities and has conducted its operations only as
contemplated hereby.


                                   ARTICLE V

                    COVENANTS RELATING TO CONDUCT OF BUSINESS

     SECTION 5.01.  Conduct of Business.  Except as set forth in Section 5.01 of
the Company  Disclosure  Schedule or expressly  contemplated  by this Agreement,
during the period from the date of this  Agreement to the  Effective  Time,  the
Company  shall,  and shall cause each of its  Subsidiaries  to: (A) carry on its
business in the ordinary  course  consistent  with past practice in all material
respects;  (B) use reasonable  best efforts,  consistent  with prudent  business
judgment,  to preserve intact its business  organization  and keep available the
services of its executive  officers and key employees;  (C) use reasonable  best
efforts,   consistent  with  prudent  business   judgment,   to  maintain  their
relationships   with   their   material   licensors,   suppliers,   contractors,
distributors,  customers and others having material business  relationships with
it; (D) make capital  expenditures in the ordinary course of business consistent
with past  practice  in all  material  respects  (except to the extent  that the
consent  of the  Investor  has  been  requested  with  respect  to such  capital
expenditures  and such consent is withheld) and (E) make all income tax payments
in cash in the ordinary course of business  consistent with past practice in all
material respects and without regard to the impact or anticipated  impact of the
transactions  contemplated  hereby.  Without  limiting the foregoing,  except as
expressly contemplated by this Agreement and except as set forth in Section 5.01
of the  Company  Disclosure  Schedule,  during the period  from the date of this
Agreement to the Effective Time, the Company shall not, and shall not permit any
of its Subsidiaries to, without Parent's prior written consent:

     (a) (i)  declare,  set  aside or pay any  dividends  on,  or make any other
distributions  (whether in cash,  stock or  property)  in respect of, any of its
capital  stock,  other than dividends or  distributions  by a direct or indirect
wholly owned Subsidiary of the Company to its parent or to another  wholly-owned
Subsidiary of the Company; or (ii) split,  combine,  reclassify or redeem any of
its capital stock;


                                       30


<PAGE>


     (b) authorize for issuance,  issue,  sell,  pledge,  encumber or deliver or
agree or commit to issue, sell, pledge, encumber or deliver (whether through the
issuance or granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise) any shares of its capital stock,  or issue any securities
convertible  into,  exchangeable  for or  representing  a right to  purchase  or
receive,  or enter into any Contract  with respect to the issuance of, shares of
its capital stock,  other than in the ordinary  course of business under current
employee  benefit plans and other shares of Company  Common Stock  issuable upon
exercise of Company  Stock  Options and  Warrants in  accordance  with the terms
thereof;

     (c)  amend  the  Company   Certificate  or  Company  Bylaws  or  amend  the
certificate of incorporation or bylaws or equivalent organizational documents of
any Subsidiary of the Company;

     (d)  except as set  forth on  Section  5.01(d)  of the  Company  Disclosure
Schedule,  (i) incur or assume any  indebtedness for borrowed money or guarantee
any such indebtedness or issue or sell any debt securities or warrants or rights
to acquire  any debt  securities  of the Company or any of its  Subsidiaries  or
guarantee (or become liable for) any  indebtedness for borrowed money of others,
enter  into any  "keep  well" or  other  agreement  to  maintain  any  financial
statement  condition to another person or enter into any arrangement  having the
economic effect of any of the foregoing,  except for borrowings under the Credit
Facility for any purpose permitted thereunder and other borrowings not exceeding
$250,000  in  the   aggregate,   (ii)  make  any  loans,   advances  or  capital
contributions  to, or  investments  in, any other person other than to or in the
Company or any direct or indirect wholly-owned Subsidiary of the Company;

     (e)  except as set  forth in  Section  5.01(e)  of the  Company  Disclosure
Schedule,  acquire or sell (whether by merger,  consolidation or otherwise),  or
lease,  transfer,  encumber  or  otherwise  dispose  of any of  its  assets  for
aggregate consideration in excess of $250,000,  except in the ordinary course of
business consistent with past practice;

     (f) (i) make or change any Tax  election,  (ii)  settle or  compromise  any
federal, state, local or foreign Tax liability,  (iii) waive or extend the state
of limitations in respect of any such Taxes,  in the case of (ii) or (iii) where
the amount of Taxes at issue is greater  than  $100,000 or (iv)  prepare or file
any Tax return (including any amendment thereof) in respect of income or similar
taxes (other than Tax returns with  respect to quarterly  deposits,  deposits of
employee payroll withholding or similar Tax returns), with respect to the filing
thereof,  without  having  provided  Parent  with  a  copy  (together  with  the
supporting work papers) at least 5 days before the due date thereof for Parent's
review and comment;

     (g)  materially  modify,  amend or terminate or waive  compliance  with the
terms of or breaches  under,  or release or assign any material rights or claims
under,  any  material  Contract  except  in  the  ordinary  course  of  business
consistent with the past practices of the Company and its Subsidiaries;


                                       31


<PAGE>


     (h) except as may otherwise be required by applicable  law or regulation or
generally accepted accounting  principle,  change any of the material accounting
principles or practices used by it (for financial accounting or Tax purposes);

     (i) adopt a plan of complete or partial liquidation,  dissolution,  merger,
consolidation, restructuring, recapitalization or other reorganization;

     (j) settle any  litigation or other legal  proceeding or claim of liability
against the Company,  which is reasonably likely to materially negatively impact
the Company's  position with respect to similar  pending or threatened  material
claim or suit;

