AMENDED AND RESTATED

                          AGREEMENT AND PLAN OF MERGER

                                  BY AND AMONG

                            KUSHI MACROBIOTICS CORP.

                                       AND

                          AMERICAN PHOENIX GROUP, INC.

                                       AND

                            KUSHI NATURAL FOODS CORP.

                             DATED: AUGUST 12, 1996

<PAGE>

                                TABLE OF CONTENTS

                                                                         Page

          AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER               1

          ARTICLE I                                                       1

               THE MERGER                                                 1

                    1.1  Surviving corporation                            1
                    1.2  Articles of Incorporation                        1
                    1.3  By-Laws                                          2
                    1.4  Directors                                        2
                    1.5  Officers                                         2
                    1.6  Effective Time                                   2
                    1.7  Additional Actions                               2

          ARTICLE II                                                      3

               CONSIDERATION; CONVERSION OF SHARES                        3

                    2.1  Merger Consideration                             3
                    2.2  Conversion of Shares; Treatment of Warrants,
                         Options, and Convertible Securities              3
                    2.3  Cancellation of Certificates                     4
                    2.4  No Fractional Securities                         5
                    2.5  Closing                                          5

          ARTICLE III                                                     6

               REPRESENTATIONS AND WARRANTIES WITH RESPECT TO APHX        6

                    3.1  Corporate Existence and Power; Qualification;
                         Subsidiaries                                     6
                    3.2  Corporate and Governmental Authorization;
                         Contravention                                    6
                    3.3  Capitalization                                   7
                    3.4  Financial Statements of APHX; Changes            7
                    3.5  No Undisclosed Liabilities                       9
                    3.6  Compliance with Laws                            10
                    3.7  Tax Matters                                     10
                    3.8  Title to Properties; Absence of Liens and
                         Encumbrances, Etc                               11
                    3.9  Plant Facilities                                11
                    3.10 Condition of Plants, Equipment, Etc             11
                    3.11 Insurance                                       11
                    3.12 Agreements, Plans, Arrangements, Etc            12
                    3.13 Intellectual Properties                         14


                    3.14 Permits, License, Etc.                          14
                    3.15 Litigation                                      15
                    3.16 Accounts and Notes Receivable                   15
                    3.17 Inventories                                     15
                    3.18 No Interest in Competitors, Etc                 15
                    3.19 Customers, Suppliers                            16
                    3.20 Books and Records                               16
                    3.21 Employees, Labor Relations, Etc                 16
                    3.22 Environmental Matters                           17
                    3.23 Employee Benefit Plans, Etc                     18
                    3.24 SEC Filings                                     22
                    3.25 Information                                     22
                    3.26 Directors and Executive Officers                23

                                        2


<PAGE>

          ARTICLE IV                                                     23

               REPRESENTATIONS AND WARRANTIES WITH RESPECT TO
                    KMC                                                  23

                    4.1  Corporate Existence and Power; Qualification;
                         Subsidiaries                                    23
                    4.2  Corporate and Governmental Authorization;
                         Contravention                                   23
                    4.3  Capitalization                                  24
                    4.4  Financial Statements of KMC; Changes            24
                    4.5  No Undisclosed Liabilities                      27
                    4.6  Compliance with Laws                            27
                    4.7  Tax Matters                                     27
                    4.8  Title to Properties; Absence of Liens and
                         Encumbrances, Etc                               27
                    4.9  Plant Facilities                                28
                    4.10 Condition of Plants, Equipment, Etc             28
                    4.11 Insurance                                       28
                    4.12 Agreements, Plans, Arrangements, Etc            28
                    4.13 Intellectual Properties                         30
                    4.14 Permits, License, Etc                           31
                    4.15 Litigation                                      31
                    4.16 Accounts and Notes Receivable                   31
                    4.17 Inventories                                     32
                    4.18 No Interest in Competitors, Etc                 32
                    4.19 Customers, Suppliers                            32
                    4.20 Books and Records                               32
                    4.21 Employees, Labor Relations, Etc                 32
                    4.22 Environmental Matters                           33
                    4.23 Employee Benefit Plans, Etc                     34
                    4.24 SEC Filings                                     38
                    4.25 Information                                     38
                    4.26 Kushi Natural Foods                             39

                                        3

<PAGE>

          ARTICLE V                                                      39

               CONDUCT OF BUSINESS OF APHX
                    AND KMC PRIOR TO THE EFFECTIVE TIME                  39

                    5.1 Conduct of Business of APHX                      39
                    5.2 Conduct of Business of KMC                       41
                    5.3 KMC Spin Off                                     42

          ARTICLE VI                                                     43

               ADDITIONAL AGREEMENTS                                     43

                    6.1  Access to Properties and Records                43
                    6.2  Registration Statement                          43
                    6.3  Stockholders, Approvals                         43
                    6.4  Restricted Stock                                44
                    6.5  Reasonable Efforts; Etc                         44
                    6.6  Material Events                                 44
                    6.7  Tax Consequences                                44
                    6.8  Exclusivity                                     45
                    6.9  Certificate of Incorporation and
                         Directors of KMC                                45
                    6.10 Indemnification                                 45
                    6.11 Quarterly Financial Statements                  46

          ARTICLE VII                                                    46

               CONDITIONS TO THE OBLIGATIONS OF KMC                      46

                    7.1  Representations and Warranties True             46
                    7.2  Performance                                     46
                    7.3  Authorization of Merger                         46
                    7.4  Registration Statement; Blue Sky Laws           47
                    7.5  Restrictive Legends                             47
                    7.6  Absence of Litigation                           47
                    7.7  Opinion of Counsel                              47
                    7.8  Appraisal Rights                                48
                    7.9  Certificates of Merger                          48
                    7.10 Consents                                        48
                    7.11 No Material Change in Financial Statements      48
                    7.12 Directors and Executive Officers                48


          ARTICLE VIII                                                   48

               CONDITIONS TO THE OBLIGATIONS OF APHX                     48

                    8.1   Representations and Warranties True            48
                    8.2   Performance                                    49
                    8.3   Authorization of Merger                        49
                    8.4   Registration Statement; Blue Sky Laws          49
                    8.5   Absence of Litigation                          49
                    8.6   Opinion of Counsel                             49
                    8.7   Certificates of Merger                         50
                    8.8   Consents                                       50
                    8.9   Director Resignations                          50
                    8.10  Inclusion on NASDAQ System                     50
                    8.11  Hold Harmless and Indemnification Agreement    50


                                        4

<PAGE>

          ARTICLE IX                                                     50

               TERMINATION                                               50

                    9.1 Termination                                      50
                    9.2 Effect of Termination                            51

          ARTICLE X                                                      52

               MISCELLANEOUS PROVISIONS                                  52

                    10.1   Amendment                                     52
                    10.2   Waiver of Compliance                          52
                    10.3   Notices                                       52
                    10.4   Assignment                                    53
                    10.5   No Third Party Beneficiaries                  53
                    10.6   Expenses                                      53
                    10.7   Public Announcements                          54
                    10.8   Brokers and Finders                           54
                    10.9   Further Agreements                            54
                    10.10  Counterparts                                  54
                    10.11  Entire Agreement                              54
                    10.12  Governing Law                                 54
                    10.13  Descriptive Headings                          55
                    10.14  Specific Performance                          55

 EXHIBITS

 6.12 KMC Restated Articles of Incorporation
 7.7  Form of Opinion of APHX Counsel
 8.7  Form of Opinion of KMC Counsel

 SCHEDULES

 1.4  List of Directors of Surviving Corporation
 1.5  List of Officers of Surviving Corporation

 APHX Representations and Warranties/Covenants

 3.1  Subsidiaries
 3.2  Conflicts and Consents
 3.3  Contracts Relating to Stock
 3.4 Changes Since Balance Sheet Date
 3.5 Undisclosed Liabilities
 3.6 Compliance with Laws
 3.7 Taxes
 3.8 Title to Properties;  Liens and  Encumbrances
 3.9 Plant Facilities
 3.11 Insurance
 3.12 Contracts
 3.13  Intellectual Properties
 3.14 Permits
 3.15 Litigation
 3.16 Accounts and Notes Receivable
 3.18 Related Party Transactions,  Etc.
 3.21 Labor Matters
 3.22 Environmental Matters
 3.23 Employee Benefit Plans
 3.24 SEC Filings
 3.26 Directors and Executive Officers
 5.1  Capital Expenditures

 KMC Representations and Warranties/Covenants

 4.1  Subsidiaries
 4.2  Conflicts and Consents
 4.4  Changes Since Balance Sheet Date
 4.5  Undisclosed Liabilities
 4.6  Compliance with Laws
 4.7  Taxes
 4.8  Title to Properties; Liens and Encumbrances
 4.9  Plant Facilities
 4.11 Insurance
 4.12 Contracts
 4.13 Intellectual Properties
 4.14 Permits
 4.15 Litigation
 4.16 Accounts and Notes Receivable
 4.18 Related Party Transactions,  Etc.
 4.21 Labor Matters
 4.22 Environmental Matters
 4.23 Employee Benefit Plans

                                        5


<PAGE>

AMENDED AND RESTATED  AGREEMENT  AND PLAN OF MERGER dated August --, 1996 by and
among KUSHI  MACROBIOTICS  CORP., a corporation  organized under the laws of the
State of Delaware ("KMC"), AMERICAN PHOENIX GROUP, INC., a corporation organized
under the laws of the State of Nevada  ("APHX") and KUSHI NATURAL FOODS Corp., a
corporation organized under the laws of the State of Delaware ("Foods").

WHEREAS,  the  respective  Boards of Directors of KMC and APHX have approved the
merger of APHX with and into KMC (the  "Merger"),  pursuant to which KMC will be
the surviving  corporation and the holders of APHX Common Stock will be entitled
to receive the consideration provided for in this Agreement,  all upon the terms
and subject to the conditions set forth herein; and

WHEREAS,  the parties  hereto entered into an Agreement and Plan of Merger dated
June 1,  1996  and now  wish to  amend  said  agreement  and  restate  it in its
entirety.

NOW,  THEREFORE,  in  consideration  of the mutual  covenants,  representations,
warranties and  agreements  set forth herein,  and intending to be legally bound
hereby, the parties hereby agree as follows:


                                        6


<PAGE>

THE MERGER

1.1     Surviving  corporation.  In  accordance  with  the  provisions  of  this
        Agreement, the Delaware General Corporation Law (the "Delaware Act") and
        the Nevada Revised  Statutes (the "Nevada  Act"),  at the Effective Time
        (as that term is  hereinafter  defined in Section 1.6 hereof) APHX shall
        be merged with and into KMC, with KMC being the surviving corporation in
        the Merger (hereinafter  sometimes called the "Surviving  Corporation").
        At the Effective  Time,  the separate  existence of APHX shall cease and
        the Surviving  Corporation shall continue its corporate  existence under
        the laws of the State of Delaware.  Without  limiting the  generality of
        the  foregoing,  from  and  after  the  Effective  Time,  the  Surviving
        Corporation  shall  possess all of the rights,  privileges,  immunities,
        powers  and  purposes,  and shall  assume  and be liable  for all of the
        liabilities, obligations and penalties, of each of KMC and APHX, and the
        Merger  shall have all of the effects  provided  for in the Delaware Act
        and the Nevada Act.

1.2     Articles of  Incorporation.  At the Effective  Time, the  Certificate of
        Incorporation  of KMC as in effect at the  Effective  Time  shall be the
        Certificate  of  Incorporation  of  the  Surviving   Corporation   until
        thereafter amended as provided by law.

1.3     By-Laws.  At the Effective  Time, the By-Laws of KMC as in effect at the
        Effective Time shall be the By-Laws of the Surviving  Corporation  until
        thereafter amended as provided by law.

1.4     Directors.  On and  after  the  Effective  Time,  the  directors  of the
        Surviving  Corporation shall be those persons who are listed on Schedule
        1.4, all such directors to hold office until their respective successors
        are duly elected and  qualified  in the manner  provided in the Restated
        Articles of Incorporation and Bylaws of the Surviving Corporation, or as
        otherwise provided by law.

1.5     Officers. On and after the Effective Time, the officers of the Surviving
        Corporation  shall be those persons who are listed on Schedule 1.5, each
        to hold the office(s) set forth opposite their  respective names on such
        Schedule,  all such  officers  to hold  office  until  their  respective
        successors are duly elected and qualified in the manner  provided in the
        Restated  Certificate  of  Incorporation  and  By-Laws of the  Surviving
        Corporation, or as otherwise provided by law.

1.6     Effective  Time. As soon as  practicable  following the Closing (as that
        term is  hereinafter  defined in Section 2.5  hereof),  Certificates  of
        Merger or any  similar  document  required  by state  law to effect  the
        Merger  (the   "Certificates   of  Merger")  shall  be  filed  with  the
        Secretaries  of State of the States of Nevada and  Delaware.  The Merger
        shall become  effective  upon the filing the last of such  certificates.
        The time when the Merger shall become effective is herein referred to as
        the "Effective Time."

1.7     Additional  Actions.  If, at any time  after  the  Effective  Time,  the
        Surviving Corporation shall consider or be advised that any deeds, bills
        of  sale,  assignments,  assurances  or any  other  acts or  things  are
        necessary  or  desirable  to vest,  perfect  or  confirm,  of  record or
        otherwise, in the Surviving corporation, its right, title or interest in
        or to any of the rights,  properties or assets of APHX acquired or to be
        acquired by reason of, or as a result of, the Merger,  or  otherwise  to
        carry out the purposes of this Agreement (including, but not limited to,
        any  applications  which may be required in order to allow the Surviving
        Corporation  to transact  business in any  jurisdiction),  the Surviving
        Corporation and its proper officers and directors shall be authorized to
        execute and deliver,  in the name and on behalf of APHX, all such deeds,
        bills of sale,  assignment  and assurances and to do, in the name and on
        behalf of APHX, all such other acts and things necessary or desirable to
        vest,  perfect or confirm any and all right, title or interest in, to or
        under such rights,  properties or assets in the Surviving Corporation or
        otherwise to carry out the purposes of this Agreement.

                                        7



<PAGE>

CONSIDERATION; CONVERSION OF SHARES

2.1     Merger Consideration.  Except as set forth in Section 2.2(d) hereof, the
        consideration  payable in the Merger to holders of shares of APHX Common
        Stock,  par value $.01 per share  ("APHX  Common  Stock"),  and,  to the
        holders of warrants, options, convertible securities and other rights to
        purchase  APHX Common  Stock upon  exercise or  conversion  of the same,
        shall  consist  solely of shares of Common  Stock,  par value  $.001 per
        share, of KMC ("KMC Common  Stock"),  such shares of KMC Common Stock to
        be issuable in accordance with the terms of this Agreement.

2.2     Conversion of Shares;  Treatment of Warrants,  Options,  and Convertible
        Securities.  (a) The  current  holders  of APHX  Common  Stock  shall be
        entitled to own,  in the  aggregate,  eighty  five  percent of the total
        number  of  shares  of  Common  Stock  of  the  Surviving   Corporation.
        Accordingly,   each  holder  of  APHX  Common  Stock  (other  than  APHX
        Dissenting Shares, as that term is hereinafter defined in Section 2.2(d)
        below) shall,  upon  completion  of the Merger,  own a percentage of the
        total  number of shares of  Common  Stock of the  Surviving  Corporation
        equal to the product of eighty five percent multiplied by his percentage
        ownership of APHX Common Stock  immediately  prior to the merger.  (Said
        percentage will be referred to as the "Exchange Percentage.")

(b)     (i) Each warrant to acquire  shares of APHX Common  Stock (a  "Warrant")
        that is outstanding  and  unexercised  at the Effective  Time shall,  by
        virtue of the  merger and  without  any action on the part of the holder
        thereof,  and  subject  to  the  other  terms  and  conditions  thereof,
        automatically  be deemed to be exercisable  for that number of shares of
        KMC Common Stock the holder of such Warrant  would have  received in the
        Merger pursuant to Section 2.2(a) had such holder exercised such Warrant
        in full immediately prior to the Effective Time, and the price per share
        of KMC Common Stock  issuable  after the Effective Time upon exercise of
        such Warrant  shall equal seventy  percent of the exercise  price of the
        Warrant immediately prior to the Merger.

(ii)    Each option to acquire shares of APHX Common Stock issued,  or agreed or
        committed  to be  issued,  under  the APHX  1987  Stock  Option  Plan or
        otherwise (an  "Option")  that is  outstanding  and  unexercised  at the
        Effective Time shall,  by virtue of the Merger and without any action on
        the part of the  holders  thereof,  and  subject to the other  terms and
        conditions  thereof,  automatically  be  assumed  by KMC  and  shall  be
        exercisable  for that number of shares of KMC Common Stock the holder of
        such option would have received in the Merger pursuant to Section 2.2(a)
        had such holder exercised such Option in full (assuming, for the purpose
        of this calculation  only, that there is no limitation on the vesting of
        the right to exercise  such option)  immediately  prior to the Effective
        Time,  and the price per share of KMC Common  Stock  issuable  after the
        Effective  Time upon  exercise  of such option  shall equal  eighty five
        percent of the  exercise  price of the Option  immediately  prior to the
        Merger.  Any term or  condition  respecting  the vesting of the right to
        exercise such Option shall remain  unaffected  by the Merger;  provided,
        however,  that any period  during  which the holder of such Option shall
        have served as an employee  or  consultant,  as the case may be, of APHX
        prior to the Merger shall be counted toward  determining  the vesting of
        the right to exercise such option after the Effective Time.

                                        8


<PAGE>

(iii)   Each note,  debenture,  or other  security of APHX which is  convertible
        into shares of APHX Common Stock (a "Convertible  security") and that is
        outstanding  and  unconverted at the Effective Time shall,  by virtue of
        the Merger and without any action on the part of the holder thereof, and
        subject to the other  terms and  conditions  thereof,  automatically  be
        deemed to be convertible  into that number of shares of KMC Common Stock
        the  holder of such  Convertible  Security  would have  received  in the
        Merger  pursuant  to  Section  2.2(a)  had such  holder  converted  such
        Convertible  Security in full  immediately  prior to the Effective Time,
        and the  price  per  share  of KMC  Common  Stock,  issuable  after  the
        Effective Time upon conversion of such Convertible  Security shall equal
        eighty five percent of the exercise  price of the  Convertible  Security
        immediately prior to the Merger.

(iv)    APHX  Warrants,  Options  and  Convertible  Securities  are  hereinafter
        referred to collectively as the "APHX Derivative  securities." Except as
        provided in clauses (i), (ii) and (iii) above,  the terms and conditions
        of the APHX Derivative  Securities in effect prior to the Effective Time
        shall continue in effect after the Effective Time.

(c)     Each  share of APHX  Common  Stock held in the APHX  treasury  as of the
        Effective  Time,  if any,  shall,  by virtue of the Merger,  be canceled
        without payment of any consideration thereof.

(d)     Notwithstanding  the  foregoing,  any shares of APHX Common Stock issued
        and outstanding  immediately  prior to the Effective Time which are held
        by  shareholders  of APHX who have not voted such shares in favor of the
        Merger  and who have  complied  with all other  relevant  provisions  of
        Section  78.492 of the Nevada Act (the "APHX  Dissenting  Shares") shall
        not  be  converted  into  shares  of KMC  Common  Stock  in  the  manner
        contemplated by Section 2.2(a) above,  and the rights of holders of APHX
        Dissenting Shares shall be governed by the provisions of the Nevada Act.

2.3     Cancellation of Certificates.  The Surviving Corporation shall designate
        Continental Stock Transfer & Trust Company (the "Exchange Agent") to act
        as exchange agent in effecting the exchange of certificates representing
        APHX Common Stock (other than APHX Dissenting  Shares) for  certificates
        representing  the shares of KMC Common  Stock into which such  shares of
        APHX Common Stock have been  converted.  The Exchange Agent shall send a
        letter of  transmittal  to the holders of APHX Common Stock  offering to
        exchange the certificates  representing such shares of APHX Common Stock
        for   certificates    representing   shares   of   KMC   Common   Stock.
        Notwithstanding  the foregoing,  from and after the Effective  Time, all
        such outstanding  shares of APHX Common Stock when so converted shall no
        longer be outstanding  and shall  automatically  be canceled and retired
        and shall  cease to  exist.  From and after  the  Effective  Time,  each
        certificate or instrument  which prior to the Effective Time represented
        shares  of  APHX  Common  Stock  or  APHX  Derivative   Securities,   as
        applicable,  shall be deemed to represent  only the right to receive the
        certificates  of KMC Common Stock or the right to acquire  shares of KMC
        Common Stock  contemplated by Section 2.2 hereof, and the holder of each
        such  certificate  or  instrument  shall  cease to have any rights  with
        respect to the shares of APHX Common Stock formerly represented thereby,
        in the case of certificates  formerly representing shares of APHX Common
        Stock,  or with respect to the shares of APHX Common Stock issuable upon
        exercise or  conversion  thereof,  in the case of  instruments  formerly
        representing APHX Derivative Securities, except as otherwise provided by
        law.

2.4     No  Fractional  Securities.  Notwithstanding  anything  to the  contrary
        contained in this  Agreement,  no fractional  shares of KMC Common Stock
        shall be  issuable by KMC upon the  conversion  of shares of APHX Common
        Stock in the Merger  pursuant to Section  2.2(a) hereof or upon exercise
        or conversion of any APHX Derivative  Security.  The number of shares of
        KMC  Common  Stock  any  APHX  shareholder  or the  holder  of any  APHX
        Derivative  Security would otherwise be entitled to receive  pursuant to
        Section  2.2(a) or upon exercise or  conversion of such APHX  Derivative
        Security shall be rounded to the nearest whole number of shares so as to
        eliminate any fractional shares.

2.5     Closing.  Subject to Section 9.1 hereof, the closing of the transactions
        contemplated by this Agreement (the  "Closing")  shall take place at the
        offices of Heller,  Horowitz & Feit, P.C., 292 Madison Avenue, New York,
        New York  10017 at 10:00 A.M.  local  time,  (i) as soon as  practicable
        after the later to occur of (x) the date of the  stockholders'  approval
        referred  to in  Section  6.3  hereof  or (y) the day on which  the last
        condition  set forth in  Articles  VII and VIII  hereof  shall have been
        fulfilled  or  waived,  or (ii) at such  other  time as KMC and APHX may
        mutually agree (the "Closing Date").

