================================================================================



                          AGREEMENT AND PLAN OF MERGER

                                  BY AND AMONG

                                 DYNAGEN, INC.,

                           DYNAGEN ACQUISITION CORP.,

                         SUPERIOR PHARMACEUTICAL COMPANY

                                       AND

               THE STOCKHOLDERS OF SUPERIOR PHARMACEUTICAL COMPANY


                            DATED AS OF MARCH 7, 1997




================================================================================







                          AGREEMENT AND PLAN OF MERGER

                                Table of Contents
<TABLE>
<CAPTION>

                                                                                                               Page
<S>                                                                                                             <C>

ARTICLE I - THE MERGER............................................................................................1

   SECTION 1.1.  The Merger.......................................................................................1
   SECTION 1.2.  Effective Time...................................................................................1
   SECTION 1.3.  Effect of the Merger.............................................................................2
   SECTION 1.4.  Certificate of Incorporation; By-Laws............................................................2
   SECTION 1.5.  Directors and Officers...........................................................................2
   SECTION 1.6.  (Intentionally Omitted)..........................................................................2
   SECTION 1.7.  Certain Other Agreements.........................................................................2
   SECTION 1.8.  Taking of Necessary Action; Further Action.......................................................2

ARTICLE II - CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES...................................................3

   SECTION 2.1.  Definitions......................................................................................3
   SECTION 2.2.  Merger Consideration; Conversion or Cancellation of Company Common Stock.........................3
   SECTION 2.3.  Exchange of Certificates.........................................................................3
   SECTION 2.4.  Tangible Net Worth Requirement...................................................................4
   SECTION 2.5.  Additional Consideration.........................................................................5
   SECTION 2.6.  Incentive Payments...............................................................................6
   SECTION 2.7.  No Fractional Shares.............................................................................6
   SECTION 2.8.  Checks or Certificates in Other Names............................................................7
   SECTION 2.9.  Distributions with Respect to Unexchanged Shares of Parent Common Stock..........................7
   SECTION 2.10. Stock Transfer Books.............................................................................7
   SECTION 2.11. Lost, Stolen or Destroyed Certificates...........................................................7

ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................................8

   SECTION 3.1.  Corporate Existence and Power....................................................................8
   SECTION 3.2.  Corporate Authorization..........................................................................8
   SECTION 3.3.  Governmental Authorization.......................................................................8
   SECTION 3.4.  Non-Contravention................................................................................8
   SECTION 3.5.  Capitalization...................................................................................9
   SECTION 3.6.  Subsidiaries.....................................................................................9
   SECTION 3.7.  Financial Statements.............................................................................9
   SECTION 3.8.  Absence of Undisclosed Liabilities..............................................................10
   SECTION 3.9.  Title and Condition of Assets...................................................................10
   SECTION 3.10. Real Property...................................................................................11
   SECTION 3.11. Condition of Tangible Assets....................................................................11
   SECTION 3.12. Subsequent Events...............................................................................11
   SECTION 3.13. Legal Proceedings...............................................................................13
   SECTION 3.14. Material Contracts..............................................................................13
   SECTION 3.15. Employees.......................................................................................14
   SECTION 3.16. Transactions with Affiliates....................................................................15
   SECTION 3.17. Insurance Coverage..............................................................................15
   SECTION 3.18. Compliance with Laws............................................................................15
   SECTION 3.19. Accounts Receivable; Inventories................................................................15


                                      -i-




   SECTION 3.20.  Finders' Fees..................................................................................16
   SECTION 3.21.  Employee Benefit Plans.........................................................................16
   SECTION 3.22.  Taxes..........................................................................................17
   SECTION 3.23.  Environmental Matters..........................................................................19
   SECTION 3.24.  Intellectual Property..........................................................................19
   SECTION 3.25.  (Intentionally Omitted)........................................................................19
   SECTION 3.26.  Certain FDA Matters............................................................................19
   SECTION 3.27.  Stockholder Representations....................................................................20
   SECTION 3.28.  Title..........................................................................................21

ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB....................................................21

   SECTION 4.1.  Corporate Existence and Power...................................................................21
   SECTION 4.2.  Corporate Authorization.........................................................................21
   SECTION 4.3.  Governmental Authorization......................................................................22
   SECTION 4.4.  Non-Contravention...............................................................................22
   SECTION 4.5.  Capitalization..................................................................................22
   SECTION 4.6.  Legal Proceedings...............................................................................23
   SECTION 4.7.  Compliance with Laws............................................................................23
   SECTION 4.8.  SEC Documents...................................................................................23
   SECTION 4.9.  Board Recommendation............................................................................24
   SECTION 4.10. Finders' Fees...................................................................................24
   SECTION 4.11  (Intentionally Omitted).........................................................................24
   SECTION 4.12. Interim Operations of Sub.......................................................................24

ARTICLE V - COVENANTS OF ALL PARTIES.............................................................................24

   SECTION 5.1.  Cooperation.....................................................................................24
   SECTION 5.2.  Other Required Information......................................................................24
   SECTION 5.3.  Confidentiality.................................................................................25
   SECTION 5.4.  Public Announcements............................................................................25
   SECTION 5.5.  Miscellaneous Agreements and Consents...........................................................25
   SECTION 5.6.  Board Representation............................................................................26
   SECTION 5.7.  Best Efforts and Further Assurances.............................................................26
   SECTION 5.8.  Operations Following Closing....................................................................26
   SECTION 5.9.  Guaranties of the Company.......................................................................26