     (k) pay or agree to pay in settlement  or  compromise of any  litigation or
other legal  proceedings  or claims of  liability  against the  Company,  net of
insurance recoveries, more than $150,000 for any such suit or claim or more than
an aggregate of $375,000 for all such suits and claims;

     (l)  change  in any  material  respect  its  credit  policy  as to sales of
inventories  or its policies or practices with respect to the payment of current
liabilities,  the  collection  of  accounts  receivable  or the payment of sales
representative;

     (m) enter into any commitment for capital  expenditures  of the Company and
its Subsidiaries in excess of $50,000 for any individual commitment and $125,000
for all  commitments  in the  aggregate  other  than  for  capital  expenditures
contemplated  by the draft  capital  budget for the fiscal year 2005,  a copy of
which has been provided to Parent;

     (n) enter into,  materially  modify or  terminate  any labor or  collective
bargaining  agreement  of the  Company or any of its  Subsidiaries  or,  through
negotiation  or  otherwise,  make any  commitment  or incur any liability to any
labor organization with respect to the Company or any of its Subsidiaries;

     (o)  enter  into any  transaction,  contract,  commitment,  arrangement  or
understanding that limits, restrains, impedes or otherwise restricts the ability
of the Company or any of its Subsidiaries from competing with or engaging in any
business in any geographic location;

     (p) take  any  action  to  accelerate  any  option  or  other  equity-based
compensation granted to any director, officer, employee or other person;

     (q) prepay or otherwise make any payments,  other than scheduled  payments,
with respect to the Senior Notes or the PIK Notes; or

     (r)  commit,  propose  or agree to take any of,  the  foregoing  actions or
intentionally  and knowingly take any action that would make any  representation
or warranty of the Company  contained in this  Agreement  untrue or incorrect in
any material  respect as of the date when made or as if made as of the Effective
Time.


                                       32


<PAGE>


                                   ARTICLE VI

                              ADDITIONAL AGREEMENTS

     SECTION 6.01. Section 262 Notice and Information Statement;  Section 228(e)
Notice.

     (a) In accordance  with the  requirements of Section 262, the Company shall
notify each holder of Company  Common Stock and Company  Preferred  Stock who is
entitled to appraisal  rights of the  approval of the Merger and that  appraisal
rights are  available for shares of Company  Common Stock and Company  Preferred
Stock,  and the Company shall prepare and deliver an information  statement with
respect to the Merger to such holders. The Company and the Surviving Corporation
shall otherwise comply with Section 262.

     (b) In accordance with the  requirements of Section 228(e) of the DGCL, the
Company shall notify each holder of Company  Common Stock and Company  Preferred
Stock who did not  execute the  written  consent  approving  and  adopting  this
Agreement  referenced  in the  recitals  hereto of the  corporate  action  taken
thereby.

     SECTION 6.02. Access to Information; Confidentiality.

     (a) Subject to applicable Laws relating to the exchange of information, the
Company shall afford,  upon reasonable advance notice, to Parent and JHC, and to
Parent's  and  JHC's  respective  officers,   directors,   members,   employees,
accountants,  counsel,  environmental consultants,  financial advisors and other
representatives, including Marc Reisch, reasonable access during normal business
hours during the period prior to the Effective  Time or the  termination of this
Agreement  to all  its  and  its  Subsidiaries'  properties  (including  for the
purposes of environmental site visits), books, contracts, commitments, personnel
and records.

     (b) Parent and Merger Sub shall not, and shall cause their  Affiliates  not
to,  directly or  indirectly,  disclose,  reveal,  divulge or communicate to any
person other than their officers, directors,  employees,  accountants,  counsel,
financial advisors and other  representatives  any Confidential  Information (as
defined  below).  Parent and Merger  Sub shall not have any  obligation  to keep
confidential (or cause their Affiliates to keep  confidential)  any Confidential
Information if and to the extent disclosure thereof is specifically  required by
law; provided,  however,  that in the event disclosure is required by applicable
Law, Parent and Merger Sub shall, to the extent reasonably possible, provide the
Company with prompt notice of such requirement prior to making any disclosure so
that  the  Company  may  seek an  appropriate  protective  order.  "Confidential
Information" shall mean any confidential information with respect to the Company
or any of its Subsidiaries, including, methods of operation, customers, customer
lists, Products,  prices, fees, costs,  Technology,  inventions,  Trade Secrets,
know-how, Software, marketing methods, plans, personnel, suppliers, competitors,
markets or other specialized  information or proprietary matters.  "Confidential
Information" does not include,  and there shall be no obligation  hereunder with
respect to,  information  that (i) is  generally


                                       33


<PAGE>


available to the public on the date of this Agreement or (ii) becomes  generally
available  to the public other than as a result of a  disclosure  not  otherwise
permissible thereunder.

     (c) For each fiscal month, quarter and year ending between the date of this
Agreement  and the  Effective  Time,  the Company will deliver to Parent and JHC
promptly after made available by management of the Company:

          (i) unaudited monthly consolidated financial statements;

          (ii) unaudited quarterly consolidated financial statements; and

          (iii) audited annual consolidated financial statements.