                                        9


<PAGE>

REPRESENTATIONS AND WARRANTIES WITH RESPECT TO APHX

APHX, represents and warrants to KMC as follows:

3.1     Corporate Existence and Power; Qualification;  Subsidiaries.   APHX is a
        corporation  duly  incorporated,  validly  existing and in good standing
        under the laws of its jurisdiction of  incorporation,  has all corporate
        powers  and all  governmental  licenses,  authorizations,  consents  and
        approvals  required to carry on its business as now conducted and to own
        or lease its properties,  and is duly qualified to do business and is in
        good standing in each  jurisdiction in which the conduct of its business
        or  the   ownership  or  leasing  of  its   properties   requires   such
        qualification. The copies of APHX's Articles of Incorporation and Bylaws
        that have been delivered to KMC are complete and correct and are in full
        force and effect. APHX has no subsidiaries other than the four listed on
        Schedule 3.1. APHX has not made any advances to or  investments  in, nor
        owns any  securities  of,  any  domestic  or  foreign  business  entity,
        enterprise or organization other than as set forth on Schedule 3.1.

3.2     Corporate and Governmental Authorization;  Contravention. The execution,
        delivery and  performance  by APHX of this Agreement and the Merger have
        been duly authorized by all necessary  corporate  action (other than the
        approval of this  Agreement  and the Merger by the holders of a majority
        of the outstanding shares of APHX Common Stock). This Agreement has been
        duly executed and delivered by APHX.  The execution and delivery of this
        Agreement do not and the consummation of the  transactions  contemplated
        hereby is not  prohibited by, and will not violate or conflict with, any
        provision of the Articles of Incorporation or Bylaws of APHX, or, except
        as set  forth on  Schedule  3.2,  any  provision  of,  or  result in the
        acceleration  of, result in any severance or termination  pay liability,
        constitute a default  under,  entitle any party to  accelerate  (whether
        after the  giving  of  notice  or lapse of time or both) any  obligation
        under, result in the creation or imposition of any lien, charge, pledge,
        security  interest  or  other  encumbrance  upon  any  property  of APHX
        pursuant  to any  provisions  of, or create any right on the part of any
        party to  modify,  amend or  terminate,  any  Contract  (as such term is
        defined in Section 3.3 hereof), lien, instrument, order, Permit (as such
        term is defined in Section 3.14 hereof),  arbitration award, judgment or
        decree to which APHX is a party or by which any of them is bound.  Other
        than  the  requirement  to file  the  Certificates  of  Merger  with the
        Secretaries  of  State  of  the  States  of  Nevada  and  Delaware,   as
        applicable,  and except as set forth in Schedule 3.2, no  authorization,
        consent or approval of, or filing with,  any domestic or foreign  public
        body or authority is necessary on the part of APHX for the  consummation
        by APHX of the transactions  contemplated by this Agreement or the other
        agreements  referred to herein and the  ownership  and  operation by the
        Surviving  Corporation  of the business and properties of APHX after the
        Effective Time in  substantially  the same manner as presently owned and
        operated,  except  where the failure to give such  notices,  obtain such
        authorizations, consents or approvals or make such filings would not, in
        the  aggregate,   have  a  material  adverse  effect  on  the  condition
        (financial  or  otherwise),  business  or  operations  of the  Surviving
        Corporation,  or delay or prevent the  consummation of the  transactions
        contemplated  by this  Agreement  or prevent  APHX from  performing  its
        obligations  hereunder.  This  Agreement  is a valid,  legal and binding
        agreement  of  APHX,  subject  to  applicable  bankruptcy,   insolvency,
        moratorium or other laws affecting the enforcement of creditors'  rights
        in general from time to time in effect and general  principles of equity
        (regardless of whether such enforceability is considered in a proceeding
        in equity or at law). As used herein,  "Contracts" shall mean any lease,
        license,  mortgage,  contract,  sales  order,  purchase  order  or other
        agreement, arrangement,  understanding or commitment, whether written or
        oral which is material to the business or  properties of APHX or KMC, as
        the context shall require.

3.3     Capitalization.  (a) The shares of APHX Common Stock which are currently
        outstanding  have been duly  authorized  and are validly  issued,  fully
        paid,  nonassessable  and  free of  preemptive  rights.  The  authorized
        capital  stock of APHX  consists  of  50,000,000  shares of APHX  Common
        Stock,  of which  ------------shares  are  issued  and  outstanding  and
        20,000,000  shares of  Preferred  Stock,  none of which are  issued  and
        outstanding.

(b)     There are no subscriptions,  options,  warrants or other rights,  calls,
        agreements  or  commitments  obligating  APHX to issue,  or  repurchase,
        redeem or otherwise acquire,  capital stock or other securities of APHX,
        except as set forth in Schedule 3.3.

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<PAGE>

3.4     Financial Statements of APHX; Changes. (a) APHX has heretofore delivered
        to KMC its Form 10-KSB (the "APHX 10-KSB") for the year ended August 31,
        1995 (the  "APHX  Balance  Sheet  Date")  and its Forms  10-QSB  for the
        periods  ended  November 30, 1995,  February 29, 1996,  and May 31, 1996
        (collectively,  the "APHX  Financial  Statements").  The APHX  Financial
        Statements   present  fairly,  in  conformity  with  generally  accepted
        accounting  principles  applied on a consistent basis,  except as stated
        thereon,  the  financial  position of APHX as of the APHX Balance  Sheet
        Date and the results of operations for the period then ended.

(b)     Except as set forth in the APHX  10-KSB or in  Schedule  3.4  hereto and
        except as contemplated  by this Agreement,  since the APHX Balance Sheet
        Date:

(i)     there  has been no  material  adverse  change in the  business,  assets,
        financial condition or results of operations of APHX;

(ii)    there has not been any direct or indirect redemption,  purchase or other
        acquisition  by APHX of any of its capital  stock,  or any  declaration,
        setting aside or payment of any dividend or other  distribution  by APHX
        in respect of its capital stock, and APHX has not authorized or proposed
        any  of  the  foregoing,  or  entered  into  any  contract,   agreement,
        commitment or arrangement  to do any of the foregoing,  except as may be
        contemplated by this Agreement and the agreements contemplated hereby or
        referred to herein;

(iii)   APHX has  conducted its business in the ordinary  course and  consistent
        with past practices;

(iv)    there has been no damage,  destruction  or casualty loss (whether or not
        covered by insurance)  suffered by APHX materially  adversely  affecting
        the business,  assets,  financial  condition or results of operations of
        APHX, nor has APHX been notified of any pending condemnation  proceeding
        concerning any of its properties;

(v)     there have not been any defaults or breaches by APHX under agreements to
        which  it is a  party  or by  which  it is  bound  which,  taken  in the
        aggregate,  would  have a material  adverse  effect  upon the  business,
        assets, financial condition or results of operation of APHX;

(vi)    APHX has not directly or indirectly, (A) issued, sold, pledged, disposed
        of, or encumbered,  or  authorized,  proposed or agreed to the issuance,
        sale,  pledge,  disposition  or  encumbrance  of,  any shares of, or any
        options,  warrants or rights of any kind to acquire any shares of or any
        securities  convertible  into or  exchangeable  for any of, the  capital
        stock of any class of APHX,  or any other  securities  in respect of, in
        lieu of, or in substitution for any such capital stock; (B) acquired (by
        merger,   consolidation,   or  acquisition  of  shares  or  assets)  any
        corporation,  partnership  or other  business  organization  or division
        thereof  or  made  any  investment  either  by  purchase  of  shares  or
        securities,  contributions  to capital  (other than to  subsidiaries  or
        affiliates)  or  property  transfer;  (C)  authorized  any change in its
        capitalization  or  authorized,  recommended  or proposed any release or
        relinquishment  of any  Contract  right;  or (D)  authorized  any of the
        foregoing,  or  entered  into  or  modified  any  contract,   agreement,
        commitment or arrangement to do any of the foregoing;

                                       11


<PAGE>

(vii)   APHX has not incurred any obligation or liability  (fixed or contingent)
        with respect to its  business or any of its assets,  except (1) trade or
        business  obligations  incurred  in  the  ordinary  course  of  business
        consistent with past practice and (2) obligations and liabilities  under
        this Agreement or contemplated hereby;

(viii)  APHX has not discharged or satisfied any mortgage,  lien, charge,  claim
        or  other   encumbrance   (collectively,   "Encumbrance")  or  paid  any
        obligation  or  liability  (fixed  or  contingent)  except  (1)  current
        obligations,  obligations and liabilities included in the APHX Financial
        Statements and (2) current  obligations and  liabilities  incurred since
        the APHX Balance Sheet Date in the ordinary course of business;

(ix)    APHX has not mortgaged,  pledged or subjected to any  Encumbrance any of
        its assets or properties;

(x)     APHX has not sold, transferred or leased any of its assets or properties
        except for the sale of  inventory,  if any,  in the  ordinary  course of
        business;

(xi)    APHX has not taken  any  action  other  than in the  ordinary  course of
        business and  consistent  with past practice  (none of which actions are
        unreasonable  or unusual)  with respect to the grant of any severance or
        termination  pay (otherwise  than pursuant to policies of APHX in effect
        on the date hereof) or with respect to any increase of benefits  payable
        under its  severance or  termination  pay policies in effect on the date
        hereof; and

(xii)   APHX has not  adopted or  amended  any bonus,  profit  sharing,  thrift,
        savings,  compensation,  stock  option,  pension,  retirement,  deferred
        compensation,  employment or other  employee  benefit  plan,  agreement,
        trust, plan, fund or other arrangement for the benefit or welfare of any
        employee or increased in any manner the  compensation or fringe benefits
        of any employee or paid any benefit not  required by any  existing  plan
        and  arrangement,  except  for salary  increases  for  employees  in the
        ordinary course of business consistent with past practices.

3.5     No undisclosed  Liabilities.  Except as set forth in Schedules 3.4, 3.5,
        3.12,  3.14, 3.15, 3.21, 3.22 and 3.23, there are no liabilities of APHX
        of  any  kind  whatsoever,   whether  accrued,   contingent,   absolute,
        determined, determinable or otherwise, other than:

(a)     liabilities  disclosed or provided for in the APHX Financial Statements;
        and

(b)     liabilities  incurred in the ordinary course of business consistent with
        past practice since the APHX Balance Sheet Date.

3.6     Compliance  with Laws.  Except as set forth in  Schedule  3.6,  APHX has
        complied in all material  respects with all applicable  federal,  state,
        local or foreign laws,  regulations or orders or any other  requirements
        of any governmental, regulatory or administrative agency or authority or
        court or other  tribunal  (including,  but not  limited  to,  any  laws,
        regulations,   order  or  requirement   relating  to   securities,   the
        environment,  properties,  business, products,  manufacturing processes,
        advertising,  sales or  employment  practices,  terms and  conditions of
        employment,  occupational  safety,  health  and  welfare  conditions  of
        occupied  premises,  environmental  protection,  air or water pollution,
        product  safety,  and  liability or civil  rights)  (each and all of the
        foregoing being herein referred to as Law). APHX is not now charged with
        or to its knowledge under investigation with respect to any violation of
        any applicable Law where such  violation  could have a material  adverse
        effect on its  business,  assets,  financial  condition  or  results  of
        operation.  APHX has filed all  reports  required  to be filed  with any
        governmental,  regulatory or  administrative  agency or authority  where
        failure to file such report would have a material  adverse effect on its
        business, assets, financial condition or results of operation.

                                       12


<PAGE>

3.7     Tax  Matters.  Except as set forth in  Schedule  3.7,  (a) APHX has duly
        filed or will file with the appropriate  government agencies all Tax (as
        hereinafter  defined  below)  returns  required  to be filed by it on or
        before the Effective  Time,  (b) APHX has timely paid, or made provision
        on its books and records by  establishing  a reserve for the payment of,
        all Taxes due with  respect  to its  operations  prior to the  Effective
        Time,  including all Taxes shown as due on all Tax returns  described in
        clause (a) above and all  estimated  Tax  payments  due on or before the
        Effective  Time,  (c)  APHX has not  executed  or  filed  any  agreement
        extending the period for  assessment or collection of any Taxes,  nor is
        APHX a party to any pending  Litigation (as hereafter defined in Section
        3.15 hereof) by any governmental  authority for assessment or collection
        of any Taxes,  and no claims for  assessment  or collection of any Taxes
        have been asserted  against  APHX,  and (d) to the knowledge of APHX, no
        Tax returns of APHX are under examination.  APHX is not a "United States
        real property holding company" within the meaning of Section 1445 of the
        Internal Revenue Code of 1986 as amended (the "Code").  "Tax" or "Taxes"
        shall mean taxes of any kind payable to any federal,  state,  local,  or
        foreign taxing authority,  including,  without  limitation,  (A) income,
        gross receipts, ad valorem, value added, sales, use, service, franchise,
        profits,  real or personal property,  capital stock,  license,  payroll,
        withholding,   employment,   social  security,   workers   compensation,
        unemployment  compensation,   utility,  severance,  production,  excise,
        stamp, sales, liquor,  occupation,  premium,  windfall profits, transfer
        and gains  taxes,  (B) customs  duties,  (C)  interest,  penalties,  and
        additions to tax imposed  with  respect to the above taxes,  and (D) any
        damages,  costs, expenses, fees or other liability arising from such Tax
        or Taxes.

3.8     Title to Properties;  Absence of Liens and Encumbrances,  Etc. Except as
        set forth in Schedule 3.8, APHX owns no real property and has good title
        to or a legal,  valid and enforceable  right to use the other properties
        and  assets  used in the  conduct  of its  business  (including  without
        limitation the assets reflected in the APHX Financial  Statements except
        as  since  sold or  otherwise  disposed  of in the  ordinary  course  of
        business), free and clear of all Encumbrances, imperfections of or other
        matters  affecting  title,  and any rights of third parties  whatsoever,
        except (i) the lien of taxes not yet due and payable or being  contested
        in good faith by appropriate proceedings, and (ii) such imperfections of
        title and other  Encumbrances,  if any,  which,  individually  or in the
        aggregate,  do not materially detract from the marketability,  value, or
        interfere with the present use, of the property or asset subject thereto
        or  otherwise  impair  the  operations  of its  business  (collectively,
        "Permitted Encumbrances").

3.9     Plant Facilities. Schedule 3.9 sets forth a correct and complete list of
        all of  the  real  properties,  together  with  the  buildings,  plants,
        improvements,  and structures located thereon,  owned or used by APHX in
        the conduct of its business,  indicating  whether such property is owned
        or leased and setting forth where such property is located.

3.10    Condition of Plants, Equipment, Etc. The plants, buildings,  structures,
        equipment and other physical properties and assets owned,  operated,  or
        leased by APHX are in good condition and repair  (ordinary wear and tear
        which are not such as to affect adversely the operation of APHX business
        excepted),  free of any structural or engineering  defect,  are suitable
        for the  conduct  of  APHX's  business  as  presently  conducted  and as
        presently  proposed to be conducted,  and do not require any maintenance
        or repairs except for routine maintenance and repairs. All such physical
        properties  and  assets  are in  conformity  in all  respects  with  all
        applicable Laws and other  requirements  relating  thereto  currently in
        effect or scheduled to come into effect, including,  without limitation,
        Laws  relating  to  environmental  regulation  and  the  maintenance  of
        occupational safety and health among the workforce.

                                       13


<PAGE>

3.11    Insurance.  The business and the assets of APHX are covered by insurance
        with property  licensed  insurance  companies against casualty and other
        losses customarily obtained to cover comparable businesses and assets in
        the region in which such businesses and assets are located,  in amounts,
        scope and coverage which are reasonable in light of existing conditions.
        Schedule  3.11 sets  forth a  correct  and  complete  list of all of the
        policies of insurance  and fidelity or surety bonds carried by APHX with
        respect to its business or any of its assets  (including  prior policies
        to the extent  that they  continue  to provide  coverage).  APHX has not
        failed to give any notice or  present  any claim  under  such  insurance
        policies  in due and  timely  fashion,  and  there are no claims by APHX
        against  any of such  policies  as to which  any  insurance  company  is
        denying liability or defending under a reservation of rights clause.

3.12    Agreements,  Plans,  Arrangements,  Etc. Except as set forth in Schedule
        3.12 (which may refer to other specific Schedules hereto), APHX is not a
        party  to,  nor is APHX or any of its  properties  and  assets  bound or
        affected by, any of the following:

(a)     a lease  (whether  as lessor or  lessee)  relating  to real or  personal
        property;

(b)     a license, sublicense, assignment or other Contract (whether as licensor
        or licensee, assignor or assignee) relating to Intellectual Property (as
        such term is defined in Section 3.13 hereof);

(c)     an employment Contract or consulting Contract;

(d)     a purchase  Contract in excess of $20,000,  or which is at an  excessive
        price in light of current market conditions or which is in excess of the
        normal  requirements of the business or which call for deliveries beyond
        90 days from the date hereof;

(e)     a sales  Contract  in  excess  of  $20,000,  or which  (individually  or
        together with any other sales Contracts) will result in any loss to APHX
        and/or the Surviving  Corporation  upon  performance  thereof,  or which
        quotes prices which will not result in a normal profit or which call for
        deliveries beyond 90 days from the date hereof;

(f)     a Contract  containing  product  warranties with respect to the products
        manufactured or sold by APHX which deviate from the warranties contained
        in APHX standard form sales order;

(g)     a Contract with any distributor, dealer, sales agent or representative;

                                       14



<PAGE>

(h)     a Contract with any  manufacturer,  supplier or customer with respect to
        discounts or allowances or the return of inventory or merchandise;

(i)     a joint venture or partnership Contract;

(j)     a  Contract  for the  borrowing  or  lending  of money or  guaranteeing,
        indemnifying  or  otherwise  becoming  liable  for  the  obligations  or
        liabilities of another;

(k)     a Contract with any bank, finance company or similar  organization which
        acquires from APHX consumer  paper or Contracts for sale of  merchandise
        on credit;

(1)     a Contract  granting any person a security interest or other Encumbrance
        on any  of the  assets  of  APHX,  including,  without  limitation,  any
        factoring agreement or agreement for the assignment of inventory;

(m)     a Contract  for the  construction  or  modification  of any  building or
        structure or for the incurrence of any other capital expenditure;

(n)     a Contract  which  restricts  APHX from doing  business  anywhere in the
        world;


(o)     a Contract not entered into in the ordinary course of business;

(p)     a  Contract  giving  any  party the right to  renegotiate  or  require a
        reduction in prices or the repayment of any amount previously paid;

(q)     a Contract requiring the payment of royalties; or

(r)     any other  Contract  which could have a material  adverse  effect on the
        Surviving Corporation.

Correct and complete  copies of all  Contracts set forth in Schedule 3.12 or any
other  Schedule  hereto,  including all  amendments to date (or,  where they are
oral, true and complete written summaries thereof), and true and complete copies
of all standard form  Contracts used by APHX in the conduct of its business have
been delivered to KMC or its Representatives (as such term is defined in Section
3.24 hereof)  prior to the date  hereof.  Each such  Contract is valid,  in full
force and  effect  and  enforceable  in  accordance  with its terms and APHX has
fulfilled, or taken all action reasonably necessary to enable it to fulfill when
due, all of their  respective  obligations  under such Contracts.  There has not
occurred any default, or any event which, with the lapse of time or the election
of any  person  other than  APHX,  or any  combination  thereof,  will  become a
default, by APHX, nor to the knowledge of APHX has there occurred any default by
others or any event which,  with the lapse of time or the election of APHX, will
become a default by others under any material  Contracts.  Neither APHX, nor, to
the  knowledge  of APHX,  any other  party,  is in  arrears  in  respect  of the
performance  or  satisfaction  of the  terms  or  conditions  on its  part to be
performed or satisfied  under any of such  Contracts and no waiver or indulgence
has been granted by any of the parties thereto.

                                       15


<PAGE>

3.13    Intellectual Properties. Schedule 3.13 sets forth a correct and complete
        list of all patents, trademarks, trade names, service marks, copyrights,
        and applications therefor (collectively, "Intellectual Properties") used
        in the conduct of the business of APHX.  Except as disclosed in Schedule
        3.13, (a) APHX owns or possesses adequate licenses or other valid rights
        to use (without the making of any payment to others or the obligation to
        grant  rights  to  others  in  exchange)  all  Intellectual   Properties
        necessary to the conduct of its business as  presently  being  conducted
        and the  consummation of the transactions  contemplated  hereby will not
        alter or impair any of such rights;  (b) the validity of such rights and
        the title thereto of APHX, as  applicable,  have not been  questioned in
        any  Litigation  (as  defined in Section  3.15  hereof) to which it is a
        party,  nor to the knowledge of APHX is any such Litigation  threatened;
        (c) the conduct of APHX business as now  conducted  does not infringe or
        conflict with any Intellectual Properties of others; (d) there is no use
        of any  trademark,  service  mark or trade name owned by or  licensed to
        APHX that has heretofore been or is now being made, except by APHX or by
        an entity duly licensed by it to use the same under a Contract disclosed
        in  Schedule  3.12;  and  (e) to  the  knowledge  of  APHX  there  is no
        infringement  by  others  of any  Intellectual  Properties  owned  by or
        licensed by or to APHX. All patents,  patent  applications and rights to
        inventions  heretofore  owned or held by any employee or officer of APHX
        and  relating to its  business in any manner have been duly  effectively
        transferred to APHX. All licenses and Contracts requiring the payment of
        royalties by APHX are  referenced  and  correctly  described in the APHX
        10-KSB.

3.14    Permits, License, Etc. APHX has all Permits (as hereafter defined below)
        that  are  required  in order to  carry  on its  business  as  presently
        conducted and is not in default of any thereof. Schedule 3.14 sets forth
        a correct and  complete  list of all such  Permits,  all of which are in
        full force and effect, and no suspension, cancellation or non-renewal of
        any of them is  threatened,  nor does  any  basis  for such  suspension,
        cancellation  or  non-renewal  exist.  As to any  such  Permit  that has
        expired or is about to expire, APHX has promptly applied for the renewal
        of same. A true and  complete  copy of each Permit set forth in Schedule
        3.14 has been  previously  delivered to KMC. As used  herein,  "Permits"
        shall mean all licenses, permits, consent orders, administrative orders,
        product  approvals and  registrations,  authorizations,  franchises  and
        other approvals from any domestic  (federal,  state or local) or foreign
        governmental, public or self-regulatory body or authority the failure of
        which to obtain would have a material  adverse effect on the business or
        properties of APHX or KMC as the content shall require.

3.15    Litigation.  Except as set forth on  Schedule  3.15,  there is no claim,
        action, suit,  proceeding,  arbitration,  investigation or inquiry (each
        and all of the foregoing items being herein referred to as "Litigation")
        pending before any federal, state, municipal,  foreign or other court or
        governmental,  administrative or self-regulatory  body or agency, or any
        private  arbitration  tribunal,  or to the knowledge of APHX threatened,
        against,  relating to or affecting  APHX with respect to its business or
        the transactions contemplated by this Agreement; nor to the knowledge of
        APHX is there any basis for any such  Litigation.  Neither  APHX nor any
        officer,   director  or  employee  of  APHX  has  been   permanently  or
        temporarily enjoined or barred by order, judgment or decree of any court
        or other tribunal or any agency or self regulatory body from engaging in
        or continuing  any conduct or practice in connection  with its business.
        There is not in existence any order,  judgment or decree of any court or
        other tribunal or any agency or self-regulatory body enjoining APHX from
        taking or requiring  APHX to take action of any kind with respect to its
        business or to which APHX is subject or by which APHX is bound.