     SECTION 6.03.  Efforts.  Upon the terms and subject to the  conditions  set
forth in this Agreement,  each of the parties agrees to use, except as otherwise
provided  below,  its  commercially  reasonable  efforts to take, or cause to be
taken, all actions,  and to do, or cause to be done, and to assist and cooperate
with the other parties in doing,  all things  necessary,  proper or advisable to
consummate and make effective,  in the most expeditious manner practicable,  the
Merger and the other  transactions  contemplated  by this  Agreement,  including
using  commercially  reasonable  efforts to accomplish  the  following:  (i) the
taking of all acts  necessary to cause the conditions to Closing to be satisfied
as promptly as  practicable,  (ii) the  obtaining  of all  necessary  actions or
nonactions,  waivers,  consents and  approvals  from all  relevant  Governmental
Authorities and the making of all necessary  registrations  and filings with all
relevant  Governmental  Authorities  and  the  taking  of  all  steps  as may be
necessary  to  obtain  an  approval  or  waiver  from,  or to avoid an action or
proceeding by any Governmental Authority and (iii) the execution and delivery of
any additional instruments necessary to consummate the transactions contemplated
by, and to fully carry out the purposes of, this Agreement.

     SECTION 6.04. Indemnification, Exculpation and Insurance.

     (a) Parent and Merger Sub agree that (i) the  certificate of  incorporation
or the bylaws of the  Surviving  Corporation  and its  Subsidiaries  immediately
after  the   Effective   Time  shall   contain   provisions   with   respect  to
indemnification and exculpation from liability that are at least as favorable to
the  beneficiaries  of such provisions as those provisions that are set forth in
the Company Certificate and Company Bylaws and similar organizational  documents
of its Subsidiaries,  on the date of this Agreement,  which provisions shall not
be amended,  repealed or otherwise  modified for a period of six years following
the  Effective  Time in any  manner  that  would  adversely  affect  the  rights
thereunder  of persons  who at or prior to the  Effective  Time were  directors,
officers, employees or agents of the Company or any of its Subsidiaries,  unless
such modification is required by law and (ii) all rights to  indemnification  as
provided in any indemnification agreements with any current or former directors,
officers and employees of the Company or any of its Subsidiaries as in effect as
of the  date  hereof  with  respect  to  matters  occurring  at or  prior to the
Effective Time shall survive the Merger.


                                       34


<PAGE>


     (b) For a period  of six years  after the  Effective  Time,  the  Surviving
Corporation  shall  maintain or cause to be maintained  officers' and directors'
liability  insurance  and  fiduciary  liability  insurance  covering the persons
described  in  paragraph  (a) of this  Section  6.04  (whether  or not  they are
entitled  to  indemnification  thereunder)  who  are  currently  covered  by the
Company's  existing  officers' and directors' or fiduciary  liability  insurance
policies set forth on Section  6.04(b) of the  Disclosure  Schedules on terms no
less  advantageous  to such  indemnified  parties than such existing  insurance;
provided  that the  Surviving  Corporation  shall not be obligated to pay annual
premiums for such  insurance  in excess of 200% of the last annual  premium paid
prior to the date of this  Agreement  (which  premium  is set  forth on  Section
6.04(b) of the Disclosure Schedules).

     (c) The Surviving  Corporation shall indemnify and hold harmless (and shall
advance expenses to), to the fullest extent permitted under applicable law, each
director,  officer and employee of the Company or any Subsidiary of the Company,
including,  without limitation,  officers and directors,  serving as such on the
date hereof,  against any reasonable expenses (including  reasonable  attorneys'
fees  and  disbursements),   judgments,  penalties,  fines  and  settlements  in
connection  with  any  threatened,   pending  or  completed   civil,   criminal,
administrative,  arbitration or investigative  proceeding relating to any of the
transactions  contemplated  hereby,  and in the  event  of any  such  proceeding
(whether  arising before or after the Effective  Time),  the parties hereto will
cooperate  in the  defense  of any  such  matter;  provided,  however,  that the
Surviving  Corporation  shall not be liable for any settlement  effected without
its prior written  consent,  which consent shall not unreasonably be withheld or
delayed.

     (d) The Surviving Corporation shall pay all reasonable expenses,  including
attorneys' fees that may be incurred by any indemnified parties in enforcing the
indemnity and other obligations provided for in this Section 6.04 to the fullest
extent permitted by applicable law.

     (e)  In the  event  the  Surviving  Corporation  or  any of its  respective
successors or assigns (i) consolidates  with or merges into any other person and
is not the continuing or surviving  corporation or entity of such  consolidation
or merger or (ii)  transfers  all or  substantially  all of its  properties  and
assets to any person, proper provisions shall be made so that the successors and
assigns of the Surviving  Corporation  assume the  obligations set forth in this
Section 6.04.

     (f) This Section 6.04,  which shall survive the  consummation of the Merger
at the Effective Time and shall continue for the periods  specified  herein,  is
intended to benefit the Company,  the Surviving  Corporation,  and any person or
entity  referenced in this Section 6.04 or indemnified  hereunder,  each of whom
may enforce the  provisions of this Section 6.04 (whether or not parties to this
Agreement).

     SECTION 6.05.  Cooperation.  The Company shall, to the extent Parent or JHC
may reasonably  request in connection  with any  third-party  financing  Parent,
Merger Sub and JHC may seek to obtain in connection with the Transactions and to
refinance the existing  indebtedness of the Company,  use its best efforts,  to:
(i) cooperate