                                       16


<PAGE>

3.16    Accounts and Notes  Receivable.  Attached  hereto as Schedule  3.16 is a
        true, complete and correct listing of all of the receivables  (including
        accounts  receivable,   notes  receivable,   loans  receivable  and  any
        advances) as of the APHX Balance Sheet Date. All such  receivables,  net
        of any allowance for doubtful accounts,  have been reflected on the APHX
        Financial  Statements,  in accordance with generally accepted accounting
        principles  applied  on a  consistent  basis  except as stated  thereon.
        Except as set forth on Schedule 3.16, all accounts and notes  receivable
        reflected on the APHX Financial  Statements or arising thereafter and on
        or prior to the Effective Time arose from bona fide  transactions in the
        ordinary course of business.

3.17    Inventories.  The  inventories  of APHX  reflected on the APHX Financial
        Statements  or  thereafter  acquired on or prior to the  Effective  Time
        consist of items of a quality  and  quantity  usable and  salable in the
        ordinary course of business and the value at which such  inventories are
        carried are stated at the lower of cost (on a first-in, first-out basis)
        or market in accordance with generally  accepted  accounting  principles
        consistently  applied.  The  quantity  of  inventories  on  hand  at the
        Effective  Time  will  be  consistent  with  the  requirements  of  then
        outstanding sales activities of APHX.

3.18    No Interest in  Competitors,  Etc.  Schedule  3.18 hereto sets forth all
        Contracts or other  arrangements  between APHX and any affiliate thereof
        for space, facilities,  personnel,  management,  computer,  telephone or
        other services.  Except as set forth in Schedule 3.18, APHX does not owe
        any amount to, or have any Contract  with or  commitment  to, any of its
        shareholders,  directors, officers, employees or consultants (other than
        compensation   for  current   services  not  yet  due  and  payable  and
        reimbursement  of expenses  arising in the  ordinary  course of business
        pursuant, in either case, to Contracts listed on Schedule 3.18), none of
        such persons  owes any amount to APHX,  and no property or assets of any
        shareholders  of APHX or any  affiliate of any  shareholders  of APHX is
        used by APHX.

3.19    Customers,  Suppliers.  Since the APHX Balance  Sheet Date there has not
        been any termination, cancellation or limitation of, or any modification
        or change in, the  business  relationship  of APHX with any  customer or
        group of customers or supplier or group of suppliers  whose purchases or
        sales individually or in the aggregate  accounted for 10% or more of the
        gross  sales or  purchases  of APHX,  as the case may be, for the twelve
        months ended on the APHX Balance Sheet Date nor to the knowledge of APHX
        is any of the foregoing  threatened by reason of the consummation of the
        transactions contemplated hereby.

3.20    Books  and  Records.  The  books of  account  and  other  financial  and
        corporate  records of APHX are in all  material  respects  complete  and
        correct,  are maintained in accordance with good business  practices and
        all Laws  applicable to APHX, and are  accurately  reflected in the APHX
        Financial  Statements.  The  minute  books  of APHX as  previously  made
        available  to KMC  and  its  counsel  contain  accurate  records  of all
        meetings,  and  accurately  reflect  all other  corporate  action of the
        shareholders and directors of APHX.

3.21    Employees,  Labor Relations,  Etc. Except as set forth in Schedule 3.21,
        (a) APHX is not a party to any  Contract  or  agreement  with any  labor
        organization or other representative of APHX employees;  (b) there is no
        unfair  labor  practice  charge  or  complaint  pending  or, to the best
        knowledge  of APHX,  threatened,  against  APHX;  (c)  there is no labor
        strike,  slowdown,  work stoppage or other material labor controversy in
        effect,  or to the  knowledge  of APHX  threatened  against or otherwise
        affecting  APHX;  (d)  APHX,  or the  entities  existing  prior to their
        acquisition by APHX,  has not  experienced  any labor strike,  slowdown,
        work stoppage or other material labor controversy  within the past three
        years; (e) no representation  question has been raised respecting any of
        APHX's employees within the past three years, nor, to the best knowledge
        of APHX are there any  campaigns  being  conducted to solicit cards from
        APHX's employees to authorize  representation by any labor organization;
        (f) no collective bargaining agreement relating to any of APHX employees
        is  being  negotiated;   (g)  no  action,   suit,   complaint,   charge,
        arbitration,  inquiry,  proceeding,  or  investigation  by or before any
        court, governmental agency,  administrative agency or commission brought
        by or on behalf of any employee,  prospective employee, former employee,
        retiree, labor organization or other representative of APHX's employees,
        is pending or, to the best knowledge of APHX, threatened,  against APHX;
        (h) APHX is not a party to, or  otherwise  bound by, any consent  decree
        with, or citation by, any government  agency  relating to APHX employees
        or employment  practices  relating to APHX's  employees;  (i) APHX is in
        compliance  in all  material  respects  with  all  applicable  Laws  and
        Contracts relating to employment,  employment  practices,  wages, hours,
        and terms and  conditions  of  employment,  and has not  engaged  in any
        unfair labor practice or discriminated on the basis of race, age, sex or
        otherwise in its employment  conditions or practices with respect to its
        employees;  (j) APHX has paid in full to all of its employees all wages,
        salaries, commissions,  bonuses, benefits and other compensation due and
        payable to such employees on or prior to the date hereof; (k) APHX is in
        compliance with its obligations with respect to APHX employees  pursuant
        to the Worker  Adjustment and Retraining  Notification  Act of 1988, and
        all other  notification  and  bargaining  obligations  arising under any
        collective  bargaining  agreement,  statute or otherwise.  Schedule 3.21
        sets forth the name, position,  title or function and salary or wages of
        each  employee of APHX employed as of April 31, 1996 at an annual salary
        or wage  (including in each case  commissions and bonuses) of $35,000 or
        more.  Except as set forth on Schedule 3.21,  none of such employees has
        notified APHX of his or her intention to resign or retire.

                                       17


<PAGE>

3.22    Environmental  Matters.  (a) Schedule  3.22 lists all notices to APHX of
        environmental violations or environmental claims and all reports made by
        APHX to any  foreign  or  domestic  environmental  agency  and  true and
        correct copies of all such notices,  claims and reports have  previously
        been delivered to KMC.

(b)     APHX currently conducts its business within the limits set forth in each
        and every  environmental  Permit it holds,  regardless  of whether  such
        Permits are current,  have expired or about to expire, and has conducted
        its  business  in  compliance  with all  terms  and  conditions  of such
        Permits.


(c)     Except as set forth in  Schedule  3.22,  no  Permit  of any  foreign  or
        domestic  environmental  authority is required for, or by reason of, the
        Merger or for the  consummation and performance of this Agreement in any
        other respect.

(d)     APHX has not  conducted  or operated or  currently  conducts or operates
        storage areas, drum storage areas, surface  impoundments,  incinerators,
        land fills, tanks,  lagoons,  ponds, waste piles, or deep well injection
        system for the purpose of  treatment,  storage or disposal of  hazardous
        waste as defined by the Federal Resource  conservation and Recovery Act,
        as amended ("RCRA"),  or to which any similar foreign Law is applicable,
        on any real property used or formerly used by it.

(e)     APHX has not  transported  for off site disposal any hazardous  waste or
        substance  as  defined  in  either  RCRA  or the  Federal  Environmental
        Response,  Compensation and Liability Act, as amended ("CERCLA"),  or to
        which  any  similar  foreign  Law is  applicable,  or  entered  into any
        contract or agreement,  or otherwise  arranged,  for the transportation,
        storage, or disposal of any such hazardous substance or waste at any off
        site treatment, storage or disposal facility.

(f)     There  has  been no  release  or  discharge  by  APHX  of any  hazardous
        substance,  as defined in CERCLA or in the Federal  Superfund  Amendment
        and  Reauthorizations  Act of 1986  ("SARA")  or to  which  any  similar
        foreign Law is applicable,  or of a hazardous  waste, as defined in RCRA
        or to which any  similar  foreign  Law is  applicable,  which  would (i)
        constitute or have  constituted a violation of Law, or (ii) give rise to
        an obligation  by APHX,  or its assigns or  successors  in interest,  to
        effect any environmental cleanup or recommendation.

(g)     No federal,  state or local government or agency has asserted or created
        an Encumbrance  upon any or all of the real properties  utilized by APHX
        in  conducting  its  business  as a result of any use,  spill,  release,
        discharge or cleanup of any  hazardous  substance or waste under CERCLA,
        SARA or RCRA or any  similar  foreign  Law nor has any such use,  spill,
        release,  discharge  or  cleanup  occurred  which  could  result  in the
        assertion or creation of such an Encumbrance.

3.23    Employee  Benefit Plans,  Etc. (a) Schedule 3.23 hereto  contains a true
        and  complete  list  of  each  plan,   Contract,   program,   policy  or
        arrangement,  including,  but not limited to,  pension,  bonus,  section
        401(k)  plan,  deferred  compensation,   incentive  compensation,  stock
        purchase,  supplemental retirement,  severance or termination pay, stock
        option,  hospitalization,  medical, life insurance,  dental, disability,
        salary  continuation,   vacation,  supplemental  unemployment  benefits,
        profit-sharing,   or  retirement  plan,  Contract,  program,  policy  or
        arrangement,  maintained,  contributed to, or required to be contributed
        to, by APHX or by any of its  subsidiaries or affiliates for the benefit
        of any employee,  whether or not any of the foregoing is funded, whether
        formal or informal, whether or not subject to ERISA, and whether legally
        binding or not (collectively,  the "Benefit Plans").  APHX has delivered
        to KMC (i)  true and  complete  copies  of all  documents  embodying  or
        relating to the  Benefit  Plans,  including,  without  limitation,  with
        respect to each Benefit Plan, all  amendments to the Benefit Plans,  and
        any trust or other funding  arrangement,  including  certified financial
        statements  which fairly  present the assets and  liabilities of each of
        the  Benefit  Plans as of the  date  thereof  (and  there  have  been no
        material  changes in the assets  and the  liabilities  since the date of
        such  financial  statements),  (ii) the most recent  annual and periodic
        actuarial  valuations,  if any, prepared for any Benefit Plan, (iii) the
        most recent annual reports (series 5500 and all schedules  thereto),  if
        any, required under ERISA, (iv) if the Benefit Plan is funded,  the most
        recent annual and periodic  accounting of the Benefit Plan's assets, (v)
        the most recent  determination letter received from the Internal Revenue
        Service,  if  any,  and  (vi) a copy of the  most  recent  summary  plan
        description  together  with the most  recent  summary  of  modifications
        required  under ERISA with  respect to each such Benefit  Plan,  and all
        employee communications relating to each such Benefit Plan.

                                       18


<PAGE>

(b)     Except as  specifically  set  forth in  Schedule  3.23,  (i) each of the
        Benefit Plans which is an "employee  pension  benefit  plan," within the
        meaning of Section  3(2) of ERISA  (each a "Pension  Plan") and which is
        intended  to  meet  the   requirements  of  Section  401(a)  and,  where
        applicable,  Section  401(k)  of the  Code,  now  meets,  and  since its
        inception  has met, the  requirements  for  qualification  under Section
        401(a) and, where applicable, Section 401(k) of the Code and its related
        trust is now, and since its  inception  has been,  exempt from  taxation
        under  Section  501(a) of the Code and nothing has occurred  which would
        adversely  affect the qualified  status of any such Pension  Plan;  (ii)
        APHX has performed all obligations required to be performed by it under,
        and is not in  default  under  or in  violation  of,  any and all of the
        Benefit Plans, and is in compliance with, and each Benefit Plan has been
        operated and  administered  in  accordance  with its  provisions  and in
        compliance  with, the Laws governing each such Benefit Plan,  including,
        without limitation,  rules and regulations promulgated by the Department
        of Labor, the Pension Benefit Guaranty Corporation and the Department of
        the Treasury  pursuant to the provisions of ERISA and the Code; (iii) no
        event has  occurred  and there has been no failure to act on the part of
        APHX, a fiduciary of any Benefit Plan or a "plan  official"  (as defined
        in Section  412 of ERISA)  that  violates  Section 404 of ERISA or could
        subject the Surviving Corporation, a Benefit Plan, a fiduciary or a plan
        official  to the  imposition  of any tax,  penalty  or other  liability,
        whether by way of indemnity or  otherwise;  (iv) there is no  litigation
        pending,  or to APHX's knowledge  threatened  (other than routine claims
        for  benefits)  against  any  Benefit  Plan or against the assets of any
        Benefit Plan; (v) there are no accrued but unpaid  contributions  to any
        of the Benefit  Plans;  (vi) no reportable  event (as defined in Section
        4043(e)  of  ERISA)  for  which the  notice  requirements  have not been
        waived,  prohibited  transaction  (as defined in Section 406 of ERISA or
        Section 4975 of the Code), accumulated funding deficiency (as defined in
        section  302 of  ERISA  or  Section  412 or  418B of the  Code)  or plan
        termination  (as  defined in Title IV of ERISA or Section  411(d) of the
        Code) has occurred with respect to any of the Benefit  Plans;  (vii) the
        present  value of accrued  benefits  (as  agreed to by KMC's  actuary in
        writing)  under any of the Benefit  Plans that is covered by Title IV of
        ERISA  (except for any  multi-employer  plan as defined in ERISA Section
        3(37))  does not exceed the value of the assets of such  Benefit  Plans;
        (viii) no filing, application or other matter with respect to any of the
        Benefit  Plans is pending with the  Internal  Revenue  Service,  Pension
        Benefit Guaranty Corporation,  Department of Labor or other governmental
        body;  (ix) none of the Benefit  Plans has been  terminated  nor has the
        Pension  Benefit  Guaranty  Corporation  or any other person  stated its
        intention to or taken any action to terminate  any of the Benefit  Plans
        and no trustee has been  appointed by any court to administer any of the
        Benefit  Plans;  and (x) in the case of any  Benefit  Plan to which APHX
        makes contributions on behalf of employees under which contributions are
        fixed  pursuant  to a  collective  bargaining  agreement,  the  level of
        contributions  currently  provided  for  in  the  applicable  collective
        bargaining  agreement is sufficient to meet the funding  requirements of
        ERISA applicable to such plan, based on reasonable actuarial assumptions
        (as determined in writing by the actuary employed by such Benefit Plan).

(c)     Except as  specifically  set forth in Schedule  3.23,  the execution and
        delivery of, and performance of the  transactions  contemplated by, this
        Agreement  will  not  (either  alone  or  upon  the  occurrence  of  any
        additional or subsequent  events)  constitute an event under any Benefit
        Plan or  individual  agreement  that will or may  result in any  payment
        (whether  of  severance  pay or  otherwise),  acceleration,  vesting  or
        increase in benefits  with respect to any  employee,  and will not cause
        APHX and/or the Surviving  Corporation to incur any multi-employer  plan
        or other withdrawal liability.

                                       19


<PAGE>

(d)     Except as specifically  set forth in Schedule 3.23, there is no, nor has
        there ever been,  any  multi-employer  plan (as defined in ERISA Section
        3(37))  covering  employees  of  APHX or a past  or  present  withdrawal
        therefrom within the meaning of Section 4201 and 4204 of ERISA.

(e)     Except for multi-employer plans, APHX does not maintain any Benefit Plan
        which is funded by a trust described in Section 501(c)(9) of the Code or
        subject to the provisions of Section 505 of the Code.

(f)     Except as  specifically  set forth in  Schedule  3.23,  no Benefit  Plan
        provides or is required to provide  health,  medical,  death or survivor
        benefits  to any  former or retired  employee  or  beneficiary  thereof,
        except to the extent  required  under any state  insurance law providing
        for a conversion  option under a group insurance policy or under Section
        601 of ERISA.

(g)     APHX has not incurred any liability (other than the payment of premiums)
        to the PBGC in  connection  with any Benefit Plan covering any employees
        of APHX,  including  any  liability  under Section 4069 of ERISA and any
        penalty imposed under Section 4071 of ERISA, or ceased operations of any
        facility or withdrawn from any such Benefit Plan in a manner which could
        subject it to liability  under Section  4063,  4064 or 4068(f) of ERISA,
        and there are no facts or  circumstances  which  might  give rise to any
        liability  of APHX to the Pension  Benefit  Guaranty  Corporation  under
        Title IV of ERISA which could reasonably be anticipated to result in any
        claims  being made  against  the  Surviving  Corporation  by the Pension
        Benefit Guaranty Corporation.

(h)     APHX does not maintain  any Benefit Plan which is a "Group  Health Plan"
        (as such term is defined in Section  162(i)(2) of the Code) that has not
        been  administered  and operated in all respects in compliance  with the
        applicable requirements of Section 601 of ERISA and Section 4980B of the
        Code and APHX is not subject to any liability including, but not limited
        to,  additional  contributions,  fines  or  penalties  or  loss  of  tax
        deduction as a result of such  administration  and operation.  APHX does
        not  maintain any Benefit  Plan which is an  "Employee  Welfare  Benefit
        Plan" (as such term is  defined  in  Section  3(1) of ERISA) and has not
        provided any benefit which is a "Disqualified  Benefit" (as such term is
        defined in Section 4976(b) of the Code) for which an excise tax would be
        imposed.

(i)     Except as specifically set forth in Schedule 3.23, full payment has been
        made of all amounts  which APHX is  required,  under  applicable  law or
        under any Benefit Plan or any agreement  relating to any Benefit Plan to
        which APHX is a party, to have paid as  contributions  thereto as of the
        last day of the most recent fiscal year of such Benefit Plan ended prior
        to the date hereof.  APHX has made  adequate  provision  for reserves to
        meet  contributions that have not been made because they are not yet due
        under the terms of any  Benefit  Plan or  related  agreements.  Benefits
        under all Benefit Plans are as  represented  and have not been increased
        subsequent to the date as of which documents have been provided.

(j)     Except as set forth in Schedule 3.23, as of the date of this  Agreement,
        the  aggregate  current  value  of  all  accrued  benefits  (based  upon
        actuarial  assumptions,  if any, which have been furnished to and relied
        upon by KMC) under all  Benefit  Plans  which are subject to Title IV of
        ERISA and which are "Single  Employer Plans" (as such term is defined in
        Section 4001(a)(15) of ERISA) did not exceed the aggregate current value
        of all assets of such Single  Employer  Plans  allocable  to such vested
        accrued benefits, and since APHX's most recent fiscal year end there has
        been (A) no  adverse  change in the  financial  condition  of any Single
        Employer Plan, (B) no change in the actuarial  assumptions  with respect
        to any Single  Employer Plan as a result of plan  amendments,  change in
        applicable  law or otherwise,  which  individually  or in the aggregate,
        would result in the aggregate  current value of all accrued  benefits to
        exceed the  aggregate  current  value of all such  assets or require the
        provision of security to any such Plan pursuant to Section 401(a)(29) of
        the Code.

                                       20


<PAGE>

(k)     APHX has either  adopted  on a timely  basis all  amendments  to Benefit
        Plans  which are  required  by the Tax Reform Act of 1986 so as to avoid
        discrimination   in   participating  or  benefits  in  favor  of  highly
        compensated   employees  or  has  complied  with  the  requirements  for
        obtaining  "anti-cutback" relief provided under Internal Revenue Service
        Notice  88-131 as  modified  by  Notice  89-92 by  adopting  appropriate
        amendments to such Benefit Plans.

(1)     For  purposes of this  Section  3.23,  any  reference to the term "APHX"
        shall  be  deemed  to refer  also to any  entity  which is under  common
        control or  affiliated  with APHX within the meaning of Section  4001 of
        ERISA and the rules and regulations thereunder and/or Section 414 of the
        Code and the rules and regulations thereunder.

3.24    SEC Filings.  Except as set forth on Schedule 3.24,  APHX has filed with
        the  Securities  and Exchange  Commission  ("SEC"),  and has  previously
        delivered  to KMC true and  complete  copies  of,  all  forms,  reports,
        schedules,  statements, and other documents required to be filed by APHX
        under the Securities Act or the Exchange Act. No form, report, schedule,
        statement or other  document  filed by APHX with the SEC  contained  any
        untrue  statement  of a material  fact or omitted to state any  material
        fact,  at the time such  document was filed,  necessary in order to make
        the statements  therein,  in light of the circumstances under which they
        were made,  not  misleading,  other than such facts as were corrected in
        any subsequent form, report, schedule, statement or other document filed
        by APHX with the SEC.

3.25    Information.  None of the information supplied or to be supplied by APHX
        or any of its  agents,  accountants,  lawyers  or other  consultants  or
        advisors (each of the foregoing referred to therein as "Representative")
        for inclusion in the proxy (or information  statement) and  registration
        statement  on  Form  S-4 or  any  other  appropriate  form  prepared  in
        connection with the transactions contemplated hereby or any amendment or
        supplement  thereto  has or  will,  at  the  time  that  the  proxy  and
        registration  statement  was or any  amendment  is mailed,  contain  any
        untrue  statement of a material  fact or omit to state any material fact
        necessary  in  order  to make the  statements  therein,  in light of the
        circumstances under which they were made, not misleading or, in the case
        of any such proxy and registration  statement,  necessary to correct any
        statement in any earlier  communication with respect to the solicitation
        of any proxy for the  meeting or consent in  connection  with which such
        proxy  and  registration   statement  shall  be  mailed.   None  of  the
        information and documents which have been or may be furnished by APHX or
        any of its  Representatives to KMC or its  Representatives in connection
        with the transactions contemplated hereby is or will be materially false
        or misleading or contains or will contain any material  misstatement  of
        fact or omits or will omit any material  fact  necessary to be stated in
        order to make the  statements  therein  not  misleading.  The APHX  Form
        10-KSB,  and any  amendment or supplement  thereto,  did not contain any
        material  misstatement of fact or omit any material fact necessary to be
        stated in order to make the statements therein not misleading.

3.26    Directors  and Executive  Officers.  There are no directors or executive
        officers of APHX other than as set forth on Schedule 3.26.

                                       21


<PAGE>

REPRESENTATIONS AND WARRANTIES WITH RESPECT TO KMC

KMC represents and warrants to APHX as follows:

4.1     Corporate  Existence and Power;  Qualification;  Subsidiaries.  KMC is a
        corporation  duly  incorporated,  validly  existing and in good standing
        under  the  laws  of its  jurisdiction  of  incorporation.  KMC  has all
        corporate powers and all governmental licenses, authorizations, consents
        and approvals  required to carry on its business as now conducted and to
        own its properties,  and is duly qualified to do business and is in good
        standing in each  jurisdiction  in which the conduct of its  business or
        the ownership or leasing of its properties  requires such qualification.
        The copies of KMC's Restated  Articles of Incorporation and By-laws that
        have been  delivered  to APHX are  complete  and correct and are in full
        force and  effect.  KMC has no  subsidiaries,  although  its  principals
        caused  the  formation  of Foods.  KMC has not made any  advances  to or
        investments  in, nor owns any  securities  of, any  domestic  or foreign
        business entity, enterprise or organization.

4.2     Corporate and Governmental Authorization;  Contravention. The execution,
        delivery and  performance  by KMC of this  Agreement and the Merger have
        been duly authorized by all necessary  corporate  action (other than the
        approval of this  Agreement  and the Merger by the holders of a majority
        of the outstanding shares of KMC Common Stock).  This Agreement has been
        duly  executed and  delivered by KMC. The execution and delivery of this
        Agreement do not and the consummation of the  transactions  contemplated
        hereby  will not be  prohibited  by, or violate or  conflict  with,  any
        provision of the Restated Certificate of Incorporation or Bylaws of KMC,
        or the  Delaware  Act,  or,  except as set forth on  Schedule  4.2,  any
        provision of, or result in the  acceleration of, result in any severance
        or termination  pay liability,  constitute a default under,  entitle any
        party to accelerate (whether after the giving of notice or lapse of time
        or both) any obligation  under,  result in the creation or imposition of
        any lien,  charge,  pledge,  security interest or other encumbrance upon
        any property of KMC pursuant to any  provisions  of, or create any right
        on the part of any party to modify,  amend or  terminate,  any Contract,
        lien, instrument, order, Permit (as such term is defined in Section 3.14
        hereof),  arbitration award,  judgment or decree to which KMC is a party
        or by  which  it is  bound.  Other  than  the  requirement  to file  the
        Certificates  of Merger with the  Secretaries  of State of the States of
        Nevada and Delaware,  as appropriate,  and the other regulatory  filings
        and  approvals  referenced  in Section  6.2  hereof,  no  authorization,
        consent or approval of, or filing with,  any domestic or foreign  public
        body or authority  is necessary on the part of KMC for the  consummation
        by KMC of the  transactions  contemplated by this Agreement or the other
        agreements  referred to herein and the  ownership  and  operation by the
        Surviving  Corporation  of the business and  properties  of APHX and the
        NASDAQ listing and outstanding  warrants of KMC after the Effective Time
        in substantially the same manner as presently owned and operated, except
        where the  failure to give such  notices,  obtain  such  authorizations,
        consents or approvals or make such filings  would not, in the  aggregate
        have  a  materially  adverse  effect  on  the  condition  (financial  or
        otherwise),  business or  operations of the  surviving  corporation,  or
        delay or prevent the  consummation of the  transactions  contemplated by
        this Agreement or prevent KMC from performing its obligations hereunder.
        This Agreement is a valid,  legal and binding  agreement of each of KMC,
        subject to applicable bankruptcy,  insolvency,  moratorium or other laws
        affecting the  enforcement of creditors'  rights in general from time to
        time in effect and general  principles of equity  (regardless of whether
        such enforceability is considered in a proceeding in equity or at law).

4.3     Capitalization.  (a) The shares of KMC Common Stock which are  currently
        outstanding  have been duly  authorized  and are validly  issued,  fully
        paid,  nonassessable  and  free of  preemptive  rights.  The  authorized
        capital stock of KMC consists of 15,000,000  shares of KMC Common Stock,
        of which  -----------shares  are issued and  outstanding  and  5,000,000
        shares  of  Preferred  Stock,  of which  -------shares  are  issued  and
        outstanding.

                                       22


<PAGE>

(b)     There are no subscriptions,  options,  warrants or other rights,  calls,
        agreements or commitments obligating KMC to issue, or repurchase, redeem
        or otherwise acquire, capital stock or other securities of KMC except as
        set forth in Schedule 4.3.

(c)     The shares of KMC Common Stock to be issued to the  stockholders of APHX
        pursuant  to the  Merger  or upon  exercise  or  conversion  of any APHX
        Derivative Security to the holder thereof,  will be, upon such issuance,
        duly authorized and validly issued, fully paid (assuming the exercise or
        conversion  of such APHX  Derivative  Security  in  accordance  with its
        terms), nonassessable and free of preemptive rights.

4.4     Financial  statements of KMC; Changes.  (a) KMC has heretofore delivered
        to APHX its Form 10-KSB (the "KMC  10-KSB") for the year ended  December
        31,  1995,  (the "KMC  Balance  Sheet Date") and its Form 10-QSB for the
        periods ended March 31, 1996 and June 30, 1996  (collectively,  the "KMC
        Financial Statements").  The KMC Financial Statements present fairly, in
        conformity with generally  accepted  accounting  principles applied on a
        consistent basis,  except as stated thereon,  the financial  position of
        KMC as of the KMC Balance Sheet Date and the results of  operations  for
        the period then ended.

(b)     Except as set forth in KMC  10-KSB or in  Schedule  4.4 hereto or in the
        KMC Financial  Statements and except as  contemplated by this Agreement,
        since the Balance Sheet Date:

(i)     there  has been no  material  adverse  change in the  business,  assets,
        financial condition or results of operations of KMC;

(ii)    there has not been any direct or indirect redemption,  purchase or other
        acquisition  by KMC of any of KMC's capital stock,  or any  declaration,
        setting aside or payment of any dividend or other distribution by KMC in
        respect of its capital stock, and KMC has not authorized or proposed any
        of the foregoing, or entered into any contract, agreement, commitment or
        arrangement to do any of the foregoing, except as may be contemplated by
        this  Agreement and the  agreements  contemplated  hereby or referred to
        herein;

(iii)   KMC has  conducted  its business in the ordinary  course and  consistent
        with past practices;

(iv)    there has been no damage,  destruction  or casualty loss (whether or not
        covered by insurance) suffered by KMC materially adversely affecting the
        business,  assets,  financial condition or results of operations of KMC,
        nor  has  KMC  been  notified  of any  pending  condemnation  proceeding
        concerning any of its properties;

                                       23


<PAGE>

(v)     there have not been any defaults or breaches by KMC under  agreements to
        which  it is a  party  or by  which  it is  bound  which,  taken  in the
        aggregate,  would  have a material  adverse  effect  upon the  business,
        assets, financial condition or results of operation of KMC;

(vi)    KMC has not directly or indirectly,  (A) issued, sold, pledged, disposed
        of, or encumbered,  or  authorized,  proposed or agreed to the issuance,
        sale,  pledge,  disposition  or  encumbrance  of,  any shares of, or any
        options,  warrants or rights of any kind to acquire any shares of or any
        securities  convertible  into or  exchangeable  for any of, the  capital
        stock of any class of KMC or any other securities in respect of, in lieu
        of, or in  substitution  for any such  capital  stock;  (B) acquired (by
        merger,   consolidation,   or  acquisition  of  shares  or  assets)  any
        corporation,  partnership  or other  business  organization  or division
        thereof  or  made  any  investment  either  by  purchase  of  shares  or
        securities,  contributions  to capital  (other than to  subsidiaries  or
        affiliates)  or  property  transfer;  (C)  authorized  any change in its
        capitalization  or  authorized,  recommended  or proposed any release or
        relinquishment  of any  Contract  right;  or (D)  authorized  any of the
        foregoing,  or  entered  into  or  modified  any  contract,   agreement,
        commitment or arrangement to do any of the foregoing;

(vii)   KMC has not incurred any  obligation or liability  (fixed or contingent)
        with respect to its  business or any of its assets,  except (1) trade or
        business  obligations  incurred  in  the  ordinary  course  of  business
        consistent with past practice and (2) obligations and liabilities  under
        this Agreement or contemplated hereby;

(viii)  KMC has  not  discharged  or  satisfied  any  Encumbrance  or  paid  any
        obligation  or  liability  (fixed  or  contingent)  except  (1)  current
        obligations,  obligations and liabilities  included in the KMC Financial
        Statements and (2) current  obligations and  liabilities  incurred since
        the Balance Sheet Date in the ordinary course of business;

(ix)    KMC has not mortgaged,  pledged or subjected to any  Encumbrance  any of
        the assets or properties of KMC;

(x)     KMC has not sold,  transferred or leased any of the assets or properties
        of KMC,  except  for the sale of  inventory  in the  ordinary  course of
        business;

(xi)    KMC has not  taken  any  action  other  than in the  ordinary  course of
        business and  consistent  with past  practice  (none of which actions is
        unreasonable  or unusual)  with respect to the grant of any severance or
        termination pay (otherwise than pursuant to policies of KMC in effect on
        the date  hereof) or with  respect to any  increase of benefits  payable
        under its  severance or  termination  pay policies in effect on the date
        hereof; and

(xii)   KMC has not  adopted  or  amended  any bonus,  profit  sharing,  thrift,
        savings,  compensation,  stock  option,  pension,  retirement,  deferred
        compensation,  employment or other  employee  benefit  plan,  agreement,
        trust, plan, fund or other arrangement for the benefit or welfare of any
        employee or increased in any manner the  compensation or fringe benefits
        of any employee or paid any benefit not  required by any  existing  plan
        and  arrangement,  except  for salary  increases  for  employees  in the
        ordinary course of business consistent with past practices.

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4.5     No Undisclosed  Liabilities.  Except as set forth in Schedules 4.4, 4.5,
        4.12,  4.14,  4.15, 4.21, 4.22 and 4.23, there are no liabilities of KMC
        of  any  kind  whatsoever,   whether  accrued,   contingent,   absolute,
        determined, determinable or otherwise, other than:

(a)     liabilities  disclosed or provided for in the KMC Financial  Statements;
        and

(b)     liabilities  incurred in the ordinary course of business consistent with
        past practice since the Balance Sheet Date.

4.6     Compliance  with  Laws.  Except as set forth in  Schedule  4.6,  KMC has
        complied in all material  respects with all applicable  Laws. KMC is not
        now charged with or to its knowledge under investigation with respect to
        any violation of any applicable  Law where such  violation  could have a
        material adverse effect on the business,  assets, financial condition or
        results of operation  of KMC.  KMC has filed all reports  required to be
        filed with any  governmental,  regulatory  or  administrative  agency or
        authority  where  failure  to file such  report  would  have a  material
        adverse effect on the business,  assets,  financial condition or results
        of operation of KMC.

4.7     Tax Matters. Except as set forth in Schedule 4.7, (a) KMC has duly filed
        or will file with the  appropriate  government  agencies all Tax returns
        required to be filed by it on or before the Effective  Time, (b) KMC has
        timely paid, or made provision on its books and records by  establishing
        a  reserve  for the  payment  of,  all  Taxes  due with  respect  to its
        operations prior to the Effective Time, including all Taxes shown as due
        on all Tax returns  described in clause (a) above and all  estimated Tax
        payments due on or before the Effective  Time,  (c) KMC has not executed
        or filed any agreement extending the period for assessment or collection
        of any  Taxes,  nor is KMC a  party  to any  pending  Litigation  by any
        governmental authority for assessment or collection of any Taxes, and no
        claims for  assessment  or  collection  of any Taxes have been  asserted
        against KMC, and (d) to the  knowledge of KMC, no Tax returns of KMC are
        under  examination.  KMC is not a "United  States real property  holding
        company" within the meaning of Section 1445 of the Code.

4.8     Title to Properties;  Absence of Liens and Encumbrances,  Etc. Except as
        set forth in Schedule  4.8, KMC owns no real property and has good title
        to or a legal,  valid and enforceable  right to use the other properties
        and assets used in the conduct of the business of KMC (including without
        limitation the assets  reflected in its balance sheet as at December 31,
        1995  except as since  sold or  otherwise  disposed  of in the  ordinary
        course of business),  free and clear of all Encumbrances,  imperfections
        of or other  matters  affecting  title,  and any rights of third parties
        whatsoever, except Permitted Encumbrances.

4.9     Plant Facilities. Schedule 4.9 sets forth a correct and complete list of
        all of  the  real  properties,  together  with  the  buildings,  plants,
        improvements,  and structures  located thereon,  owned or used by KMC in
        the conduct of its business,  indicating  whether such property is owned
        or leased and setting forth where such property is located.

4.10    Condition of Plants, Equipment, Etc. The plants, buildings,  structures,
        equipment and other physical properties and assets owned,  operated,  or
        leased by KMC are in good  condition and repair  (ordinary wear and tear
        which  are not  such as to  affect  adversely  the  operation  of  KMC's
        business  excepted),  free of any structural or engineering  defect, are
        suitable for the conduct of KMC's business as presently conducted and as
        presently  proposed to be conducted,  and do not require any maintenance
        or repairs except for routine maintenance and repairs. All such physical
        properties  and  assets  are in  conformity  in all  respects  with  all
        applicable Laws and other  requirements  relating  thereto  currently in
        effect or scheduled to come into effect, including,  without limitation,
        Laws  relating  to  environmental  regulation  and  the  maintenance  of
        occupational safety and health among the workforce.

4.11    Insurance.  The  business and the assets of KMC are covered by insurance
        with  licensed  insurance  companies  against  casualty and other losses
        customarily  obtained to cover  comparable  businesses and assets in the
        region in which such  businesses  and assets are  located,  in  amounts,
        scope and coverage which are reasonable in light of existing conditions.
        Schedule  4.11 sets  forth a  correct  and  complete  list of all of the
        policies of insurance  and fidelity or surety bonds  carried by KMC with
        respect to KMC's business or any of its assets (including prior policies
        to the  extent  that they  continue  to provide  coverage).  KMC has not
        failed to give any notice or  present  any claim  under  such  insurance
        policies  in due and  timely  fashion,  and  there  are no claims by KMC
        against  any of such  policies  as to which  any  insurance  company  is
        denying liability or defending under a reservation of rights clause.

4.12    Agreements,  Plans,  Arrangements,  Etc. Except as set forth in Schedule
        4.12 (which may refer to other specific Schedules hereto),  KMC is not a
        party  to,  nor is KMC or any of its  properties  and  assets  bound  or
        affected by, any of the following:

(a)     a lease  (whether  as lessor or  lessee)  relating  to real or  personal
        property;

(b)     a license, sublicense, assignment or other Contract (whether as licensor
        or licensee, assignor or assignee) relating to Intellectual Property;

(c)     an employment Contract or consulting Contract;

(d)     a purchase  Contract in excess of $20,000,  or which is at an  excessive
        price in light of current market conditions or which is in excess of the
        normal  requirements of the business or which call for deliveries beyond
        90 days from the date hereof;

(e)     a sales  Contract  in  excess  of  $20,000,  or which  (individually  or
        together with any other sales  Contracts) will result in any loss to KMC
        and/or the Surviving  Corporation  upon  performance  thereof,  or which
        quotes prices which will not result in a normal profit or which call for
        deliveries beyond 90 days from the date hereof;

                                       25


<PAGE>

(f)     a Contract  containing  product  warranties with respect to the products
        manufactured or sold by KMC which deviate from the warranties  contained
        in KMC's standard form sales order;

(g)     a Contract with any distributor, dealer, sales agent or representative;

(h)     a Contract with any  manufacturer,  supplier or customer with respect to
        discounts or allowances or the return of inventory or merchandise;

(i)     a joint venture or partnership Contract;

(j)     a  Contract  for the  borrowing  or  lending  of money or  guaranteeing,
        indemnifying  or  otherwise  becoming  liable  for  the  obligations  or
        liabilities of another;

(k)     a Contract with any bank, finance company or similar  organization which
        acquires from KMC consumer paper or Contracts for sale of merchandise on
        credit;

(1)     a Contract  granting any person a security interest or other Encumbrance
        on any  of  the  assets  of  KMC,  including,  without  limitation,  any
        factoring agreement or agreement for the assignment of inventory;

(m)     a Contract  for the  construction  or  modification  of any  building or
        structure or for the incurrence of any other capital expenditure;

(n)     a Contract  which  restricts  KMC from doing  business  anywhere  in the
        world;

(o)     a Contract not entered into in the ordinary course of business;

(p)     a  Contract  giving  any  party the right to  renegotiate  or  require a
        reduction in prices or the repayment of any amount previously paid;

(q)     a Contract requiring the payment of royalties; or

(r)     any other  Contract  which could have a material  adverse  effect on the
        Surviving Corporation.

Correct and complete  copies of all  Contracts set forth in Schedule 4.12 or any
other  Schedule  hereto,  including all  amendments to date (or,  where they are
oral, true and complete written summaries thereof), and true and complete copies
of all standard form  Contracts  used by KMC in the conduct of its business have
been  delivered to APHX or its  Representatives  prior to the date hereof.  Each
such Contract is valid,  in full force and effect and  enforceable in accordance
with its terms and KMC has fulfilled,  or taken all action reasonably  necessary
to enable it to fulfill when due, all of its  obligations  under such Contracts.
Except as set forth in Schedule 4.12, there has not occurred any default, or any
event  which,  with the lapse of time or the  election of any person  other than
KMC,  or any  combination  thereof,  will become a default,  by KMC,  nor to the
knowledge  of KMC has there  occurred  any default by others or any event which,
with the lapse of time or the  election of KMC,  will become a default by others
under any of such Contracts.  Neither KMC nor to KMC's knowledge any other party
is in  arrears in respect of the  performance  or  satisfaction  of the terms or
conditions on its part to be performed or satisfied  under any of such Contracts
and no waiver or indulgence has been granted by any of the parties thereto.

4.13    Intellectual Properties. Schedule 4.13 sets forth a correct and complete
        list of all  Intellectual  Properties  used or presently  proposed to be
        used in the  conduct of the  business  of KMC.  Except as  disclosed  in
        Schedule  4.13,  (a) KMC owns or  possesses  adequate  licenses or other
        valid  rights to use (without the making of any payment to others or the
        obligation  to grant  rights  to others in  exchange)  all  Intellectual
        Properties  necessary to the conduct of its business as presently  being
        conducted and the business of KMC as presently  being  conducted and the
        consummation of the transactions  contemplated  hereby will not alter or
        impair any of such rights; (b) the validity of such rights and the title
        thereto of KMC have not been questioned in any Litigation (as defined in
        Section  3.15 hereof) to which KMC is a party,  nor to the  knowledge of
        KMC is any  such  Litigation  threatened;  (c) to KMC's  knowledge,  the
        conduct of KMC's business as now conducted does not infringe or conflict
        with any Intellectual  Properties of others;  (d) there is no use of any
        trademark,  service  mark or trade name owned by or licensed to KMC that
        has heretofore been or is now being made,  except by KMC or by an entity
        duly  licensed  by it to use the  same  under a  Contract  disclosed  in
        Schedule 4.12; and (e) to the knowledge of KMC there is no  infringement
        by others of any  Intellectual  Properties owned by or licensed by or to
        KMC. All licenses and  Contracts  requiring  the payment of royalties by
        KMC are referenced and correctly described in the KMC 10-KSB.

                                       26


<PAGE>

4.14    Permits, License, Etc. KMC has all Permits that are required in order to
        carry on its  business as presently  conducted  and is not in default of
        any thereof. Schedule 4.14 sets forth a correct and complete list of all
        such  Permits,  all of  which  are in  full  force  and  effect,  and no
        suspension,  cancellation  or  non-renewal of any of them is threatened,
        nor does any  basis for such  suspension,  cancellation  or  non-renewal
        exist. As to any such Permit that has expired or is about to expire, KMC
        has promptly  applied for the renewal of same. A true and complete  copy
        of each Permit set forth in Schedule 4.14 has been previously  delivered
        to APHX.

4.15    Litigation. Except as set forth on Schedule 4.15, there is no Litigation
        pending before any federal, state, municipal,  foreign or other court or
        governmental,  administrative or self-regulatory  body or agency, or any
        private  arbitration  tribunal,  or to the knowledge of KMC  threatened,
        against,  relating to or  affecting  KMC with respect to its business or
        the transactions contemplated by this Agreement; nor to the knowledge of
        KMC is there  any  basis for any such  Litigation.  Neither  KMC nor any
        officer, director or employee of KMC has been permanently or temporarily
        enjoined  or barred by order,  judgment  or decree of any court or other
        tribunal  or any  agency or  self-regulatory  body from  engaging  in or
        continuing  any conduct or practice in connection  with KMC's  business.
        There is not in existence any order,  judgment or decree of any court or
        other tribunal or any agency or self-regulatory  body enjoining KMC from
        taking or requiring KMC to take action of any kind with respect to KMC's
        business or to which KMC is subject or by which it is bound.

4.16    Accounts and Notes  Receivable.  Attached  hereto as Schedule  4.16 is a
        true, complete and correct listing of all of the receivables  (including
        accounts  receivable,   notes  receivable,   loans  receivable  and  any
        advances) of KMC as of the KMC Balance Sheet Date showing the dates upon
        which  each such  receivable  arose.  All such  receivables,  net of any
        allowance  for  doubtful  accounts,  have  been  reflected  on  the  KMC
        Financial  Statements in accordance with generally  accepted  accounting
        principles applied on a consistent basis, except as stated thereon.  All
        accounts and notes receivable  reflected on the KMC Financial Statements
        or arising  thereafter  and on or prior to the Effective Time arose from
        bona fide transactions in the ordinary course of business.

4.17    Inventories.  The  inventories  of KMC  reflected  on the KMC  Financial
        Statements  or  thereafter  acquired on or prior to the  Effective  Time
        consist of items of a quality  and  quantity  usable and  salable in the
        ordinary course of business and the value at which such  inventories are
        carried are stated at the lower of cost (on a first-in, first-out basis)
        or market in accordance with generally  accepted  accounting  principles
        consistently  applied.  The  quantity  of  inventories  on  hand  at the
        Effective  Time  will  be  consistent  with  the  requirements  of  then
        outstanding sales activities of KMC.

4.18    No Interest in  Competitors,  Etc.  Schedule  4.18 hereto sets forth all
        Contracts or other arrangements between any affiliate of KMC and KMC for
        space, facilities,  personnel,  management, computer, telephone or other
        services.  Except as set forth in the KMC 10-KSB or Schedule  4.18,  KMC
        does not owe any amount to, or have any Contract with or commitment  to,
        any of its shareholders,  directors,  officers, employees or consultants
        (other than  compensation  for current  services not yet due and payable
        and reimbursement of expenses arising in the ordinary course of business
        pursuant, in either case, to Contracts listed on Schedule 4.18), none of
        such  persons  owes any amount to KMC,  and no part of the  property  or
        assets of any  shareholder of KMC or any affiliate of any shareholder of
        KMC is used by KMC.