                                       35


<PAGE>


in  the  preparation  of any  offering  memorandum  or  similar  document,  (ii)
cooperate in providing all  information  necessary to prepare the Deal Financial
Statements (as that term is defined in the Contribution  Agreement),  (iii) make
senior management of the Company reasonably  available for customary  "roadshow"
presentations,  (iv)  cooperate  with  prospective  lenders,  placement  agents,
initial  purchasers  and  their  respective  advisors  in  performing  their due
diligence,  including,  without limitation, any environmental  assessments,  (v)
enter  into  customary  agreements  with  underwriters,  initial  purchasers  or
placement  agents  and (vi)  enter  into or help  procure  pledge  and  security
documents,  other definitive financing documents or other requested certificates
or documents,  including a customary  certificate of the chief financial officer
of the Company with respect to solvency matters, comfort letters of accountants,
legal opinions and real estate title  documentation.  The Company shall,  at the
request of Parent,  Merger Sub or JHC, repay at Closing all amounts  outstanding
under  the  PIK  Notes  and the  Credit  Facility,  and to  provide  such  other
commercially  reasonable  cooperation  as Parent,  Merger Sub or JHC  reasonably
requests with respect thereto, including, without limitation,  obtaining pay-off
letters and  terminating  security  interests  under the Credit  Facility.  With
respect to the  Senior  Notes,  each of the  Company  and  Parent  shall use its
reasonable best efforts to assist  connection  with any  repurchase,  redemption
and/or  satisfaction and discharge of Senior Notes and any debt tender offer and
consent solicitation (the "Debt Tender Offer"), which Debt Tender Offer shall be
conditioned upon the consummation of the Merger, including,  without limitation,
to cooperate in the  preparation of all redemption  notices and tender offer and
consent solicitation documents.  The Debt Tender Offer shall be made by means of
an offer to purchase and consent  solicitation  on terms to be determined by JHC
(subject  to the  approval  of the  Company,  which  shall  not be  unreasonably
withheld).  In the case of Senior  Notes which are to be redeemed on the Closing
Date or acquired in the Debt Tender  Offer on the Closing  Date,  the Company or
any  applicable   Subsidiary  shall  cooperate  with  Parent  in  preparing  and
delivering any required  notices of redemption,  officers'  certificates,  legal
opinions or other  documentation  which may be required in  connection  with the
redemption or acquisition of such Senior Notes.

     SECTION  6.06.  Fees and  Expenses.  All fees and expenses  incurred by the
parties  hereto in  connection  with this  Agreement,  the  Merger and the other
transactions contemplated by this Agreement shall be paid by the party incurring
such  fees  or  expenses;  provided,  that if the  Merger  is  consummated,  the
Surviving  Corporation  shall bear and pay all  Transaction  Expenses  unpaid at
Closing.  "Transaction Expenses" means the aggregate amount of fees and expenses
and  other  payment   obligations   incurred  by  the  Company  or  any  of  its
Subsidiaries,  or by DLJ Merchant Banking II, Inc. on behalf of the Company,  in
connection with this Agreement or any of the transactions  contemplated  hereby,
including,  without  limitation,  fees and expenses  incurred in connection with
obtaining a fairness opinion with respect to the Merger, but excluding,  (i) any
amount  payable to Renaissance  Brands LLC as set forth in Section  3.07(iii) of
the Company  Disclosure  Schedule  and (ii) costs and  expenses  arising from or
relating to the repayment,  redemption or repurchase of Company Indebtedness and
fees and expenses of counsel, advisors, consultants,  investment bankers, dealer
managers,   actuaries,   auditors  and   accountants  in  connection  with  such
repayments,  redemptions  or  repurchases  of  Company  Indebtedness,  including
related tender offers and consent solicitations.


                                       36


<PAGE>


     SECTION  6.07.  Public  Announcements.  Each of Parent,  Merger Sub and the
Company agree that it shall not make any public  announcement or issue any press
release  in  connection  with the  transactions  consummated  hereby,  except as
provided in this  Section  6.07 and except if either  Parent,  Merger Sub or the
Company  (i) is  ordered  to  make  such  disclosure  by a  court  of  competent
jurisdiction  or (ii) is  advised  by legal  counsel  that  such  disclosure  is
required  under  applicable  laws,  in which case the party  making the required
disclosure  shall  inform the other party as to the timing and  contents of such
disclosure prior to making such disclosure. Parent and the Company shall jointly
agree upon and approve one or more press releases (which need not be joint press
releases)  to be issued on or about the date  hereof and on or about the Closing
Date, as mutually determined by the parties hereto. Any subsequent press release
or public  announcement  made by either party hereto after  approval of any such
press release shall be consistent  with (including in scope) the mutually agreed
upon press release or releases. This Section 6.07 shall survive the Closing.

     SECTION  6.08.  Stock  Option  Plan.  The  Company  shall take all  actions
necessary and  appropriate  so that all options  granted under the Company Stock
Plan shall become accelerated, fully vested and exercisable and shall terminate,
and the Company Stock Plan shall be terminated, as of the Effective Time.

     SECTION 6.09. Further Assurances. From time to time after the Closing, upon
the  reasonable  request of any party hereto,  the other party or parties hereto
shall  execute and deliver or cause to be executed  and  delivered  such further
instruments,  and  take  such  further  action,  as  the  requesting  party  may
reasonably  request  in  order to  effectuate  fully  the  purposes,  terms  and
conditions hereof

     SECTION 6.10.  Termination  of Affiliate  Arrangements.  All agreements set
forth on  Schedule  3.07 shall be  terminated  as of the Closing  Date,  and all
obligations and liabilities  thereunder shall be canceled without payment or any
further  liability on the part of the Company or any of its  Subsidiaries  other
than obligations or liabilities incurred or accrued as of the Closing Date.

     SECTION 6.11. Equity Commitment.  At the Closing, Parent will contribute to
the Surviving  Corporation  an amount in cash equal to the Merger  Consideration
determined based on the Estimated Working Capital Statement.