4.19    Customers,  Suppliers.  Since the KMC  Balance  Sheet Date there has not
        been any termination, cancellation or limitation of, or any modification
        or change in, the  business  relationship  of KMC with any  customer  or
        group of customers or supplier or group of suppliers  whose purchases or
        sales individually or in the aggregate  accounted for 10% or more of the
        gross  sales or  purchases  of KMC,  as the case may be,  for the twelve
        months  ended on the Balance  Sheet Date nor to the  knowledge of KMC is
        any of the  foregoing  threatened by reason of the  consummation  of the
        transactions contemplated hereby.

4.20    Books  and  Records.  The  books of  account  and  other  financial  and
        corporate  records  of KMC are in all  material  respects  complete  and
        correct,  are maintained in accordance with good business  practices and
        all Laws  applicable  to KMC,  and are  accurately  reflected in the KMC
        Financial  Statements.  The  minute  books  of  KMC as  previously  made
        available  to APHX  and its  counsel  contain  accurate  records  of all
        meetings,  and  accurately  reflect  all other  corporate  action of the
        stockholders and directors of KMC.

4.21    Employees,  Labor Relations,  Etc. Except as set forth in Schedule 4.21,
        (a) KMC is not a party to any  contract  or  agreement  with  any  labor
        organization or other representative of KMC's employees; (b) there is no
        unfair  labor  practice  charge  or  complaint  pending  or, to the best
        knowledge of KMC, threatened, against KMC; (c) there is no labor strike,
        slowdown,  work stoppage or other material labor  controversy in effect,
        or to the  knowledge of KMC  threatened  against or otherwise  affecting
        KMC;  (d) KMC has not  experienced  any  labor  strike,  slowdown,  work
        stoppage or other material labor controversy  during its existence;  (e)
        no  representation  question  has been  raised  respecting  any of KMC's
        employees  during its  existence,  nor, to the best knowledge of KMC are
        there  any  campaigns  being  conducted  to  solicit  cards  from  KMC's
        employees to authorize representation by any labor organization;  (f) no
        collective  bargaining  agreement  relating to any of KMC's employees is
        being negotiated; (g) no action, suit, complaint,  charge,  arbitration,
        inquiry,   proceeding,   or   investigation  by  or  before  any  court,
        governmental agency,  administrative  agency or commission brought by or
        on  behalf  of any  employee,  prospective  employee,  former  employee,
        retiree,  labor organization or other representative of KMC's employees,
        is pending or, to the best  knowledge of KMC,  threatened,  against KMC;
        (h) KMC is not a party to, or  otherwise  bound by, any  consent  decree
        with, or citation by, any government  agency relating to KMC's employees
        or  employment  practices  relating  to KMC's  employees;  (i) KMC is in
        compliance  in all  material  respects  with  all  applicable  Laws  and
        Contracts relating to employment,  employment  practices,  wages, hours,
        and terms and  conditions  of  employment,  and has not  engaged  in any
        unfair labor practice or discriminated on the basis of race, age, sex or
        otherwise in its employment  conditions or practices with respect to its
        employees; (j) KMC has paid in full to all of KMC's employees all wages,
        salaries, commissions,  bonuses, benefits and other compensation due and
        payable to such employees on or prior to the date hereof;  (k) KMC is in
        compliance with its obligations with respect to KMC's employees pursuant
        to the Worker  Adjustment and Retraining  Notification  Act of 1988, and
        all other  notification  and  bargaining  obligations  arising under any
        collective  bargaining  agreement,  statute or otherwise.  Schedule 4.21
        sets forth the name, position,  title or function and salary or wages of
        each  employee of KMC employed as of April 31, 1996 at an annual  salary
        or wage  (including in each case  commissions and bonuses) of $35,000 or
        more.  Except as set forth on Schedule 4.21,  none of such employees has
        notified KMC of his or her intention to resign or retire.

                                       27


<PAGE>

4.22    Environmental  Matters.  (a)  Schedule  4.22 lists all notices to KMC of
        environmental violations or environmental claims and all reports made by
        KMC to any foreign or domestic environmental agency and true and correct
        copies of all such  notices,  claims and reports  have  previously  been
        delivered to KMC.

(b)     KMC currently  conducts its business within the limits set forth in each
        and every  environmental  Permit it holds,  regardless  of whether  such
        Permits are current,  have expired or about to expire, and has conducted
        its  business  in  compliance  with all  terms  and  conditions  of such
        Permits.

(c)     Except as set forth in  Schedule  4.22,  no  Permit  of any  foreign  or
        domestic  environmental  authority is required for, or by reason of, the
        Merger or for the  consummation and performance of this Agreement in any
        other respect.

(d)     KMC has not  conducted  or operated  and  currently  does not conduct or
        operate  storage  areas,  drum  storage  areas,  surface   impoundments,
        incinerators,  land fills, tanks,  lagoons,  ponds, waste piles, or deep
        well injection system for the purpose of treatment,  storage or disposal
        of  hazardous  waste as defined by RCRA,  on any real  property  used or
        formerly used by it.

(e)     KMC has not  transported  for off site disposal any  hazardous  waste or
        substance  as defined  in either  RCRA or  CERCLA,  or entered  into any
        contract or agreement,  or otherwise  arranged,  for the transportation,
        storage,  or disposal of any such  hazardous  substance  or waste at any
        offsite treatment,  storage or disposal of any such hazardous  substance
        or waste at any off site treatment, storage or disposal facility.

(f)     There  has  been  no  release  or  discharge  by KMC  of  any  hazardous
        substance, as the term is defined in CERCLA or in SARA or of a hazardous
        waste,  as the term is defined in RCRA,  which would (i)  constitute  or
        have  constituted a violation of Law, or (ii) give rise to an obligation
        by KMC,  its  assigns  or its  successors  in  interest,  to effect  any
        environmental cleanup or remediation.

                                       28


<PAGE>

(g)     No federal,  state or local government or agency has asserted or created
        an Encumbrance upon any or all of the real properties utilized by KMC in
        conducting  its  business  as a  result  of  any  use,  spill,  release,
        discharge or cleanup of any hazardous substance or waste, as those terms
        are  defined  in  CERCLA,  SARA or RCRA  nor has any  such  use,  spill,
        release,  discharge  or  cleanup  occurred  which  could  result  in the
        assertion or creation of such an Encumbrance.

4.23    Employee  Benefit Plans,  Etc. (a) Schedule 4.23 hereto  contains a true
        and  complete  list  of  each  plan,   Contract,   program,   policy  or
        arrangement,  including,  but not limited to,  pension,  bonus,  section
        401(k)  plan,  deferred  compensation,   incentive  compensation,  stock
        purchase,  supplemental retirement,  severance or termination pay, stock
        option,  hospitalization,  medical, life insurance,  dental, disability,
        salary  continuation,   vacation,  supplemental  unemployment  benefits,
        profit-sharing,   or  retirement  plan,  Contract,  program,  policy  or
        arrangement,  maintained,  contributed to, or required to be contributed
        to, by KMC or by any of its  subsidiaries  or affiliates for the benefit
        of any employee,  whether or not any of the foregoing is funded, whether
        formal or informal, whether or not subject to ERISA, and whether legally
        binding or not (collectively, the "Benefit Plans"). KMC has delivered to
        APHX (i) true and complete copies of all documents embodying or relating
        to the Benefit Plans,  including,  without  limitation,  with respect to
        each Benefit Plan, all amendments to the Benefit Plans, and any trust or
        other funding  arrangement,  including  certified  financial  statements
        which fairly  present the assets and  liabilities of each of the Benefit
        Plans as of the date thereof (and there have been no material changes in
        the  assets  and the  liabilities  since  the  date  of  such  financial
        statements),   (ii)  the  most  recent  annual  and  periodic  actuarial
        valuations, if any, prepared for any Benefit Plan, (iii) the most recent
        annual reports (series 5500 and all schedules thereto), if any, required
        under ERISA, (iv) if the Benefit Plan is funded,  the most recent annual
        and  periodic  accounting  of the Benefit  Plan's  assets,  (v) the most
        recent  determination letter received from the Internal Revenue Service,
        if any,  and (vi) a copy of the most  recent  summary  plan  description
        together with the most recent  summary of  modifications  required under
        ERISA  with  respect  to  each  such  Benefit  Plan,  and  all  employee
        communications relating to each such Benefit Plan.

(b)     Except as  specifically  set  forth in  Schedule  4.23,  (i) each of the
        Benefit Plans which is an "employee  pension  benefit  plan," within the
        meaning of Section  3(2) of ERISA  (each a "Pension  Plan") and which is
        intended  to  meet  the   requirements  of  Section  401(a)  and,  where
        applicable,  Section  401(k)  of the  Code,  now  meets,  and  since its
        inception  has met, the  requirements  for  qualification  under Section
        401(a) and, where applicable, Section 401(k) of the Code and its related
        trust is now, and since its  inception  has been,  exempt from  taxation
        under  Section  501(a) of the Code and nothing has occurred  which would
        adversely affect the qualified status of any such Pension Plan; (ii) KMC
        has performed all obligations  required to be performed by it under, and
        is not in default  under or in violation  of, any and all of the Benefit
        Plans,  and is in  compliance  with,  and  each  Benefit  Plan  has been
        operated and  administered  in  accordance  with its  provisions  and in
        compliance  with, the Laws governing each such Benefit Plan,  including,
        without limitation,  rules and regulations promulgated by the Department
        of Labor, the Pension Benefit Guaranty Corporation and the Department of
        the Treasury  pursuant to the provisions of ERISA and the Code; (iii) no
        event has  occurred  and there has been no failure to act on the part of
        KMC, a fiduciary of any Benefit Plan or a "plan official" (as defined in
        Section  412 of  ERISA)  that  violates  Section  404 of  ERISA or could
        subject the Surviving Corporation, a Benefit Plan, a fiduciary or a plan
        official  to the  imposition  of any tax,  penalty  or other  liability,
        whether by way of indemnity or  otherwise;  (iv) there is no  litigation
        pending, or to KMC's knowledge threatened (other than routine claims for
        benefits)  against any Benefit Plan or against the assets of any Benefit
        Plan;  (v) there are no accrued but unpaid  contributions  to any of the
        Benefit Plans;  (vi) no reportable  event (as defined in Section 4043(e)
        of ERISA)  for  which  the  notice  requirements  have not been  waived,
        prohibited  transaction  (as  defined in Section 406 of ERISA or Section
        4975 of the Code), accumulated funding deficiency (as defined in section
        302 of ERISA or Section 412 or 418B of the Code) or plan termination (as
        defined in Title IV of ERISA or Section 411(d) of the Code) has occurred
        with  respect to any of the Benefit  Plans;  (vii) the present  value of
        accrued  benefits (as agreed to by APHX's  actuary in writing) under any
        of the  Benefit  Plans that is covered by Title IV of ERISA  (except for
        any  multi-employer  plan as defined in ERISA  Section  3(37))  does not
        exceed the value of the assets of such Benefit Plans;  (viii) no filing,
        application  or other matter with respect to any of the Benefit Plans is
        pending with the Internal  Revenue  Service,  Pension  Benefit  Guaranty
        Corporation,  Department of Labor or other  governmental body; (ix) none
        of the Benefit  Plans has been  terminated  nor has the Pension  Benefit
        Guaranty  Corporation  or any other  person  stated its  intention to or
        taken any action to  terminate  any of the Benefit  Plans and no trustee
        has been  appointed by any court to administer any of the Benefit Plans;
        and (x) in the case of any Benefit Plan to which KMC makes contributions
        on behalf of employees under which contributions are fixed pursuant to a
        collective  bargaining agreement,  the level of contributions  currently
        provided  for in  the  applicable  collective  bargaining  agreement  is
        sufficient to meet the funding  requirements of ERISA applicable to such
        plan,  based on  reasonable  actuarial  assumptions  (as  determined  in
        writing by the actuary employed by such Benefit Plan).

                                       29


<PAGE>

(c)     Except as  specifically  set forth in Schedule  4.23,  the execution and
        delivery of, and performance of the  transactions  contemplated by, this
        Agreement  will  not  (either  alone  or  upon  the  occurrence  of  any
        additional or subsequent  events)  constitute an event under any Benefit
        Plan or  individual  agreement  that will or may  result in any  payment
        (whether  of  severance  pay or  otherwise),  acceleration,  vesting  or
        increase in benefits  with respect to any  employee,  and will not cause
        KMC and/or the Surviving Corporation to incur any multi-employer plan or
        other withdrawal liability.

(d)     Except as specifically  set forth in Schedule 4.23, there is no, nor has
        there ever been,  any  multi-employer  plan (as defined in ERISA Section
        3(37))  covering  employees  of  KMC  or a past  or  present  withdrawal
        therefrom within the meaning of Section 4201 and 4204 of ERISA.

(e)     Except for multi-employer  plans, KMC does not maintain any Benefit Plan
        which is funded by a trust described in Section 501(c)(9) of the Code or
        subject to the provisions of Section 505 of the Code.

(f)     Except as  specifically  set forth in  Schedule  4.23,  no Benefit  Plan
        provides or is required to provide  health,  medical,  death or survivor
        benefits  to any  former or retired  employee  or  beneficiary  thereof,
        except to the extent  required  under any state  insurance law providing
        for a conversion  option under a group insurance policy or under Section
        601 of ERISA.

(g)     KMC has not incurred any liability  (other than the payment of premiums)
        to the PBGC in  connection  with any Benefit Plan covering any employees
        of KMC,  including  any  liability  under  Section 4069 of ERISA and any
        penalty imposed under Section 4071 of ERISA, or ceased operations of any
        facility or withdrawn from any such Benefit Plan in a manner which could
        subject it to liability  under Section  4063,  4064 or 4068(f) of ERISA,
        and there are no facts or  circumstances  which  might  give rise to any
        liability of KMC to the Pension Benefit Guaranty Corporation under Title
        IV of ERISA  which  could  reasonably  be  anticipated  to result in any
        claims  being made  against  the  Surviving  Corporation  by the Pension
        Benefit Guaranty Corporation.

(h)     KMC does not maintain  any Benefit  Plan which is a "Group  Health Plan"
        (as such term is defined in Section  162(i)(2) of the Code) that has not
        been  administered  and operated in all respects in compliance  with the
        applicable requirements of Section 601 of ERISA and Section 4980B of the
        Code and KMC is not subject to any liability including,  but not limited
        to,  additional  contributions,  fines  or  penalties  or  loss  of  tax
        deduction as a result of such administration and operation. KMC does not
        maintain any Benefit Plan which is an "Employee  Welfare  Benefit  Plan"
        (as such term is defined in Section  3(1) of ERISA) and has not provided
        any benefit which is a  "Disqualified  Benefit" (as such term is defined
        in  Section  4976(b)  of the  Code)  for  which an  excise  tax would be
        imposed.

(i)     Except as specifically set forth in Schedule 4.23, full payment has been
        made of all amounts which KMC is required, under applicable law or under
        any Benefit Plan or any agreement  relating to any Benefit Plan to which
        KMC is a party, to have paid as contributions thereto as of the last day
        of the most recent  fiscal year of such  Benefit Plan ended prior to the
        date  hereof.  KMC has made  adequate  provision  for  reserves  to meet
        contributions that have not been made because they are not yet due under
        the terms of any Benefit Plan or related agreements.  Benefits under all
        Benefit Plans are as represented and have not been increased  subsequent
        to the date as of which documents have been provided.

(j)     Except as set forth in Schedule 4.23, as of the date of this  Agreement,
        the  aggregate  current  value  of  all  accrued  benefits  (based  upon
        actuarial  assumptions,  if any, which have been furnished to and relied
        upon by APHX) under all  Benefit  Plans which are subject to Title IV of
        ERISA and which are "Single  Employer Plans" (as such term is defined in
        Section 4001(a)(15) of ERISA) did not exceed the aggregate current value
        of all assets of such Single  Employer  Plans  allocable  to such vested
        accrued benefits,  and since KMC's most recent fiscal year end there has
        been (A) no  adverse  change in the  financial  condition  of any Single
        Employer Plan, (B) no change in the actuarial  assumptions  with respect
        to any Single  Employer Plan as a result of plan  amendments,  change in
        applicable  law or otherwise,  which  individually  or in the aggregate,
        would result in the aggregate  current value of all accrued  benefits to
        exceed the  aggregate  current  value of all such  assets or require the
        provision of security to any such Plan pursuant to Section 401(a)(29) of
        the Code.

                                       30


<PAGE>

(k)     KMC has either adopted on a timely basis all amendments to Benefit Plans
        which  are  required  by the  Tax  Reform  Act of  1986  so as to  avoid
        discrimination   in   participating  or  benefits  in  favor  of  highly
        compensated   employees  or  has  complied  with  the  requirements  for
        obtaining  "anti-cutback" relief provided under Internal Revenue Service
        Notice  88-131 as  modified  by  Notice  89-92 by  adopting  appropriate
        amendments to such Benefit Plans.

(1)     For purposes of this Section 4.23, any reference to the term "KMC" shall
        be deemed to refer also to any entity which is under  common  control or
        affiliated  with KMC within the meaning of Section 4001 of ERISA and the
        rules and regulations  thereunder and/or Section 414 of the Code and the
        rules and regulations thereunder.

4.24    SEC Filings. KMC has filed with the SEC, and has previously delivered to
        APHX  true and  complete  copies  of,  all  forms,  reports,  schedules,
        statements,  and other  documents  required to be filed by KMC under the
        Securities  Act or the  Exchange  Act,  except  for any  non-filings  or
        noncompliance  which are not in the aggregate  material to the financial
        condition,  results of  operations  or business of KMC or which will not
        prevent  or  delay  in any  material  respect  the  consummation  of the
        transactions  contemplated hereby. No form, report, schedule,  statement
        or  other  document  filed  by KMC with  the SEC  contained  any  untrue
        statement of a material  fact or omitted to state any material  fact, at
        the  time  such  document  was  filed,  necessary  in  order to make the
        statements  therein, in light of the circumstances under which they were
        made,  not  misleading,  other than such facts as were  corrected in any
        subsequent form, report, schedule,  statement or other document filed by
        KMC with the SEC.

4.25    Information.  None of the  information  concerning KMC  incorporated  by
        reference, or any other information supplied or to be supplied by KMC or
        its  Representatives  for  inclusion,   in  the  proxy  (or  information
        statement)  and  registration   statement  on  Form  S-4  or  any  other
        appropriate   form   prepared  in  connection   with  the   transactions
        contemplated  hereby or any amendment or supplement thereto has or will,
        at the  time  that  the  proxy  and  registration  statement  was or any
        amendment is mailed,  contain any untrue statement of a material fact or
        omit to  state  any  material  fact  necessary  in  order  to  make  the
        statements  therein, in light of the circumstances under which they were
        made, not misleading or, in the case of any such proxy and  registration
        statement,   necessary   to  correct  any   statement   in  any  earlier
        communication  with  respect  to  the  solicitation  of  any  proxy  (or
        information  statement)  for the meeting or consent in  connection  with
        which such proxy (or information  statement) and registration  statement
        shall be mailed.  None of the  information and documents which have been
        or may be furnished by KMC or any of its  Representatives to APHX or its
        Representatives in connection with the transactions  contemplated hereby
        is or will be materially false or misleading or contains or will contain
        any  material  misstatement  of fact or omits or will omit any  material
        fact necessary to be stated in order to make the statements  therein not
        misleading.

4.26    Kushi Natural Foods. Foods has been formed by KMC solely for the purpose
        of  executing  and  delivering  this  Agreement  and   consummating  the
        transactions  contemplated  hereby,  including  owing and  operating the
        business  operations  of KMC. At the Effective  Time,  KMC will transfer
        substantially  all of its assets and liabilities to Foods and the shares
        of Foods will be  distributed  to the  stockholders  of record of KMC on
        ------------,  1996,  at a ratio  to be  determined  by  KMC's  Board of
        Directors,  but currently  contemplated  to be three shares of Foods for
        every share of KMC.

                                       31



<PAGE>

CONDUCT OF BUSINESS OF APHX
AND KMC PRIOR TO THE EFFECTIVE TIME

5.1     Conduct of Business of APHX.  During the period  commencing  on the date
        hereof and  continuing  until the Effective  Time,  APHX agrees that it,
        except as otherwise  expressly  contemplated by this Agreement or agreed
        to in writing by KMC:

(a)     will carry on its business  only in the ordinary  course and  consistent
        with past practice;

(b)     will not declare or pay any  dividend on or make any other  distribution
        (however characterized) in respect of shares of its capital stock;

(c)     will not,  directly or  indirectly,  redeem or  repurchase,  or agree to
        redeem or repurchase, any shares of its capital stock;

(d)     will not amend its Articles of Incorporation or By-Laws;

(e)     will not  issue,  or agree to issue,  any  shares of its  capital  stock
        (except  pursuant  to  the  exercise  and/or   conversion  of  currently
        outstanding Derivative  Securities),  or any options,  warrants or other
        rights  to  acquire  shares  of its  capital  stock,  or any  securities
        convertible into or exchangeable for shares of its capital stock;

(f)     will not  combine,  split or  otherwise  reclassify  any  shares  of its
        capital stock;

(g)     will not sell or pledge,  or agree to sell or pledge,  any shares of its
        capital stock;

(h)     will use all reasonable  efforts to preserve intact its present business
        organization,  keep  available  the  services  of its  officers  and key
        employees and preserve its relationships  with clients and others having
        business  dealings  with it to the end that  its  goodwill  and  ongoing
        business shall not be materially impaired at the Effective Time;

(i)     will not,  except  as set forth in  Schedule  5.1,(A)  make any  capital
        expenditures  individually  in excess of $25,000 or in the  aggregate in
        excess of $50,000,  (B) enter into or terminate  (except in the ordinary
        course of business and  consistent  with past practice) any lease of, or
        purchase  or sell,  any real  property,  (C)  enter  into any  leases of
        personal property  involving  individually in excess of $10,000 annually
        or in the  aggregate  in  excess  of  $25,000  annually,  (D)  incur  or
        guarantee any additional  indebtedness for borrowed money, (E) create or
        permit to become effective any security interest, mortgage, lien, charge
        or other  Encumbrance on its properties or assets, or (F) enter into any
        agreement to do any of the foregoing;

(j)     will not, other than in the ordinary course of business,  adopt or amend
        any  Benefit  Plan for the  benefit  of  Employees,  or  enter  into any
        agreement to do the same;

(k)     will promptly  advise KMC of the  commencement  of, or threat of (to the
        extent  that such threat  comes to the  knowledge  of APHX),  any claim,
        action,  suit,  proceeding  or  investigation  against,  relating  to or
        involving APHX or any of its directors,  officers,  employees, agents or
        consultants  in  connection  with  its  business  or  the   transactions
        contemplated hereby;

(1)     will maintain in full force and effect all insurance policies maintained
        by APHX on the date hereof; and

(m)     will not enter into any agreement to dissolve,  merge,  consolidate  or,
        except in the ordinary course, sell any material assets of APHX.

                                       32


<PAGE>

5.2     Conduct of Business  of KMC.  During the period  commencing  on the date
        hereof and  continuing  until the  Effective  Time,  KMC agrees that it,
        except as otherwise  expressly  contemplated by this Agreement or agreed
        to in writing by APHX:

(a)     will carry on its business  only in the ordinary  course and  consistent
        with past practice;

(b)     will not declare or pay any  dividend on or make any other  distribution
        (however characterized) in respect of shares of its capital stock;

(c)     will not,  directly or  indirectly,  redeem or  repurchase,  or agree to
        redeem or repurchase, any shares of its capital stock;

(d)     will not amend its Certificate of Incorporation or By-Laws;

(e)     will not  issue,  or agree to issue,  any  shares of its  capital  stock
        (except  pursuant  to  the  exercise  and/or   conversion  of  currently
        outstanding  options and  warrants),  or any options,  warrants or other
        rights  to  acquire  shares  of its  capital  stock  or  any  securities
        convertible into or exchangeable for shares of its capital stock;

(f)     will not  combine,  split or  otherwise  reclassify  any  shares  of its
        capital stock;

(g)     will not sell or pledge,  or agree to sell or pledge,  any shares of its
        capital stock;

(h)     will use all reasonable  efforts to preserve intact its present business
        organization,  keep  available  the  services  of its  officers  and key
        employees and preserve its relationships  with clients and others having
        business  dealings  with it to the end that  its  goodwill  and  ongoing
        business shall not be materially impaired at the Effective Time;

(i)     will not, (A) make any capital  expenditures  individually  in excess of
        $25,000  or in the  aggregate  in excess of  $50,000,  (B) enter into or
        terminate (except in the ordinary course of business and consistent with
        past practice) any lease of, or purchase or sell, any real property, (C)
        enter into any leases of personal  property  involving  individually  in
        excess of  $10,000  annually  or in the  aggregate  in excess of $25,000
        annually,  (D)  incur  or  guarantee  any  additional  indebtedness  for
        borrowed  money,  (E) create or permit to become  effective any security
        interest,  mortgage, lien, charge or other Encumbrance on its properties
        or assets, or (F) enter into any agreement to do any of the foregoing;

(j)     will not, other than in the ordinary course of business,  adopt or amend
        any  Benefit  Plan for the  benefit  of  Employees,  or  enter  into any
        agreement to do any of the foregoing;

(k)     will promptly advise APHX of the  commencement  of, or threat of (to the
        extent  that such  threat  comes to the  knowledge  of KMC),  any claim,
        action,  suit,  proceeding  or  investigation  against,  relating  to or
        involving KMC or any of its directors,  officers,  employees,  agents or
        consultants  in  connection  with  its  business  or  the   transactions
        contemplated hereby;

(1)     will maintain in full force and effect all insurance policies maintained
        by KMC on the date hereof; and

(m)     will not enter into any agreement to dissolve,  merge,  consolidate  or,
        except in the ordinary course, sell any material assets of KMC.

Notwithstanding the foregoing,  KMC shall be entitled to (i) negotiate and enter
into  agreements  with its employees,  consultants  and brokers to terminate all
contractual  obligations  and  issue  securities  (including  warrants  for  the
purchase of capital stock of the Surviving  Corporation) in settlement  thereof,
(ii) transfer,  as of the Effective Time, all of its operational assets to Foods
and (iii) issue as of the Effective  Time,  one common stock  purchase  warrant,
similar to the  warrants  sold in its initial  public  offering,  to each of its
stockholders  of record on the date set for such  distribution by KMC's Board of
Directors for each share of KMC Common Stock held.

                                       33


<PAGE>

5.3     KMC Spin Off.  Prior to the Merger,  KMC will (i) form  Foods,  and (ii)
        resolve its  outstanding  liabilities  associated  with  consulting  and
        employment   contracts.   Prior  to  the  Closing  of  the  Merger  (and
        simultaneously  therewith),  KMC will (1)  transfer  to Foods all of the
        assets and  liabilities/obligations of KMC other than the liabilities of
        KMC  related to (a) the lease  obligations  for the  warehouse  facility
        located in  Parsippany,  New Jersey and the office  facility  located in
        Stamford,  Connecticut, (b) the warrants to purchase ----------shares of
        KMC  Common  Stock at $6.25  per  share,  and (c)  warrants  held by the
        underwriter of KMC's initial public offering to purchase  110,000 shares
        of KMC Common Stock at $8.25 per share and 140,000  warrants to purchase
        KMC Common  Stock at $10.3125  per share,  and (2) in  exchange  for and
        consideration   of  the   foregoing,   receive  and  distribute  to  its
        stockholders, in a tax-free distribution, shares of Foods's common stock
        notwithstanding  possible  opportunities  for such individuals with APHX
        and/or KMC after the Merger. Mr. Michio Kushi is the initial Chairman of
        Foods and he will appoint its initial board of directors.

ADDITIONAL AGREEMENTS

6.1     Access to Properties and Records. Between the date of this Agreement and
        the Effective  Time, APHX will provide KMC and its  Representatives  and
        KMC will provide APHX and its Representatives,  with full access, during
        business  hours, to their  respective  premises and properties and their
        respective books and records (including, without limitation,  contracts,
        leases,  insurance policies,  litigation files, minute books,  accounts,
        working papers and tax returns filed and in  preparation)  and each will
        cause its officers to furnish to the other and its  authorized  advisors
        such additional financial,  tax and operating data and other information
        pertaining  to its  business  as the  other  shall  from  time  to  time
        reasonably request. All of such data and information shall be subject to
        the terms and conditions of the  confidentiality  agreements dated April
        18, 1996 and May 6, 1996, between APHX and KMC.

6.2     Registration  Statement.  As soon as  reasonably  practicable  after the
        execution and delivery of this Agreement, KMC and APHX shall prepare and
        file with the SEC a joint  registration  and proxy statement on Form S-4
        (the "Registration  Statement"),  which shall cover all of the shares of
        KMC  Common  Stock to be issued  in  connection  with the  Merger to the
        shareholders  of APHX, and shall use all reasonable  efforts to have the
        Registration  Statement  declared  effective  by the SEC as  promptly as
        practicable.  KMC shall also take such actions as may be required  under
        state blue sky or securities  laws in  connection  with such issuance of
        shares  of KMC  Common  Stock  in  connection  with  the  Merger  to the
        shareholders  of APHX.  APHX  shall  cooperate  fully with KMC and shall
        furnish KMC with all information  concerning  APHX and its  shareholders
        and shall take all such other  action as KMC may  reasonably  request in
        connection with any such actions.

6.3     Stockholders'  Approvals.  In compliance with all applicable federal and
        state  corporate,  securities  and blue sky  laws,  each of KMC and APHX
        shall take all action  necessary to convene meetings of their respective
        stockholders   for  the   purpose  of  voting   upon  the   transactions
        contemplated hereby and such other matters as may be appropriate at such
        meetings  or  obtain  their  approval  through   submission  of  written
        consents,  and in connection  therewith shall in a timely manner mail to
        the respective stockholders the Proxy or Information Statement contained
        in the  Registration  Statement  and,  if  necessary  after the Proxy or
        Information  Statement  shall have been mailed,  shall promptly and in a
        timely  manner  circulate  amended  or  supplemental  materials  and  if
        necessary  materials  necessary for  re-soliciting  proxies,  and in the
        event a  meeting  is not  held,  that  all of the  stockholders  will be
        promptly  informed  of the  action  taken.  Each of KMC and  APHX  will,
        through its respective  Board of Directors,  recommend to its respective
        stockholders   approval  of  the   transactions   contemplated  by  this
        Agreement.

6.4     Restricted  Stock.  Shares  of KMC  Common  Stock to be  issued  to APHX
        shareholders  pursuant to the terms of this  Agreement  in exchange  for
        APHX securities that are "restricted"  securities  within the meaning of
        Rule 144 promulgated under the Securities Act shall, notwithstanding the
        fact that they will be registered, contain a legend indicating that such
        shares are  restricted  from  transfer  until the date when the  holding
        period would have ended had the Merger not occurred.

6.5     Reasonable  Efforts;  Etc.  Subject to the terms and  conditions  herein
        provided,  each of the  parties  hereto  agrees  to use  its  reasonable
        efforts to take, or cause to be taken, all actions,  and to do, or cause
        to be done, all things  necessary,  proper or advisable under applicable
        laws and  regulations,  whether  before or after the Effective  Time, to
        consummate  and make  effective the  transactions  contemplated  by this
        Agreement, including obtaining any consents, authorizations,  exemptions
        and approvals  from,  and making all filings with, any  governmental  or
        regulatory  authority,  agency or body which are necessary in connection
        with the transactions contemplated by this Agreement;  provided that the
        obligation of the parties to use reasonable  efforts as required by this
        Section 6.5 shall not obligate any party to incur  unreasonable costs or
        expenses.

                                       34


<PAGE>

6.6     Material  Events.  At all times prior to the Effective  Time, each party
        shall  promptly  notify the others in writing of the  occurrence  of any
        event  which  will or may result in the  failure  to satisfy  any of the
        conditions specified in Article VII or Article VIII hereof.

6.7     Tax Consequences. From and after the Effective Time, none of the parties
        will take any  position in or with regard to their  respective  Federal,
        state or local income tax returns (or any  amendments  thereto)  that is
        inconsistent   with  the   treatment   of  the   Merger  as  a  tax-free
        reorganization   for  Federal   income  tax   purposes   under   Section
        368(a)(2)(E)  of the  Code  or  with  respect  to the  tax  consequences
        contemplated  thereby (including those related to the basis of stock and
        assets).

6.8     Exclusivity.   Without  in  any  way  limiting  Article  X  hereof,   in
        consideration  for the  substantial  expenditure  of  time,  effort  and
        expense  to  be  undertaken  by  each  party  in  connection   with  its
        investigation of the other party,  each party agrees that neither it nor
        any of its affiliates will solicit or initiate any  discussions  with or
        supply  confidential  or other  information  to,  any other  prospective
        purchasers of the stock or assets of KMC or APHX between the date hereof
        and December 31, 1996.

6.9     Certificate  of  Incorporation  and Directors of KMC. On or prior to the
        Effective  Time, KMC shall take all action  necessary under the Delaware
        Act in order to adopt the Amended and Restated Articles of Incorporation
        of KMC in the form  attached  hereto as Exhibit 6.9 and to file the same
        with the Secretary of State of Delaware.

6.10    Indemnification.  (a) In the event the Merger  shall  become  effective,
        then from and after the Effective Time, the Surviving  Corporation  (the
        "Indemnifying  Party")  shall  indemnify,  defend and hold harmless each
        person  who is now,  or who  becomes  prior to the  Effective  Time,  an
        officer or director of KMC,  APHX or Foods (the  "Indemnified  Parties")
        against (i) all losses, claims, damages,  costs, expenses,  liability or
        judgment or amounts  paid with the  approval of the  indemnifying  party
        (which approval shall not be unreasonably  withheld) in settlement of or
        in connection with any claim, action, suit,  proceeding or investigation
        based in whole or in part on, or  arising in whole or in part out of the
        fact that such person is or was an officer or  director of KMC,  APHX or
        Foods,  whether  pertaining  to any matter  existing or  occurring at or
        prior to the Effective  Time, and whether  asserted or claimed prior to,
        at, or after,  the Effective Time (the  "Indemnified  Liabilities")  and
        (ii) all  Indemnified  Liabilities  based  in  whole  or in part on,  or
        arising in whole or in part out of, or pertaining  to this  Agreement or
        the transactions contemplated hereby, including, without limitation, any
        Indemnified  Liabilities  arising  under or out of any state or  federal
        securities  laws,  in each case to the fullest  extent  permitted by law
        (and the  Surviving  Corporation  shall pay  expenses  in advance of the
        final  disposition of any such action or proceeding to each  Indemnified
        Party  to the  fullest  extent  permitted  by law  upon  receipt  of any
        undertaking that may be required by law).

(b)     Any  Indemnified  Party  wishing  to claim  indemnification  under  this
        Section 6.10 shall notify KMC or the Surviving Corporation promptly upon
        learning of any such claim,  action,  suit,  proceeding or investigation
        (but the failure to notify the Indemnifying  Party should not relieve it
        from any  liability  which it may have under this Section 6.10 except to
        the extent such failure prejudices such party).

(c)     The  provisions  of this Section 6.10 are intended to be for the benefit
        of, and shall be enforceable by each  Indemnified  Party, and his or her
        heirs and representatives.

                                       35


<PAGE>

6.11    Quarterly  Financial  Statements.  Prior to the Effective Time, APHX and
        KMC shall  deliver to the other party as soon as  available,  but in any
        event no later  than 45 days after the end of each  quarterly  period of
        its fiscal year (or such later period as may be permitted for the filing
        of quarterly  financial  statements  under the Exchange Act),  unaudited
        balance  sheets  and the  related  unaudited  statements  of income  and
        retained  earnings and unaudited  statements of cash flows for each such
        quarter.

                                       36


<PAGE>

CONDITIONS TO THE OBLIGATIONS OF KMC

The  obligation  of KMC to  consummate  the  transactions  contemplated  by this
Agreement shall be subject to the satisfaction, on or prior to the Closing Date,
of each of the  following  conditions  (any of which may be waived in writing by
KMC in its sole discretion):

7.1     Representations  and Warranties True. The representations and warranties
        of APHX which are  contained  in this  Agreement,  or  contained  in any
        Schedule, certificate or other instrument or document delivered or to be
        delivered pursuant to this Agreement,  other than the representation and
        warranty  set forth in  Section  3.3(a)  with  respect  to the number of
        issued   and   outstanding   shares  of  APHX   Common   Stock  and  the
        representations  and  warranties set forth in Section  3.3(b),  shall be
        true and correct in all material  respects at and as of the Closing Date
        as though such representations and warranties were made on and as of the
        Closing Date except for changes  expressly  permitted or contemplated by
        the  terms  of this  Agreement,  and at the  Closing,  APHX  shall  have
        delivered to KMC a  certificate  (signed on its behalf by its  President
        and the Chief Financial Officer) to that effect with respect to all such
        representations and warranties.

7.2     Performance.  APHX shall have  performed  and  complied in all  material
        respects  with all of its  obligations  under this  Agreement  which are
        required to be  performed  or  complied  with on or prior to the Closing
        Date, and at the Closing, APHX shall have delivered to KMC a certificate
        (signed on its behalf by its President and its Chief Financial  officer)
        to that effect  with  respect to all such  obligations  required to have
        been performed or complied with by APHX on or before the Closing Date.

7.3     Authorization  of Merger.  This  Agreement and the  consummation  of the
        transactions  contemplated  hereby  (including,  but not limited to, the
        adoption of the Amended and Restated  Articles of  Incorporation of KMC)
        shall  have  been  duly  approved  and  adopted  (i)  by  the  requisite
        affirmative  vote of the  stockholders  of KMC and (ii) by the requisite
        affirmative vote of the stockholders of APHX, in each case in accordance
        with  applicable  law and the  rules  and  regulations  of the  National
        Association of Securities Dealers, Inc.

7.4     Registration Statement;  Blue Sky Laws. The Registration Statement shall
        have been declared  effective  under the Securities Act and shall not be
        subject to a stop order or any  threatened  stop  order.  All  necessary
        state  securities and blue sky permits,  approvals and exemption  orders
        required  in  connection  with  the  transactions  contemplated  by this
        Agreement shall have been obtained.

7.5     Restrictive  Legends.  The transfer agent for the Surviving  Corporation
        shall have been  delivered  a list of the shares  that  require a legend
        pursuant  to  Section  6.4 and shall have been  instructed  to place the
        following legend on each certificate  representing  shares of KMC Common
        Stock issued to any shareholder of APHX pursuant to the Merger:

"The sale or other transfer of the shares represented by this certificate is not
permitted unless effected pursuant to an effective  registration statement or in
the opinion of counsel to the Company it is effected in compliance with Rule 144
or another exemption from the registration requirements of the Securities Act of
1933, as amended."

                                       37


<PAGE>

7.6     Absence of Litigation.  No statute,  rule or regulation  shall have been
        enacted or promulgated,  and no order,  decree, writ or injunction shall
        have  been  issued  and  shall  remain  in  effect,   by  any  court  or
        governmental or regulatory  body,  agency or authority which  restrains,
        enjoins or otherwise  prohibits  the  consummation  of the  transactions
        contemplated  hereby, and no action, suit or proceeding before any court
        or governmental or regulatory body,  agency or authority shall have been
        instituted   by  any  person  (or   instituted   or  threatened  by  any
        governmental  or  regulatory   body,   agency  or  authority),   and  no
        investigation  by  any  governmental  or  regulatory  body,   agency  or
        authority  shall have been  commenced  with respect to the  transactions
        contemplated  hereby or with  respect to APHX which,  in the  reasonable
        judgment  of KMC's  Board of  Directors,  would have a material  adverse
        effect on the  transactions  contemplated  hereby or on the  business of
        APHX.

7.7     Opinion of  counsel.  APHX shall have  delivered  to KMC the  opinion of
        counsel to APHX, in the form annexed as Exhibit 7.7 hereto.

7.8     Appraisal  Rights.  The  holders  of more than ten (10%)  percent of the
        issued  and  outstanding  shares  of APHX  Common  Stock  shall not have
        demanded appraisal rights in respect of the Merger.

7.9     Certificates  of Merger.  APHX shall have  executed and delivered to KMC
        counterparts  of  the  Certificates  of  Merger  to be  filed  with  the
        Secretaries  of State of the States of Nevada and Delaware in connection
        with the Merger.

7.10    Consents.  KMC,  APHX  and  Foods  shall  have  obtained  all  necessary
        consents, authorizations or approvals of, and made any necessary filings
        with, any governmental,  public or self-regulatory  body or authority or
        any  other  third  party  to  the   consummation  of  the   transactions
        contemplated hereby, or executions therefrom or waivers thereof, and any
        requisite waiting period with respect thereto shall have expired.

7.11    No Material Change in Financial  Statements.  There shall be no material
        difference  between the APHX Financial  Statements and APHX's  quarterly
        financial  statements  filed with the SEC from the date hereof until the
        Closing Date reflecting a material  adverse  difference in the business,
        assets, financial condition or results of operations of APHX.

7.12    Directors  and  Executive  Officers.  APHX  shall  deliver to KMC at the
        Closing a list of all of its directors and executive officers.

                                       38



<PAGE>

CONDITIONS TO THE OBLIGATIONS OF APHX

The  obligation  of APHX to consummate  the  transactions  contemplated  by this
Agreement shall be subject to the satisfaction, on or prior to the Closing Date,
of each of the  following  conditions  (any of which may be waived in writing by
APHX in its sole discretion):

8.1     Representations  and Warranties True. The representations and warranties
        of KMC  contained  in this  Agreement,  or  contained  in any  Schedule,
        certificate or other instrument or document delivered or to be delivered
        pursuant to this Agreement,  other than the  representation and warranty
        set forth in  Section  4.3(a)  with  respect to the number of issued and
        outstanding  shares  of KMC  Common  Stock and the  representations  and
        warranties set forth in Section 4.3(b), shall be true and correct in all
        material  respects  at  and  as of  the  Closing  Date  as  though  such
        representations  and warranties  were made on and as of the Closing Date
        except for changes  expressly  permitted or contemplated by the terms of
        this Agreement,  and at the Closing,  KMC shall have delivered to APHX a
        certificate  (signed  on its  behalf  by its  President  and  its  Chief
        Financial   Officer)   to  that   effect   with   respect  to  all  such
        representations and warranties made by such entity.

8.2     Performance.  KMC shall have  performed  and  complied  in all  material
        respects  with all of its  obligations  under this  Agreement  which are
        required to be  performed  or  complied  with on or prior to the Closing
        Date,  and  at  the  Closing,   KMC  shall  have  delivered  to  APHX  a
        certificate,  signed  on its  behalf  by its  President  and  its  Chief
        Financial  Officer,  to that effect with respect to all such obligations
        required  to have been  performed  or  complied  with on or  before  the
        Closing Date.

8.3     Authorization  of Merger.  This  Agreement and the  consummation  of the
        transactions  contemplated  hereby  (including,  but not limited to, the
        adoption of the Amended and Restated  Articles of Incorporation of KMC),
        shall  have  been  duly  approved  and  adopted  by  (i)  the  requisite
        affirmative   vote  of  the   stockholders  and  directors  of  KMC,  as
        appropriate  and,  (ii)  by  the  requisite   affirmative  vote  of  the
        stockholders of APHX, in each case in accordance with applicable law and
        the rules and  regulations  of the National  Association  of  Securities
        Dealers, Inc.

8.4     Registration Statement;  Blue Sky Laws. The Registration Statement shall
        have been declared  effective  under the Securities Act and shall not be
        subject to a stop order or any  threatened  stop  order.  All  necessary
        state  securities and blue sky permits,  approvals and exemption  orders
        required  in  connection  with  the  transactions  contemplated  by this
        Agreement shall have been obtained.

8.5     Absence of Litigation.  No statute,  rule or regulation  shall have been
        enacted or promulgated,  and no order,  decree, writ or injunction shall
        have  been  issued  and  shall  remain  in  effect,   by  any  court  or
        governmental or regulatory  body,  agency or authority which  restrains,
        enjoins or otherwise  prohibits  the  consummation  of the  transactions
        contemplated  hereby, and no action, suit or proceeding before any court
        or governmental or regulatory body,  agency or authority shall have been
        instituted   by  any  person  (or   instituted   or  threatened  by  any
        governmental   or  regulatory   body,   agency  or  authority)   and  no
        investigation  by  any  governmental  or  regulatory  body,   agency  or
        authority  shall have been  commenced  with respect to the  transactions
        contemplated  hereby or with  respect  to KMC which,  in the  reasonable
        judgment of APHX's  Board of  Directors,  would have a material  adverse
        effect on the  transactions  contemplated  hereby or on the  business of
        KMC.

8.6     Opinion of  Counsel.  KMC shall have  delivered  to APHX the  opinion of
        counsel to KMC, substantially in the form annexed as Exhibit 8.6 hereto.

8.7     Certificate  of Merger.  KMC shall have  executed and  delivered to APHX
        counterparts  of  the  Certificates  of  Merger  to be  filed  with  the
        Secretaries  of State of the States of Nevada and Delaware in connection
        with the Merger.

8.8     Consents.  KMC,  APHX  and  Foods  shall  have  obtained  all  necessary
        consents, authorizations or approvals of, and made any necessary filings
        with, any governmental,  public or self-regulatory  body or authority or
        any  other  third  party  to  the   consummation  of  the   transactions
        contemplated hereby, or executions therefrom or waivers thereof, and any
        requisite waiting period with respect thereto shall have expired.