                                  ARTICLE VII

                              CONDITIONS PRECEDENT

     SECTION 7.01.  Conditions to Each Party's  Obligation to Effect the Merger.
The  respective  obligation of each party to effect the Merger is subject to the
satisfaction  or  waiver  on or  prior  to the  Closing  Date  of the  following
conditions:

     (a)  Regulatory  Matters.  The waiting  period (and any extension  thereof)
applicable  to the Merger under the HSR Act,  European  Union,  Switzerland  and
Canada and similar  foreign  antitrust Laws shall have been  terminated or shall
have


                                       37


<PAGE>


expired,  other than any expiration or termination under foreign antitrust Laws,
the failure of which to occur or obtain  individually  or in the aggregate would
not  reasonably be expected to  materially  impair the ability of the parties to
consummate the transactions contemplated hereby.

     (b)  No  Injunctions  or  Restraints.   No  temporary   restraining  order,
preliminary  or permanent  injunction  or other  judgment or order issued by any
court of competent  jurisdiction or other statute, law, rule, legal restraint or
prohibition  (collectively,  "Restraints")  shall be in  effect  preventing  the
consummation of the Merger.

     (c) Concurrent  Transactions.  All conditions precedent to the consummation
of the VHH Merger as set forth in the VHH Merger  Agreement  and all  conditions
precedent  to  the  consummation  of  the   transactions   contemplated  by  the
Contribution  Agreement  other than the  consummation  of the Merger and the VHH
Merger  shall  have  been  satisfied  or  waived,  and the VHH  Merger  shall be
consummated concurrently with the Closing.

     SECTION  7.02.  Conditions  to  Obligations  of Parent and Merger Sub.  The
obligations of Parent and Merger Sub to effect the Merger are further subject to
the  satisfaction  or waiver on or prior to the  Closing  Date of the  following
conditions:

     (a) Representations  and Warranties.  The representations and warranties of
the Company  contained in this Agreement that are qualified as to materiality or
Material Adverse Effect shall be true and correct,  and the  representations and
warranties of the Company  contained in this Agreement that are not so qualified
shall be true and  correct  in all  material  respects,  in each  case as of the
Closing  Date as though  made on the  Closing  Date,  except to the extent  such
representations  and  warranties  expressly  relate to an earlier date, in which
case as of such earlier date, and except further to the extent that the facts or
matters  as to which such  representations  and  warranties  are not so true and
correct  as of such  dates  (without  giving  effect  to any  qualifications  or
limitations  as to materiality  or Material  Adverse Effect set forth  therein),
individually  or in the  aggregate,  have not had and  would not  reasonably  be
expected to have a Material Adverse Effect.

     (b)  Performance  of  Obligations  of the Company.  The Company  shall have
performed in all material  respects all obligations  required to be performed by
it under this Agreement at or prior to the Closing Date.

     (c) Material Adverse Effect. Since the date of this Agreement,  there shall
have been no event,  condition  or  occurrence  that has had a Material  Adverse
Effect or would be reasonably expected to have, a Material Adverse Effect.

     (d) Amendment to Certificate of Designations.  The Company shall have filed
the  Certificate  of  Designations  Amendment with the Secretary of State of the
State of Delaware.


                                       38


<PAGE>


     SECTION 7.03.  Conditions to Obligations of the Company.  The obligation of
the  Company  to effect the Merger is  further  subject to the  satisfaction  or
waiver on or prior to the Closing Date of the following conditions:

     (a) Representations  and Warranties.  The representations and warranties of
Parent and Merger Sub  contained  in this  Agreement  that are  qualified  as to
materiality shall be true and correct, and the representations and warranties of
Parent and Merger Sub  contained  in this  Agreement  that are not so  qualified
shall be true and  correct  in all  material  respects,  in each  case as of the
Closing  Date as though  made on the  Closing  Date,  except to the extent  such
representations  and  warranties  expressly  relate to an earlier date, in which
case as of such earlier date.

     (b)  Performance of Obligations of Parent and Merger Sub. Parent and Merger
Sub shall have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date.

     SECTION  7.04.  Frustration  of Closing  Conditions.  None of the  Company,
Parent or  Merger  Sub may rely on the  failure  of any  condition  set forth in
Section 7.01,  7.02 or 7.03, as the case may be, to be satisfied if such failure
was caused by such party's failure to use its commercially reasonable efforts to
consummate the Merger and the other transactions contemplated by this Agreement,
as required by and subject to Section 6.03.

     SECTION 7.05. Documents to be Delivered by the Company. At the Closing, the
Company shall deliver to Parent the following:

     (a)  a  copy  of  resolutions  or  other  action  adopted  by  the  Company
authorizing  the  execution,  delivery  and  performance  of this  Agreement  as
appropriate,  and a certificate of the Company,  dated the Closing Date, stating
that such  resolutions  or other  action were duly adopted and are in full force
and  effect at such  date,  and  setting  forth the  incumbency  of each  person
executing this Agreement or any document required by this Agreement on behalf of
the Company;

     (b) a certificate  executed by an officer of the Company  setting forth the
truth and accuracy of the matters set forth in Sections  7.02(a) and (b) hereof;
and

     (c)  a  certificate  or  certificates  in  form  and  substance  reasonably
satisfactory to Parent certifying that the payment of Merger Consideration under
this Agreement is exempt from withholding under Section 1445 of the Code.