8.9     Director Resignations. KMC shall have received the written resignations,
        and  resolved  and paid  (in cash  and/or  securities)  all  contractual
        obligations,  of all officers and directors of KMC who, on and after the
        Effective Time, shall no longer serve in such capacity.

8.10    Inclusion on NASDAQ  System.  KMC Common Stock shall be  authorized  for
        inclusion on the National  Association of Securities  Dealers  Automated
        Quotation System, and there shall be no involuntary  trading halt, as of
        the Effective Time, of KMC Common Stock in the  over-the-counter  market
        imposed by the National Association of Securities Dealers, Inc.

8.11    Hold Harmless and Indemnification Agreement. Foods shall have executed a
        Hold Harmless and Indemnification Agreement in favor of APHX, reasonably
        satisfactory  to APHX,  respecting any claims,  liabilities or causes of
        actions arising from the Stamford and Parsippany  leases  currently held
        by KMC and to be transferred to Foods or the Mendelson litigation.

                                       39



<PAGE>

TERMINATION

9.1     Termination.  This  Agreement may be terminated at any time prior to the
        Effective Time, whether prior to or after approval of this Agreement and
        the transactions  contemplated hereby by the stockholders of APHX and/or
        KMC:

(a)     by the mutual  written  consent of the Boards of  Directors  of APHX and
        KMC;

(b)     by either APHX or KMC

(i)     if any court or  governmental  or regulatory  agency,  authority or body
        shall have enacted, promulgated or issued any statute, rule, regulation,
        ruling,  writ or  injunction,  or taken any other  action,  restraining,
        enjoining or otherwise prohibiting the transactions  contemplated hereby
        and all appeals and means of appeal therefrom have been exhausted;

(ii)    if the Effective Time shall not have occurred on or before  December 31,
        1996;  provided,  however,  that the right to terminate  this  Agreement
        pursuant to this Section  9.1(b)(ii) shall not be available to any party
        whose breach of any  representation or warranty or failure to perform or
        comply with any  obligation  under this Agreement has been the cause of,
        or resulted in, the failure of the Effective  Time to occur on or before
        such date; or

(iii)   if the  stockholders of KMC and/or APHX shall have failed to approve the
        Merger.

(c)     by APHX,  if any of the  conditions  specified  in Article VIII have not
        been met in all material respects or waived by it in writing; or

(d)     by KMC, if any of the conditions specified in Article VII shall not have
        been met in all material respects or waived by it in writing.

9.2     Effect  of  Termination.  In  the  event  of  the  termination  of  this
        Agreement, this Agreement shall forthwith become void and there shall be
        no  liability  on  the  part  of  any of the  parties  hereto  or  their
        respective officers or directors,  except for Sections 10.6 and 10.8 and
        the last  sentence of Section 6.1,  which shall remain in full force and
        effect,  and except that  nothing  herein  shall  relieve any party from
        liability  for a  breach  of this  Agreement  prior  to the  termination
        hereof.

MISCELLANEOUS PROVISIONS

10.1    Amendment.  This  Agreement  may be amended  only by  written  agreement
        between APHX and KMC prior to the  Effective  Time,  whether prior to or
        after approval hereof by the stockholders of KMC and/or the stockholders
        of APHX,  but after any such approval no amendment  shall be made to the
        Exchange Ratio pursuant to which outstanding shares of APHX Common Stock
        are  converted  into shares of KMC Common Stock  pursuant to the Merger,
        without the further approval of such stockholders.

                                       40


<PAGE>

10.2    Waiver of Compliance.  Except as otherwise  provided in this  Agreement,
        any  failure  of any of the  parties  to  comply  with  any  obligation,
        covenant or agreement  contained  herein may be waived only by a written
        notice from the party or parties  entitled to the benefits  thereof.  No
        failure by any party hereto to exercise, and no delay in exercising, any
        right hereunder, shall operate as a waiver thereof, nor shall any single
        or partial exercise of any right hereunder  preclude any other or future
        exercise of that right by that party.

10.3    Notices. All notices and other communications  hereunder shall be deemed
        given if given in writing and  delivered  personally,  by  registered or
        certified  mail,  return  receipt  requested,  postage  prepaid,  or  by
        overnight  courier  to the party to receive  the same at its  respective
        address  set forth  below (or at such other  address as may from time to
        time be designated  by such party to the others in accordance  with this
        Section 10.3):

(a)     if to APHX, to:

 Mr. Patrick N. DiCarlo, President and CEO
 American Phoenix Group, Inc.
 1042 Castlerock
 Santa Ana, California 92705

 with copies to:

 Whitman Breed Abbott & Morgan
 633 West Fifth Avenue, 21st Floor
 Los Angeles, California 90071
 Attention: Douglas K. Simpson, Esq.

(b)     if to KMC, to:

 Mr. Daniel A. France
 Kushi Macrobiotics Corp.
 Three Stamford Landing, Suite 210
 Stamford, Connecticut 06902

 with copies to:

 Heller, Horowitz & Feit, P.C.
 292 Madison Avenue
 New York, New York 10017
 Attn: Irving Rothstein, Esq.

All such  notices  and  communications  hereunder  shall be  deemed  given  when
received,  as evidenced by the signed acknowledgment of receipt of the person to
whom such notice or  communication  shall have been  personally  delivered,  the
acknowledgment  of  receipt  returned  to the  sender by the  applicable  postal
authorities or the confirmation of delivery rendered by the applicable overnight
courier service.

10.4    Assignment.  This  Agreement and all of the  provisions  hereof shall be
        binding  upon and inure to the benefit of the  parties  hereto and their
        respective successors and permitted assigns.  Neither this Agreement nor
        any  rights,  duties  or  obligations  hereunder  shall be  assigned  or
        delegated by any party hereto  without the prior written  consent of the
        other parties hereto.

                                       41


<PAGE>

10.5    No Third Party Beneficiaries.  Except as provided in Section 6.10 hereof
        to the contrary, neither this Agreement nor any provision hereof nor any
        Schedule, certificate or other instrument delivered pursuant hereto, nor
        any  agreement  to be  entered  into  pursuant  hereto or any  provision
        hereof, is intended to create any right, claim or remedy in favor of any
        person or entity,  other than the  parties  hereto and their  respective
        successors and permitted assigns.

10.6    Expenses.  Each party shall pay its own expenses in connection with this
        Agreement,  the  agreements to be entered into  pursuant  hereto and the
        transactions contemplated hereby; provided,  however, that if the Merger
        is  consummated  pursuant to this  Agreement,  all such expenses of APHX
        (which  shall  include  the  reasonable  fees and  disbursements  of its
        attorney's,  accountants and other professionals)  incurred on behalf of
        APHX in connection with the  transactions  contemplated  hereby shall be
        the responsibility of the Surviving Corporation.

10.7    Public  Announcements.  Promptly  upon  execution  and  delivery of this
        Agreement, KMC and APHX shall issue a press release in such form as they
        shall mutually agree.  Thereafter,  and prior to the consummation of the
        Merger or the termination of this Agreement,  none of the parties hereto
        shall,  except as mutually  agreed by KMC and APHX,  or except as may be
        required by law or applicable regulatory authority  (including,  without
        limitation, the rules applicable to NASDAQ listed companies),  issue any
        reports,  releases,  announcements  or other  statements  to the  public
        relating to the transactions contemplated hereby.

10.8    Brokers  and  Finders.  APHX and KMC each  represent  and warrant to the
        other that no broker,  finder or  investment  banker is  entitled to any
        brokerage,  finder's or other fee or  commission  based on  arrangements
        made by or on behalf of either party  hereto that has not been,  or will
        not be by Closing, satisfied.

10.9    Further Agreements. The parties acknowledge and agree that if, following
        any breach of any of the  representations  and warranties of the parties
        set forth in this  Agreement,  the  existence  of which is  disclosed in
        writing   signed  by  the   disclosing   party  and   submitted  to  the
        non-breaching  party  prior  to the  Effective  Time,  and  the  parties
        thereafter   nevertheless   proceed  to  consummate   the   transactions
        contemplated hereby, it shall be conclusively  presumed,  in the absence
        of written agreement of the parties to the contrary,  that the breach so
        disclosed has been waived by the non-breaching  party and no party shall
        be liable  therefor in damages,  whether  pursuant to this  Agreement or
        otherwise.

10.10   Counterparts.   This   Agreement  may  be  executed  in  any  number  of
        counterparts,  each of which  shall be  deemed an  original,  but all of
        which together shall constitute one and the same instrument.

10.11   Entire Agreement.  This Agreement,  and the Schedules,  certificates and
        other instruments and documents delivered pursuant hereto, together with
        the other agreements  referred to herein and to be entered into pursuant
        hereto,  embody the entire  agreement  of the  parties  and there are no
        other agreements or  understandings,  written or oral, among the parties
        relating to, the subject matter hereof,  other than the  Confidentiality
        Agreements.   This  Agreement   supersedes  all  prior   agreements  and
        understandings,  written or oral,  between  the  parties  other than the
        Confidentiality Agreements.

10.12   Governing  Law. The parties  hereby agree that this  Agreement,  and the
        respective  rights,  duties and  obligations  of the parties  hereunder,
        shall be governed by and  construed in  accordance  with the laws of the
        State of New York,  without  giving effect to principles of conflicts of
        law  thereunder,  except for the  provisions of Article I hereto setting
        forth the provisions for  consummating,  and the effects of, the Merger,
        which shall be governed by and construed in accordance with the Delaware
        Act and/or the Nevada Act to the extent that the Delaware Act and/or the
        Nevada Act is applicable by its terms.

10.13   Descriptive  Headings.  The descriptive headings herein are inserted for
        convenience  of reference  only and are not intended to be part of or to
        affect the meaning or interpretation of this Agreement.

                                       42


<PAGE>

10.14   Specific  Performance.  The parties hereto agree that irreparable damage
        would  occur in the event this  Agreement  were not to be  performed  in
        accordance  with the terms hereof and that the parties shall be entitled
        to  specific  performance  of the terms  hereof in addition to any other
        remedies at law or equity.

----------------,  KMC,  APHX and Foods have  caused this  Agreement  to be duly
executed and delivered as of the date first above written.

KUSHI MACROBIOTICS CORP.


 s/Daniel A. France
 By:  -----------------------
 Name:  Daniel A. France
 Title:  Chief Financial and
 Chief Operating Officer
 AMERICAN PHOENIX GROUP, INC.


 s/Patrick N. Di Carlo
 By:  -----------------------
 Name:  Patrick N. Di Carlo
 Title: Agent in Fact
 KUSHI NATURAL FOODS CORP.


 /Daniel A. France
 By:  -----------------------
 Name:  Daniel A. France
 Title: As Agent For
 Michio Kushi, Chairman

                                       43


<PAGE>

NOTICE OF DISSENTER'S RIGHTS

TO STOCKHOLDERS OF AMERICAN PHOENIX GROUP, INC.:

If you you intend to assert  dissenter's  rights  with  respect to the merger of
American Phoenix Group, Inc. (the "Company") into Kushi Macrobiotics  Corp., you
must:

(1)     Sign and send to the Company a demand for payment in  substantially  the
        form attached hereto at the Company's  address indicated on the attached
        form;

(2)     Ensure that the Company  receives  your demand for payment at the above-
        referenced  address no later than date  between 30 and 60 days from date
        of notice , 1996;

(3)     Deposit  your stock  certificates  with the  Company's  transfer  agent,
        American Securities Transfer, Incorporated, 938 Quail Street, Suite 101,
        Lakewood,  CO  80215-5513 no later than date between 30 and 60 days from
        date of notice , 1996;

If you are the holder of  uncertificated  stock of the Company,  you are advised
that the Company may  restrict  transfer of such shares from the date the demand
for their payment is received.

A copy of the sections  92A.300  throught 92A.502 of the Nevada Revised Statutes
accompanies this Dissenter's Notice.

Patrick N. Di Carlo
President

TO:

AMERICAN PHOENIX GROUP, INC.
5 Park Plaza
Suite 1260
Irvine, California 92714

Re: Demand for Payment

The  undersigned  shareholder of American  Phoenix Group,  Inc. (the  "Company")
hereby dissents from the merger between the Company and Kushi Macrobiotics Corp.
and demand payment for my shares.  The first  announcement  to the news media of
the  proposed  terms of the  merger was made on ------,  1996.  The  undersigned
hereby  certifies  that  he,  she or it did -- did not --  (check  one)  acquire
beneficial ownership prior to such date.

Signature of Shareholder

Name of Shareholder

Date: --------------------

                                       44


<PAGE>

NEVADA REVISED STATUTES ANNOTATED
Copyright (c) 1986-1993 by The Michie Company
Copyright (c) 1995 by The Michie Company,
a division of Reed Elsevier Inc. and Reed Elsevier Properties Inc.

All rights reserved.

*** THIS SECTION IS CURRENT THROUGH THE 1995 SUPPLEMENT ***
*** (SIXTY-EIGHTH (1995) SESSION) ***

TITLE 7. BUSINESS ASSOCIATIONS; SECURITIES; COMMODITIES
CHAPTER 92A. MERGERS AND EXCHANGES OF INTEREST
RIGHTS OF DISSENTING OWNERS

Nev. Rev. Stat. Ann.(pound)92A.300 (1995)
(pound)92A.300. Definitions

As used in NRS  92A.300 to  92A.500,  inclusive,  unless the  context  otherwise
requires, the words and terms defined in NRS 92A.305 to 92A.335, inclusive, have
the meanings ascribed to them in those sections.

(pound) 92A.305. "Beneficial stockholder" defined

"Beneficial stockholder" means a person who is a beneficial owner of shares held
in a voting trust or by a nominee as the stockholder of record.

(pound) 92A.310. "Corporate action" defined

"Corporate action" means the action of a domestic corporation.

(pound) 92A.315. "Dissenter" defined

"Dissenter"  means a  stockholder  who is  entitled  to dissent  from a domestic
corporation's  action under NRS 92A.380 and who exercises that right when and in
the manner required by NRS 92A.410 to 92A.480, inclusive.

(pound) 92A.320. "Fair value" defined

"Fair  value,"  with  respect to a  dissenter's  shares,  means the value of the
shares  immediately  before the effectuation of the corporate action to which he
objects,  excluding any  appreciation  or  depreciation  in  anticipation of the
corporate action unless exclusion would be inequitable.

(pound) 92A.325. "Stockholder" defined

"Stockholder"  means a stockholder  of record or a beneficial  stockholder  of a
domestic corporation.

(pound) 92A.330. "Stockholder of record" defined

"Stockholder  of record" means the person in whose name shares are registered in
the records of a domestic  corporation or the beneficial  owner of shares to the
extent  of the  rights  granted  by a  nominee's  certificate  on file  with the
domestic corporation.

(pound) 92A.335. "Subject corporation" defined

"Subject  corporation" means the domestic corporation which is the issuer of the
shares held by a dissenter  before the corporate action creating the dissenter's
rights  becomes  effective or the  surviving or acquiring  entity of that issuer
after the corporate action becomes effective.

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(pound) 92A.340. Computation of interest

Interest payable pursuant to NRS 92A.300 to 92A.500, inclusive, must be computed
from the effective date of the action until the date of payment,  at the average
rate  currently  paid by the entity on its principal bank loans or, if it has no
bank loans, at a rate that is fair and equitable under all of the circumstances.

(pound)92A.350. Rights of dissenting partner of domestic limited partnership

A partnership  agreement of a domestic limited  partnership or, unless otherwise
provided in the partnership  agreement,  an agreement of merger or exchange, may
provide that  contractual  rights with respect to the partnership  interest of a
dissenting  general or limited  partner of a domestic  limited  partnership  are
available for any class or group of partnership interests in connection with any
merger or exchange in which the domestic  limited  partnership  is a constituent
entity.

(pound)92A.360.  Rights  of  dissenting  member  of  domestic  limited-liability
company

The  articles of  organization  or operating  agreement  of a domestic  limited-
liability company or, unless otherwise  provided in the articles of organization
or operating  agreement,  an  agreement of merger or exchange,  may provide that
contractual  rights  with  respect to the  interest of a  dissenting  member are
available  in  connection  with any  merger or  exchange  in which the  domestic
limited-liability company is a constituent entity.

(pound)92A.370. Rights of dissenting member of domestic nonprofit corporation

1.      Except as  otherwise  provided  in  subsection  2 and  unless  otherwise
        provided  in the  articles  or  bylaws,  any  member of any  constituent
        domestic nonprofit corporation who voted against the merger may, without
        prior notice, but within 30 days after the effective date of the merger,
        resign  from  membership  and is thereby  excused  from all  contractual
        obligations to the constituent or surviving  corporations  which did not
        occur before his resignation and is thereby entitled to those rights, if
        any,  which  would  have  existed  if there had been no  merger  and the
        membership had been terminated or the member had been expelled.

2.      Unless otherwise provided in its articles of incorporation or bylaws, no
        member of a domestic nonprofit corporation,  including,  but not limited
        to, a cooperative  corporation,  which  supplies  services  described in
        chapter 704 of NRS to its members only, and no person who is a member of
        a domestic  nonprofit  corporation as a condition of or by reason of the
        ownership  of an  interest  in real  property,  may resign  and  dissent
        pursuant to subsection 1.

(pound)92A.380.  Right of stockholder to dissent from certain  corporate actions
and to obtain payment for shares

1.      Except as otherwise provided in NRS 92A.370 to 92A.390, a stockholder is
        entitled to dissent  from,  and obtain  payment of the fair value of his
        shares in the event of any of the following corporate actions:

(a)     Consummation  of a plan of merger to which the domestic  corporation isa
        party:

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(1)     If approval by the stockholders is required for the merger by NRS92A.120
        to  92A.160,  inclusive,  or the  articles  of  incorporation  and he is
        entitled to vote on the merger; or

(2)     If the domestic corporation is a subsidiary and is merged with itsparent
        under NRS 92A.180.

(b)     Consummation of a plan of exchange to which the domestic corporationis a
        party  as the  corporation  whose  subject  owner's  interests  will  be
        acquired, if he is entitled to vote on the plan.

(c)     Any corporate action taken pursuant to a vote of the stockholders  tothe
        event that the articles of incorporation,  bylaws or a resolution of the
        board of directors  provides that voting or nonvoting  stockholders  are
        entitled to dissent and obtain payment for their shares.

2.      A  stockholder  who is entitled to dissent and obtain  payment under NRS
        92A.300 to 92A.500,  inclusive,  may not challenge the corporate  action
        creating  his  entitlement  unless the action is unlawful or  fraudulent
        with respect to him or the domestic corporation.

(pound)92A.390. Limitations on right of dissent: Stockholders of certain classes
or series; action of stockholders not required for plan of merger

1.      There  is no  right of  dissent  with  respect  to a plan of  merger  or
        exchange in favor of  stockholders  of any class or series which, at the
        record  date fixed to  determine  the  stockholders  entitled to receive
        notice  of and to vote at the  meeting  at which  the plan of  merger or
        exchange is to be acted on, were either listed on a national  securities
        exchange,  included  in the  national  market  system  by  the  National
        Association  of  Securities  Dealers,  Inc.,  or held by at least  2,000
        stockholders of record, unless:

(a)     The  articles  of   incorporation   of  the   corporation   issuing  the
        sharesprovide otherwise; or

(b)     The holders of the class or series are required  under the plan ofmerger
        or exchange to accept for the shares anything except:

(1)     Cash,   owner's   interests  or  owner's  interests  and  cash  in  lieu
        offractional owner's interests of:

(I)     The surviving or acquiring entity; or

(II)    Any other entity which,  at the  effective  date of the plan ofmerger or
        exchange, were either listed on a national securities exchange, included
        in the national market system by the National  Association of Securities
        Dealers,  Inc.,  or held of record by a least  2,000  holders of owner's
        interests of record; or

(2)     A  combination  of cash and owner's  interests  of the kind  describedin
        sub-subparagraphs (I) and (II) of subparagraph (1) of paragraph (b).

2.      There is no right of dissent for any  holders of stock of the  surviving
        domestic  corporation  if the plan of merger does not require  action of
        the  stockholders  of  the  surviving  domestic  corporation  under  NRS
        92A.130.

(pound)92A.400.  Limitations on right of dissent:  Assertion as to portions only
to shares registered to stockholder; assertion by beneficial stockholder

1.      A stockholder of record may assert  dissenter's  rights as to fewer than
        all of the  shares  registered  in his  name  only if he  dissents  with
        respect to all shares  beneficially owned by any one person and notifies
        the  subject  corporation  in  writing  of the name and  address of each
        person on whose behalf he asserts  dissenter's  rights.  The rights of a
        partial  dissenter under this subsection are determined as if the shares
        as to which he  dissents  and his other  shares were  registered  in the
        names of different stockholders.

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2.      A beneficial stockholder may assert dissenter's rights as to shares held
        on his behalf only if:

(a)     He  submits  to  the  subject   corporation   the  written   consent  of
        thestockholder  of record  to the  dissent  not later  than the time the
        beneficial stockholder asserts dissenter's rights; and

(b)     He  does  so  with   respect   to  all   shares   of  which  he  is  the
        beneficialstockholder or over which he has power to direct the vote.

(pound)92A.410. Notification of stockholders regarding right of dissent

1.      If a proposed corporate action creating  dissenters' rights is submitted
        to a vote at a  stockholders'  meeting,  the notice of the meeting  must
        state that  stockholders  are or may be entitled  to assert  dissenters'
        rights under NRS 92A.300 to 92A.500,  inclusive, and be accompanied by a
        copy of those sections.

2.      If the corporate action creating  dissenters'  rights is taken without a
        vote of the  stockholders,  the  domestic  corporation  shall  notify in
        writing all stockholders  entitled to assert dissenters' rights that the
        action was taken and send them the dissenter's  notice  described in NRS
        92A.430.

(pound)92A.420. Prerequisites to demand for payment for shares

1.      If a proposed corporate action creating  dissenters' rights is submitted
        to a vote at a stockholders' meeting, a stockholder who wishes to assert
        dissenter's rights:

(a)     Must   deliver  to  the   subject   corporation,   before  the  vote  is
        taken,written  notice of his intent to demand  payment for his shares if
        the proposed action is effectuated; and

(b)     Must not vote his shares in favor of the proposed action.

2.      A stockholder  who does not satisfy the  requirements of subsection 1 is
        not entitled to payment for his shares under this chapter.

(pound)92A.430.  Dissenter's notice: Delivery to stockholders entitled to assert
rights; contents

1.      If a proposed corporate action creating dissenters' rights is authorized
        at a  stockholders'  meeting,  the subject  corporation  shall deliver a
        written  dissenter's  notice  to  all  stockholders  who  satisfied  the
        requirements to assert those rights.