     SECTION  7.06.  Documents  to be Delivered by Parent and Merger Sub. At the
Closing, Parent and Merger Sub shall deliver to the Company the following:

     (a) a copy of resolutions  adopted by the Boards of Directors of Parent and
Merger Sub authorizing the execution, delivery and performance of this Agreement
as  appropriate,  and a certificate  of the secretary or assistant  secretary or
other  appropriate  officer of Parent and Merger Sub,  dated the  Closing  Date,
stating that such resolutions were duly adopted and are in full force and effect
at such date,  and setting forth the


                                       39


<PAGE>


incumbency of each person executing this Agreement,  or any document required by
this Agreement on behalf of Parent and Merger Sub; and

     (b) a  certificate  executed by an officer of Parent and Merger Sub setting
forth the truth and accuracy of the matters set forth in Section 7.03(a) and (b)
hereof.


                                  ARTICLE VIII

                        TERMINATION, AMENDMENT AND WAIVER

     SECTION  8.01.  Termination.  This  Agreement may be terminated at any time
prior to the Effective Time:

          (a) by mutual written consent of Parent and the Company;

          (b) by either Parent or the Company:

               (i) if the Merger  shall not have been  consummated  on or before
          October 31, 2004,  upon delivery of written notice to the other party;
          provided,  however,  that the right to terminate this Agreement  under
          this  Section  8.01(b)(i)  shall not be  available  to any party whose
          action or failure to act has been a principal  cause of or resulted in
          the failure of the Merger to be consummated on or before such date; or

               (ii) if any  Restraint  having  the  effect  set forth in Section
          7.01(b)   shall  be  in  effect  and  shall  have  become   final  and
          nonappealable.

     SECTION 8.02.  Effect of  Termination.  In the event of termination of this
Agreement  by either the  Company or Parent as provided  in Section  8.01,  this
Agreement  shall  forthwith  become  void and have no  further  force or effect,
without any  liability or  obligation  on the part of Parent,  Merger Sub or the
Company,  other than this Section 8.02 and Article IX,  which  provisions  shall
survive such termination, and except to the extent that such termination results
from the willful  breach by a party of any of its  representations,  warranties,
covenants or agreements set forth in this Agreement.

     SECTION 8.03.  Amendment.  This  Agreement may not be amended  except by an
instrument in writing signed on behalf of each of the parties hereto.

     SECTION 8.04.  Extension;  Waiver. At any time prior to the Effective Time,
the  parties  may  (a)  extend  the  time  for  the  performance  of  any of the
obligations or other acts of the other parties,  (b) waive any  inaccuracies  in
the representations and warranties contained herein or in any document delivered
pursuant hereto or (c) waive compliance with any of the agreements or conditions
contained herein.  Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an  instrument  in writing  signed on
behalf of such  party.  Any such  waiver  shall not  operate  as a waiver of, or
estoppel  with  respect to, any  subsequent  inaccuracy  or  noncompliance.


                                       40


<PAGE>


The failure or delay of any party to this  Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of such rights.


                                   ARTICLE IX

                               GENERAL PROVISIONS

     SECTION  9.01.  Nonsurvival.  None  of  the  representations,   warranties,
covenants  or  agreements  in  this  Agreement  or in any  instrument  delivered
pursuant to this Agreement  shall survive the Effective  Time,  except for those
covenants and agreements  contained  herein that by their  respective  terms are
required to be performed in whole or in part after the Closing.

     SECTION  9.02.  Remedies;  Specific  Enforcement.  The  parties  agree that
Parent's and Merger Sub's sole and  exclusive  remedy in the event of any breach
of any representation,  warranty,  covenant or agreement of the Company shall be
to not close,  assuming conditions set forth in Sections 7.02(a) and 7.02(b) are
not satisfied.  No party to this agreement shall be liable for any money damages
in connection with such party's breach of a representation,  warranty,  covenant
or agreement of this Agreement.  The parties agree that irreparable damage would
occur  and that the  parties  would not have any  adequate  remedy at law in the
event  that  any of the  provisions  of this  Agreement  were not  performed  in
accordance  with  their  specific  terms  or  were  otherwise  breached.  It  is
accordingly  agreed that the  parties  shall be  entitled  to an  injunction  or
injunctions to prevent breaches of this Agreement, without the posting of a bond
or similar instrument,  and to enforce  specifically the terms and provisions of
this  Agreement in any Federal  court located in the State of New York or in any
state court in the State of New York, this being in addition to any other remedy
to which they are entitled at law or in equity.

     SECTION 9.03. Notices. Except for notices that are specifically required by
the terms of this  Agreement to be  delivered  orally,  all  notices,  requests,
claims, demands and other communications hereunder shall be in writing and shall
be deemed given if delivered personally, facsimiled (which is confirmed) or sent
by  overnight  courier  (providing  proof of  delivery)  to the  parties  at the
following  addresses (or at such other address for a party as shall be specified
by like notice):

               if  to   Parent,   Merger  Sub  or  the   Surviving   Corporation
          Representative, to:

                           c/o Kohlberg Kravis Roberts & Co.
                           9 West 57th Street
                           New York, New York 10019
                           Attn: Alexander Navab
                           Facsimile:  (212) 750-0003


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<PAGE>


               with a copy to:

                           Simpson Thacher & Bartlett LLP
                           425 Lexington Avenue
                           New York, New York 10017
                           Attn:  Gary Horowitz
                           Facsimile:  (212) 455-2502

               if to the Company or the Surviving Corporation, to:

                           AHC I Acquisition Corp.
                           1815 East Main Street
                           Chattanooga, Tennessee  37404
                           Facsimile No.:  (423) 697-7126
                           Attention:  Ken Budde

               with a copy to:

                           Weil Gotshal & Manges LLP
                           767 Fifth Avenue
                           New York, New York 10153
                           Attn:  Douglas P. Warner
                           Facsimile: (212) 310-8007

               and after the Merger with a copy to:

                           Simpson Thacher & Bartlett LLP
                           425 Lexington Avenue
                           New York, New York 10017
                           Attn:  Gary Horowitz
                           Facsimile:  (212) 455-2502

               if to the Stockholder Representative, to:

                           DLJ Merchant Banking II, Inc.
                           Eleven Madison Avenue, 16th Floor
                           New York, New York 10010
                           Attention:  David Burgstahler
                           Facsimile:  (212) 538-0415 and (212) 325-5553

               with a copy to:

                           Weil Gotshal & Manges LLP
                           767 Fifth Avenue
                           New York, NY 10153
                           Attn:  Douglas P. Warner
                           Facsimile: (212) 310-8007


                                       42


<PAGE>


     SECTION 9.04.  Definitions.  The  following  terms shall have the following
meanings for purposes of this Agreement:

     (a)  "Affiliate"  means,  with  respect  to any  person,  any other  person
directly or indirectly  controlling,  controlled by or under common control with
such person;  provided that no  securityholder of the Company shall be deemed an
Affiliate of any other  securityholder  solely by reason of an investment in the
Company. For the purpose of this definition, the term "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"),  as used with respect to any person,  shall mean the possession,
directly or  indirectly,  of the power to direct or cause the  direction  of the
management and policies of such person,  whether through the ownership of voting
securities, by contract or otherwise.

     (b) "Business Day" means any day except a Saturday,  Sunday or other day on
which commercial banks in New York City are authorized by law to close.

     (c) "Contract" means any loan or credit agreement,  bond, debenture,  note,
mortgage,   indenture,  lease,  insurance  policy  or  other  written  contract,
subcontract,  option, warranty, agreement,  instrument, or other legally binding
obligation commitment, arrangement or understanding.

     (d) "Exchange Act" means the  Securities  Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.

     (e) "Governmental  Authority" means any Federal, state, regional,  local or
foreign  government,  court,  administrative,  regulatory or other  governmental
agency,   commission,   board  agency,   public  body  or   authority,   or  any
non-governmental self-regulatory agency, commission or authority.

     (f) "Knowledge" of any person that is not an individual means, with respect
to any matter in question,  the actual knowledge,  after reasonable  inquiry, of
such   person's   executive   officers  and  other   officers   having   primary
responsibility for such matter.

     (g) "Liens" means all pledges,  claims,  liens,  charges,  encumbrances  or
security interests of any kind or nature whatsoever.

     (h)  "Material  Adverse  Effect"  shall mean any  change or effect  that is
materially adverse to the business,  properties,  assets, financial condition or
results of  operations  of the Company and its  Subsidiaries,  taken as a whole,
except  for  any  change  or  effect  that  arises  out of,  results  from or is
attributable to (a) any change in general business or economic  conditions,  (b)
the  execution,   announcement   or  consummation  of  this  Agreement  and  the
transactions contemplated hereby, including any impact thereof on relationships,
contractual or otherwise, with customers, suppliers,  distributors,  partners or
employees,  or (c) any  act of  terrorism  or war  (whether  or not  threatened,
pending or declared),  in each case that does not have a disproportionate effect
on the Company and its Subsidiaries taken as a whole.


                                       43


<PAGE>


     (i)  "person"  means  an  individual,  corporation,   partnership,  limited
liability   company,   joint   venture,   association,   trust,   unincorporated
organization or other entity.

     (j) "Securities Act" means the Securities Act of 1933, as amended,  and the
rules and regulations promulgated thereunder.

     (k)  "Subsidiary"  of any person  means  another  person,  an amount of the
voting securities,  other voting rights or voting partnership interests of which
is  sufficient  to elect at least a majority of its board of  directors or other
governing  body (or, if there are no such voting  interests,  50% or more of the
equity interests of which) is owned directly or indirectly by such first person.

     SECTION 9.05. Interpretation.

     (a) When a reference is made in this  Agreement  to an Article,  a Section,
Exhibit or Schedule,  such reference shall be to an Article of, a Section of, or
an Exhibit or Schedule to, this Agreement unless otherwise indicated.  The table
of contents and headings  contained in this Agreement are for reference purposes
only and  shall not  affect in any way the  meaning  or  interpretation  of this
Agreement.  Whenever the words "include",  "includes" or "including" are used in
this  Agreement,  they  shall be deemed  to be  followed  by the words  "without
limitation".  The words "hereof",  "herein" and "hereunder" and words of similar
import when used in this Agreement  shall refer to this Agreement as a whole and
not to any  particular  provision of this  Agreement.  All terms defined in this
Agreement shall have the defined  meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein. The
definitions  contained in this  Agreement are applicable to the singular as well
as the  plural  forms  of  such  terms  and to the  masculine  as well as to the
feminine and neuter genders of such term.  Any agreement,  instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein  means  such  agreement,  instrument  or  statute as from time to time
amended,  modified or  supplemented,  including  (in the case of  agreements  or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable  successor  statutes and  references to all  attachments  thereto and
instruments  incorporated  therein.  References  to a  person  are  also  to its
permitted successors and assigns.

     (b) Any matter disclosed in any section of the Company Disclosure  Schedule
shall be deemed  disclosed  for all  purposes  and all  sections  of the Company
Disclosure Schedule to the extent that it is readily apparent on the face of the
Company  Disclosure  Schedule that such matter is relevant to another section of
the Company Disclosure Schedule.

     SECTION 9.06.  Counterparts.  This Agreement may be executed in one or more
counterparts,  all of which shall be considered  one and the same  agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.


                                       44


<PAGE>


     SECTION 9.07. Entire Agreement;  Third-Party Beneficiaries.  This Agreement
constitutes  the entire  agreement,  and  supersedes  all prior  agreements  and
understandings,  both  written and oral,  among the parties  with respect to the
subject matter of this  Agreement  and,  except for the provisions of ARTICLE II
and Sections 6.02,  6.04 and 6.05 as  contemplated  therein,  is not intended to
confer upon any person other than the parties any rights or remedies.

     SECTION  9.08.  Governing  Law.  This  Agreement  shall be governed by, and
construed in  accordance  with,  the Laws of the State of New York as applied to
contracts made and performed entirely within such state.

     SECTION  9.09.  Assignment.  Neither this  Agreement nor any of the rights,
interests or obligations  hereunder  shall be assigned,  in whole or in part, by
operation of Law or otherwise  by any of the parties  without the prior  written
consent of the other parties.  Subject to the preceding sentence, this Agreement
will be  binding  upon,  inure to the  benefit  of, and be  enforceable  by, the
parties and their respective successors and assigns.

     SECTION  9.10.  Consent to  Jurisdiction.  Each of the  parties  hereto (a)
consents to submit  itself to the  personal  jurisdiction  of any Federal  court
located in the State of New York or of any state  court  located in the State of
New  York  in the  event  any  dispute  arises  out  of  this  Agreement  or the
transactions contemplated by this Agreement, (b) agrees that it will not attempt
to deny or defeat  such  personal  jurisdiction  by motion or other  request for
leave  from any such  court and (c)  agrees  that it will not  bring any  action
relating to this Agreement or the transactions contemplated by this Agreement in
any court other than a Federal court located in the State of New York or a state
court located in the State of New York.

     SECTION  9.11.  Waiver of Jury  Trial.  EACH OF THE PARTIES  HERETO  HEREBY
IRREVOCABLY  WAIVES  ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL  PROCEEDING
ARISING OUT OF OR RELATED TO THIS  AGREEMENT  OR THE  TRANSACTIONS  CONTEMPLATED
HEREBY.

     SECTION 9.12. No Recourse.  No past,  present or future director,  officer,
employee, incorporator, member, partner, stockholder, Affiliate, agent, attorney
or representative of the Company or Parent or any of their respective Affiliates
shall have any liability for any  obligations  or  liabilities of the Company or
Parent  under this  Agreement of or for any claim based on, in respect of, or by
reason of, the transactions contemplated hereby and thereby.

     SECTION  9.13.  Severability.  If any  term  or  other  provision  of  this
Agreement is invalid,  illegal or incapable of being enforced by any rule of law
or public policy,  all other  conditions and provisions of this Agreement  shall
nevertheless  remain in full force and effect.  Upon such determination that any
term or other provision is invalid,  illegal or incapable of being enforced, the
parties  hereto shall  negotiate in good faith to modify this Agreement so as to
effect the original  intent of the parties as closely as


                                       45


<PAGE>


possible to the fullest  extent  permitted by  applicable  Law in an  acceptable
manner to the end that the transactions contemplated hereby are fulfilled to the
extent possible.


                                       46


<PAGE>


     IN WITNESS  WHEREOF,  Parent,  Merger Sub and the Company  have caused this
Agreement to be signed by their respective  officers  thereunto duly authorized,
all as of the date first written above.

                                     FUSION ACQUISITION LLC


                                             By: /S/ Alexander Navab
                                                 --------------------
                                                 Name:  Alexander Navab
                                                 Title:  President

                                     AHC MERGER, INC.


                                             By: /S/ Alexander Navab
                                                 -------------------
                                                 Name:  Alexander Navab
                                                 Title:  President

                                     AHC I ACQUISITION CORP.


                                             By: /S/ Kenneth A. Budde
                                                 --------------------
                                                 Name:  Kenneth A. Budde
                                                 Title:  CFO


                                       47


<PAGE>


                                    EXHIBIT B

                      CERTIFICATE OF DESIGNATIONS AMENDMENT

     A new Article 9 shall be added to the Certificate of  Designations,  Rights
and Preferences of 15% Senior Preferred Stock of AHC I Acquisition Corp. to read
in its entirety as follows:

          "9.  Certain  Merger.  Notwithstanding  any  other  provision  of this
     Certificate of  Designations,  Rights and  Preferences to the contrary,  in
     connection with the proposed  merger of AHC Merger,  Inc. with and into the
     Corporation  (the  "Proposed  Merger")  as  contemplated  in  that  certain
     Agreement  and Plan of  Merger,  dated as of July 21,  2004,  by and  among
     Fusion Acquisition LLC, AHC Merger,  Inc. and the Corporation (as it may be
     amended  from time to time,  the "AHC  Merger  Agreement"),  the holders of
     shares  of Senior  Preferred  Stock  shall,  upon the  consummation  of the
     Proposed  Merger,  only be entitled  to  receive,  for each share of Senior
     Preferred Stock, the Per Share Merger  Consideration (as defined in the AHC
     Merger  Agreement),  and,  thereupon,  shall  have no further  rights  with
     respect to the Senior  Preferred  Stock except the right to receive the Per
     Share  Merger  Consideration,  unless and to the extent  that they  perfect
     appraisal  rights  pursuant  to the terms of the AHC Merger  Agreement  and
     applicable  law. This Section 9 shall  terminate and be of no further force
     and effect  immediately upon the termination of the AHC Merger Agreement in
     accordance with its terms."


                                       48