2.      The  dissenter's  notice  must be sent no later  than 10 days  after the
        effectuation of the corporate action, and must:

(a)     State  where  the  demand  for  payment  must be sent and where and when
        certificates, if any, for shares must be deposited;

(b)     Inform  the  holders  of  shares  not  represented  by  certificates  to
        whatextent  the  transfer  of the shares  will be  restricted  after the
        demand for payment is received;

(c)     Supply a form for  demanding  payment that includes the date of thefirst
        announcement  to the news media or to the  stockholders  of the terms of
        the proposed action and requires that the person  asserting  dissenter's
        rights certify  whether or not he acquired  beneficial  ownership of the
        shares before that date;

(d)     Set a date by which the subject  corporation  must receive the demandfor
        payment,  which may not be less than 30 nor more than 60 days  after the
        date the notice is delivered; and

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(e)     Be accompanied by a copy of NRS 92A.300 to 92A.500, inclusive.

(pound)92A.440.  Demand for payment and deposit of  certificates;  retention  of
rights of stockholder

1.      A stockholder to whom a dissenter's notice is sent must:

(a)     Demand payment;

(b)     Certify whether he acquired beneficial ownership of the shares beforethe
        date  required  to be set  forth  in the  dissenter's  notice  for  this
        certification; and

(c)     Deposit  his  certificates,  if any,  in  accordance  with the  terms of
        the notice.

2.      The stockholder who demands  payment and deposits his  certificates,  if
        any,  retains all other rights of a  stockholder  until those rights are
        canceled or modified by the taking of the proposed corporate action.

3.      The stockholder who does not demand payment or deposit his  certificates
        where required, each by the date set forth in the dissenter's notice, is
        not entitled to payment for his shares under this chapter.

(pound)92A.450.  Uncertificated  shares:  Authority to restrict  transfer  after
demand for payment; retention of rights of stockholder

1.      The  subject  corporation  may  restrict  the  transfer  of  shares  not
        represented by a certificate  from the date the demand for their payment
        is received.

2.      The person for whom  dissenter's  rights are  asserted  as to shares not
        represented  by a certificate  retains all other rights of a stockholder
        until  those  rights  are  canceled  or  modified  by the  taking of the
        proposed corporate action.

(pound) 92A.460. Payment for shares: General requirements

1.      Except as  otherwise  provided  in NRS  92A.470,  within  30 days  after
        receipt of a demand for payment,  the subject corporation shall pay each
        dissenter   who  complied  with  NRS  92A.440  the  amount  the  subject
        corporation  estimates to be the fair value of his shares,  plus accrued
        interest.   The  obligation  of  the  subject   corporation  under  this
        subsection may be enforced by the district court:

(a)     Of the county where the corporation's registered office is located; or

(b)     At the election of any dissenter residing or having its registeredoffice
        in this  state,  of the county  where the  dissenter  resides or has its
        registered office. The court shall dispose of the complaint promptly.

2.      The payment must be accompanied by:

(a)     The  subject  corporation's  balance  sheet  as of the  end of a  fiscal
        year ending  not  more  than 16  months before  the date of  payment,  a
        statement  of income  for that  year,  a  statement  of  changes  in the
        stockholders'  equity  for that year and the  latest  available  interim
        financial statements, if any;

(b)     A  statement  of the  subject  corporation's  estimate of the fair value
        ofthe shares;

(c)     An explanation of how the interest was calculated;

(d)     A  statement  of  the   dissenter's   rights  to  demand  payment  under
        NRS92A.480; and

(e)     A copy of NRS 92A.300 to 92A.500, inclusive.

(pound)92A.470.  Payment  for  shares:  Shares  acquired  on or  after  date  of
dissenter's notice

1.      A subject  corporation  may elect to withhold  payment  from a dissenter
        unless he was the  beneficial  owner of the  shares  before the date set
        forth in the dissenter's notice as the date of the first announcement to
        the  news  media or to the  stockholders  of the  terms of the  proposed
        action.

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2.      To the extent the subject corporation elects to withhold payment,  after
        taking the  proposed  action,  it shall  estimate  the fair value of the
        shares,  plus  accrued  interest,  and shall offer to pay this amount to
        each  dissenter  who  agrees to accept  it in full  satisfaction  of his
        demand. The subject corporation shall send with its offer a statement of
        its estimate of the fair value of the shares,  an explanation of how the
        interest was  calculated,  and a statement of the  dissenters'  right to
        demand payment pursuant to NRS 92A.480.

(pound)92A.480.  Dissenter's  estimate  of fair value:  Notification  of subject
corporation; demand for payment of estimate

1.      A  dissenter  may notify the subject  corporation  in writing of his own
        estimate of the fair value of his shares and the amount of interest due,
        and demand  payment of his  estimate,  less any payment  pursuant to NRS
        92A.460,  or reject the offer pursuant to NRS 92A.470 and demand payment
        of the fair value of his shares and  interest  due, if he believes  that
        the amount  paid  pursuant  to NRS  92A.460 or offered  pursuant  to NRS
        92A.470 is less than the fair  value of his shares or that the  interest
        due is incorrectly calculated.

2.      A dissenter  waives his right to demand payment pursuant to this section
        unless he  notifies  the  subject  corporation  of his demand in writing
        within 30 days after the subject corporation made or offered payment for
        his shares.

(pound)92A.490.  Legal  proceeding  to determine  fair value:  Duties of subject
corporation; powers of court; rights of dissenter

1.      If a demand for payment remains unsettled, the subject corporation shall
        commence  a  proceeding  within 60 days after  receiving  the demand and
        petition the court to determine the fair value of the shares and accrued
        interest.  If the subject  corporation  does not commence the proceeding
        within the  60-day  period,  it shall pay each  dissenter  whose  demand
        remains unsettled the amount demanded.

2.      A subject  corporation  shall  commence the  proceeding  in the district
        court of the  county  where its  registered  office is  located.  If the
        subject  corporation is a foreign entity without a resident agent in the
        state,  it  shall  commence  the  proceeding  in the  county  where  the
        registered  office  of the  domestic  corporation  merged  with or whose
        shares were acquired by the foreign entity was located.

3.      The  subject  corporation  shall  make all  dissenters,  whether  or not
        residents of Nevada,  whose  demands  remain  unsettled,  parties to the
        proceeding as in an action  against  their  shares.  All parties must be
        served  with a copy  of the  petition.  Nonresidents  may be  served  by
        registered or certified mail or by publication as provided by law.

4.      The jurisdiction of the court in which the proceeding is commenced under
        subsection 2 is plenary and exclusive. The court may appoint one or more
        persons as  appraisers  to receive  evidence and recommend a decision on
        the question of fair value.  The appraisers have the powers described in
        the order appointing them, or any amendment thereto.  The dissenters are
        entitled  to the  same  discovery  rights  as  parties  in  other  civil
        proceedings.

5.      Each  dissenter  who is made a party to the  proceeding is entitled to a
        judgment:

(a)     For the  amount,  if any,  by which  the court  finds the fair  value of
        his shares,  plus interest,  exceeds  the  amount  paid  by the  subject
        corporation; or

(b)     For the fair value, plus accrued interest,  of his  after-acquiredshares
        for which the subject  corporation  elected to withhold payment pursuant
        to NRS 92A.470.

(pound)92A.500.  Legal  proceeding to determine fair value:  Assessment of costs
and fees

1.      The court in a proceeding to determine fair value shall determine all of
        the costs of the proceeding,  including the reasonable  compensation and
        expenses  of any  appraisers  appointed  by the court.  The court  shall
        assess the costs against the subject corporation,  except that the court
        may assess costs against all or some of the  dissenters,  in amounts the
        court  finds  equitable,  to the extent the court  finds the  dissenters
        acted  arbitrarily,  vexatiously  or  not in  good  faith  in  demanding
        payment.

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2.      The court may also  assess  the fees and  expenses  of the  counsel  and
        experts  for  the  respective   parties,  in  amounts  the  court  finds
        equitable:

(a)     Against the subject  corporation  and in favor of all  dissenters if the
        court finds the subject  corporation did not  substantially  comply with
        the requirements of NRS 92A.300 to 92A.500, inclusive; or

(b)     Against  either  the  subject  corporation  or a  dissenter  in favor of
        anyother  party, if the court finds that the party against whom the fees
        and expenses are assessed acted arbitrarily,  vexatiously or not in good
        faith with  respect to the rights  provided  by NRS  92A.300 to 92A.500,
        inclusive.

3.      If the court finds that the services of counsel for any  dissenter  were
        of substantial benefit to other dissenters similarly situated,  and that
        the fees for those services  should not be assessed  against the subject
        corporation,  the court may award to those counsel reasonable fees to be
        paid out of the amounts awarded to the dissenters who were benefited.

4.      In a proceeding  commenced pursuant to NRS 92A.460, the court may assess
        the costs  against  the subject  corporation,  except that the court may
        assess costs  against all or some of the  dissenters  who are parties to
        the proceeding,  in amounts the court finds equitable, to the extent the
        court finds that such  parties did not act in good faith in  instituting
        the proceeding.

5.      This  section  does not  preclude  any party in a  proceeding  commenced
        pursuant to NRS  92A.460 or 92A.490  from  applying  the  provisions  of
        N.R.C.P. 68 or NRS 17.115.

 HISTORY: 1995, ch. 586

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APPENDIX C

Delaware Dissenters' Rights Statute
(Excerpted from the General Corporation Law of Delaware)

Section 262. Appraisal rights,

(a)     Any stockholder of a corporation of this State who holds shares of stock
        on the date of the making of a demand pursuant to subsection (d) of this
        section with respect to such shares,  who continuously holds such shares
        through  the  effective  date of the  merger or  consolidation,  who has
        otherwise  complied  with  subsection  (d) of this  section  and who has
        neither  voted in favor of the  merger or  consolidation  nor  consented
        thereto  in writing  pursuant  to  section  228 of this  title  shall be
        entitled to an  appraisal  by the Court of Chancery of the fair value of
        his shares of stock under the circumstances described in subsections (b)
        and (c) of this section. As used in this section, the word 'stockholder"
        means a holder  of  record  of stock in a stock  corporation  and also a
        member of record  of a  nonstock  corporation;  the  words  "stock"  and
        'share"  mean and include  what is  ordinarily  meant by those words and
        also  membership  or  membership  interest  of a  member  of a  nonstock
        corporation;  and the words 'depository receipt' mean a receipt or other
        instrument  issued by a  depository  representing  an interest in one or
        more shares,  or fractions  thereof,  solely of stock of a  corporation,
        which stock is deposited with the depository.

(b)     Appraisal  nights  shall be  available  for the  shares  of any class or
        series  of  stock  of  a   constituent   corporation   in  a  merger  or
        consolidation  to be effected  pursuant  to section  251,  section  252,
        section  254,  section 257,  section 258,  section 263 or section 264 of
        this title:

(1)     Provided,  however, that no appraisal rights under this section shall be
        available  for the shares of any class or series of stock,  which stock,
        or depository  receipts in respect thereof,  at the record date fixed to
        determine the stockholders  entitled to receive notice of and to vote at
        the  meeting  of  stockholders  to act upon the  agreement  of merger or
        consolidation,  were either (i) listed on a national securities exchange
        or designated as a national  market  system  security on an  interdealer
        quotation system by the National Association of Securities Dealers, Inc.
        or (ii) held of record by more than 2,000 holders;  and further provided
        that no appraisal  rights shall be available  for any shares of stock of
        the  constituent  corporation  surviving  a merger if the merger did not
        require for its approval the vote of the  stockholders  of the surviving
        corporation as provided in subsections (f) or (g) of section 251 of this
        title.

(2)     Notwithstanding paragraph (1) of this subsection, appraisal nights under
        this section shall be available for the shares of any class or series of
        stock of a constituent  corporation if the holders  thereof are required
        by the terms of an  agreement  of merger or  consolidation  pursuant  to
        sections  251,  252,  254, 257, 258, 263 and 264 of this title to accept
        for such stock anything except:

a.      Shares of stock of the  corporation  surviving  or  resulting  from such
        merger or consolidation or depository receipts in respect thereof:

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b.      Shares of stock of any other  corporation,  or  depository  receipts  in
        respect  thereof,  which shares of stock or  depository  receipts at the
        effective date of the merger or consolidation will be either listed on a
        national  securities  exchange or designated as a national market system
        security on an interdealer  quotation system by the National Association
        of  Securities  Dealers,  Inc.  or held of  record  by more  than  2,000
        holders;

c.      Cash in lieu of  fractional  shares or  fractional  depository  receipts
        described in the foregoing subparagraphs a. and b. of this paragraph; or

d.      Any combination of the shares of stock,  depository receipts and cash in
        lieu of fractional shares or fractional depository receipts described in
        the foregoing subparagraphs a., b. and c. of this paragraph.

(3)     In the event all of the stock of a subsidiary Delaware corporation party
        to a merger effected under section 253 of this title is not owned by the
        parent  corporation  immediately  prior to the merger,  appraisal rights
        shall  be  available   for  the  shares  of  the   subsidiary   Delaware
        corporation.

(c)     Any  corporation may provide in its  certificate of  incorporation  that
        appraisal rights under this section shall be available for the shares of
        any class or series  of its  stock as a result  of an  amendment  to its
        certificate of  incorporation,  any merger or consolidation in which the
        corporation  is  a  constituent  corporation  or  the  sale  of  all  or
        substantially  all of the assets of the corporation.  If the certificate
        of  incorporation  contains  such a provision,  the  procedures  of this
        section,  including  those set forth in subsections  (d) and (e) of this
        section, shall apply as nearly as is practicable.

(d)     Appraisal rights shall be perfected as follows:

(1)     If a proposed merger or  consolidation  for which  appraisal  rights are
        provided under tins section is to be submitted for approval at a meeting
        of  stockholders,  the  corporation,  not less than 20 days prior to the
        meeting,  shall  notify  each of its  stockholders  who was  such on the
        record date for such meeting with respect to shares for which  appraisal
        rights are  available  pursuant  to  subsection  (b) or (c) hereof  that
        appraisal  rights  are  available  for any or all of the  shares  of the
        constituent  corporations,  and shall  include in such  notice a copy of
        this section.  Each stockholder  electing to demand the appraisal of his
        shares shall deliver to the  corporation,  before the taking of the vote
        on the merger or  consolidation,  a written  demand for appraisal of his
        shares.  Such demand will be  sufficient  if it  reasonable  informs the
        corporation of the identity of the  stockholder and that the stockholder
        intends  thereby to demand the appraisal of his shares.  A proxy or vote
        against the merger or consolidation  shall not constitute such a demand.
        A  stockholder  electing  to take such  action  must do so by a separate
        written demand as herein provided.  Within 10 delves after the effective
        date of  such  merger  or  consolidation,  the  surviving  or  resulting
        corporation   shall  notify  each   stockholder   of  each   constituent
        corporation  who has complied with this  subsection and has not voted in
        favor of or  consented to the merger or  consolidation  of the date that
        the merger or consolidation has become effective; or

(2)     If the merger or consolidation  was approved  pursuant to section 228 or
        253 of this title, the surviving or resulting corporation, either before
        the  effective  date of the  merger or  consolidation  or within 10 days
        thereafter,  shall notify each of the stockholders entitled to appraisal
        rights of the  effective  date of the merger or  consolidation  and that
        appraisal  rights  are  available  for any or all of the  shares  of the
        constituent corporation, and shall include in such notice a copy of this
        section.  The notice  shall be sent by  certified  or  registered  mail,
        return receipt requested, addressed to the stockholder at his address as
        it appears on the records of the corporation.  Any stockholder  entitled
        to appraisal rights may, within 20 days after the date of mailing of the
        notice,  demand in writing from the  surviving or resulting  corporation
        the  appraisal  of his  shares.  Such demand  will be  sufficient  if it
        reasonably  informs the  corporation of the identity of the  stockholder
        and that the stockholder  intends thereby to demand the appraisal of his
        shares.

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<PAGE>

(e)     Within 120 days after the effective date of the merger or consolidation,
        the  surviving  or  resulting  corporation  or any  stockholder  who has
        complied  with  subsections  (a) and  (d)  hereof  and who is  otherwise
        entitled  to  appraisal  rights,  may file a  petition  in the  Court of
        Chancery demanding a determination of the value of the stock of all such
        stockholders.  Notwithstanding the foregoing, at any time within 60 days
        after the effective date of the merger or consolidation, any stockholder
        shall have the right to withdraw his demand for  appraisal and to accept
        the terms  offered  upon the  merger or  consolidation.  Within 120 days
        after the effective date of the merger or consolidation, any stockholder
        who has  complied  with  the  requirements  of  subsections  (a) and (d)
        hereof,  upon  written  request,  shall be entitled to receive  from the
        corporation  surviving the merger or resulting from the  consolidation a
        statement  setting  forth the  aggregate  number of shares  not voted in
        favor of the merger or  consolidation  and with respect to which demands
        for appraisal have been received and the aggregate  number of holders of
        such shares.  Such written  statement shall be mailed to the stockholder
        within  10 days  after  his  written  request  for such a  statement  is
        received by the  surviving  or resulting  corporation  or within 10 days
        after  expiration  of the period for  delivery of demands for  appraisal
        under subsection (d) hereof, whichever is later.

(f)     Upon the filing of any such petition by a stockholder, service of a copy
        thereof shall be made upon the surviving or resulting corporation, which
        shall  within  20 days  after  such  service  file in the  office of the
        Register  in Chancery in which the  petition  was filed a duly  verified
        list  containing  the names and addresses of all  stockholders  who have
        demanded  payment for their  shares and with whom  agreements  as to the
        value  of  their  shares  have  not been  reached  by the  surviving  or
        resulting  corporation.  If the petition shall be filed by the surviving
        or resulting  corporation,  the petition  shall be accompanied by such a
        duly  verified  list.  The  Register in  Chancery,  if so ordered by the
        Court,  shall give notice of the time and place fixed for the hearing of
        such  petition by  registered  or  certified  mail to the  surviving  or
        resulting  corporation and to the stockholders  shown on the list at the
        addresses  therein stated.  Such notice shall also be given by 1 or more
        publications  at  least  1 week  before  the  day of the  hearing,  in a
        newspaper of general  circulation  published in the City of  Wilmington,
        Delaware or such publication as the Court deems advisable.  The forms of
        the notices by mail and by  publication  shall be approved by the Court,
        and the  costs  thereof  shall be borne by the  surviving  or  resulting
        corporation.

(g)     At  the  hearing  on  such  petition,  the  Court  shall  determine  the
        stockholders  who have  complied  with this  section and who have become
        entitled to appraisal rights. The Court may require the stockholders who
        have  demanded  an  appraisal  for  their  shares  and  who  hold  stock
        represented by certificates to submit their certificates of stock to the
        Register  in  Chancery  for  notation  thereon  of the  pendency  of the
        appraisal proceedings;  and if any stockholder fails to comply with such
        direction, the Court may dismiss the proceedings as to such stockholder.

                                       54


<PAGE>

(h)     After determining the stockholders  entitled to an appraisal,  the Court
        shall appraise the shares, determining their fair value exclusive of any
        element of value arising from the  accomplishment  or expectation of the
        merger or consolidation,  together with a fair rate of interest, if any,
        to be  paid  upon  the  amount  determined  to be  the  fair  value.  In
        determining  such fair  value,  the Court  shall take into  account  all
        relevant  factors.  In determining the fair rate of interest,  the Court
        may consider all relevant factors,  including the rate of interest which
        the surviving or resulting  corporation  would have had to pay to borrow
        money during the pendency of the  proceeding.  Upon  application  by the
        surviving or resulting  corporation  or by any  stockholder  entitled to
        participate  in  the  appraisal  proceeding,   the  Court  may,  in  its
        discretion,  permit  discovery  or other  pretrial  proceedings  and may
        proceed to tn'al upon the appraisal prior to the final  determination of
        the stockholder  entitled to an appraisal.  Any  stockholder  whose name
        appears  on the list filed by the  surviving  or  resulting  corporation
        pursuant to  subsection  (f) of this section and who has  submitted  his
        certificates of stock to the Register in Chancery,  if such is required,
        may participate fully in all proceedings until it is finally  determined
        that he is not entitled to appraisal rights under this section.

(i)     The Court  shall  direct the  payment  of the fair value of the  shares,
        together  with   interest,   if  any,  by  the  surviving  or  resulting
        corporation to the stockholders entitled thereto. Interest may be simple
        or compound,  as the Court may direct.  Payment shall be so made to each
        such  stockholder,  in the  case  of  holders  of  uncertificated  stock
        forthwith, and the case of holders of shares represented by certificates
        upon the surrender to the corporation of the  certificates  representing
        such stock.  The Court's  decree may be enforced as other decrees in the
        Court of Chancery may be enforced,  whether such  surviving or resulting
        corporation be a corporation of this State or of any state.

(j)     The costs of the  proceeding  may be  determined  by the Court and taxed
        upon the parties as the Court deems equitable in the circumstances. Upon
        application  of a  stockholder,  the Court may order all or a portion of
        the  expenses  incurred  by  nv  stockholder  in  connection  "With  the
        appraisal   proceeding,   including,   without  limitation,   reasonable
        attorney's fees and the fees and expenses of experts,  to be charged pro
        rata against the value of all the shares entitled to an appraisal.

(k)     From and after the  effective  date of the merger or  consolidation,  no
        stockholder  who has  demanded  his  appraisal  rights  as  provided  in
        subsection  (d) of this section shall be entitled to vote such stock for
        any purpose or to receive payment of dividends or other distributions on
        the  stock  (except   dividends  or  other   distributions   payable  to
        stockholders of record at a date which is prior to the effective date of
        the merger or consolidation); provided, however, that if no petition for
        an appraisal  shall be filed within the time provided in subsection  (e)
        of this section,  or if such stockholder  shall deliver to the surviving
        or  resulting  corporation  a written  withdrawal  of his  demand for an
        appraisal  and an  acceptance  of the  merger or  consolidation,  either
        within 60 days after the effective  date of the merger or  consolidation
        as provided in  subsection  (e) of this section or  thereafter  with the
        written approval of the corporation,  then the right of such stockholder
        to an appraisal shall cease. Notwithstanding the foregoing, no appraisal
        proceeding  in the  Court  of  Chancery  shall  be  dismissed  as to any
        stockholder  without the approval of the Court, and such approval may be
        conditioned upon such terms as the Court deems just.

(l)     The shares of the surviving or resulting corporation to which the shares
        of such  objecting  stockholders  would  have  been  converted  had they
        assented  to the  merger  or  consolidation  shall  have the  status  of
        authorized   and   unissued   shares  of  the   surviving  or  resulting
        corporation.

   DCN: 96619965

LANGUAGE: ENGLISH

LOAD-DATE: September 23, 1996