ARTICLE VI - COVENANTS OF THE COMPANY............................................................................27

   SECTION 6.1.  Preservation of Business Organization...........................................................27
   SECTION 6.2.  Carry on in Regular Course......................................................................27
   SECTION 6.3.  Consents........................................................................................27
   SECTION 6.4.  Company Stockholders Meeting....................................................................28
   SECTION 6.5.  Access..........................................................................................28
   SECTION 6.6.  Documents and Information to be Furnished.......................................................28
   SECTION 6.7.  Notices of Certain Events.......................................................................28
   SECTION 6.8.  Accuracy of Representations and Warranties......................................................28
   SECTION 6.9.  No Solicitation.................................................................................28
   SECTION 6.10. Non-Disturbance Agreement.......................................................................29

ARTICLE VII - COVENANTS OF PARENT AND SUB........................................................................29


                                      -ii-




   SECTION 7.1.  Preservation of Business Organization...........................................................29
   SECTION 7.2.  Consents........................................................................................29
   SECTION 7.3.  Notices of Certain Events.......................................................................29
   SECTION 7.4.  Nasdaq SmallCap Market Listing..................................................................30
   SECTION 7.5.  Accuracy of Representations and Warranties......................................................30
   SECTION 7.6.  Documents and Information to be Furnished.......................................................30
   SECTION 7.7.  Indemnification.................................................................................30
   SECTION 7.8.  Non-Solicitation................................................................................30
   SECTION 7.9.  Compliance with Lease Terms.....................................................................30

ARTICLE VIII - CONDITIONS OF CLOSING.............................................................................30

   SECTION 8.1.  Conditions to Obligations of Parent, Sub, Stockholders and the Company..........................30
   SECTION 8.2.  Additional Conditions Applicable to Parent and Sub..............................................31
   SECTION 8.3.  Additional Conditions Applicable to the Stockholders and Company................................33

ARTICLE IX - TERMINATION.........................................................................................34

   SECTION 9.1.  Termination.....................................................................................34
   SECTION 9.2.  Certain Remedies Upon Termination...............................................................34
   SECTION 9.3.  Survival Upon Termination.......................................................................35
   SECTION 9.4.  Effect of Termination...........................................................................35

ARTICLE X -- SURVIVAL; INDEMNIFICATION...........................................................................35

   SECTION 10.1.  Survival.......................................................................................35
   SECTION 10.2.  Mutual Indemnification.........................................................................35
   SECTION 10.3.  Third Person Claims............................................................................36
   SECTION 10.4.  Limitations on Indemnification.................................................................37
   SECTION 10.5.  Method of Payment..............................................................................37
   SECTION 10.6.  Resolutions of Conflicts; Arbitration..........................................................37
   SECTION 10.7.  Remedies.......................................................................................38

ARTICLE XI - MISCELLANEOUS.......................................................................................39

   SECTION 11.1.  Specific Performance...........................................................................39
   SECTION 11.2.  Expenses.......................................................................................39
   SECTION 11.3.  Further Assurances.............................................................................39
   SECTION 11.4.  Parties in Interest............................................................................39
   SECTION 11.5.  Entire Agreement...............................................................................39
   SECTION 11.6   Amendment or Modification......................................................................40
   SECTION 11.7.  Waiver.........................................................................................40
   SECTION 11.8.  Assignability..................................................................................40
   SECTION 11.9.  Headings and Interpretation....................................................................40
   SECTION 11.10. Notices........................................................................................40
   SECTION 11.11. Law Governing..................................................................................41
   SECTION 11.12. Invalidity of Provisions.......................................................................41
   SECTION 11.13. Counterparts...................................................................................41

</TABLE>

                                     -iii-





EXHIBITS

EXHIBIT A       FORM OF SECURED PROMISSORY NOTE
EXHIBIT B       FORM OF PLEDGE AGREEMENT
EXHIBIT C       FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT D       FORM OF EMPLOYMENT AGREEMENT, ERIC HAGERSTRAND AND DENNIS SMITH
EXHIBIT E       FORM OF EMPLOYMENT AGREEMENT, THOMAS CANNING




                                      -iv-






                          AGREEMENT AND PLAN OF MERGER


         Agreement  and  Plan  of  Merger  dated  as  of  March  7,  1997  (this
"AGREEMENT")  by and among  DynaGen,  Inc., a Delaware  corporation  ("PARENT");
DynaGen  Acquisition  Corp., a Delaware  corporation and a direct,  wholly-owned
subsidiary  of  Parent  ("SUB");   Superior   Pharmaceutical  Company,  an  Ohio
corporation (the "COMPANY");  and Eric C.  Hagerstrand  ("HAGERSTRAND"),  Dennis
Smith ("SMITH") and Thomas Canning ("CANNING"), the stockholders of the Company.
Each of Hagerstrand,  Smith and Canning are hereinafter collectively referred to
as the "STOCKHOLDERS".

                                   WITNESSETH:

         WHEREAS,  the  respective  Boards of Directors  of Parent,  Sub and the
Company have each  determined  that it is advisable and in the best interests of
each company and its respective stockholders for Parent to enter into a business
combination  with the Company upon the terms and subject to the  conditions  set
forth herein; and

         WHEREAS,  in furtherance of such combination,  the respective Boards of
Directors  of Parent,  Sub and the Company  have each  approved  the merger (THE
"MERGER")  of Sub with and into the Company in  accordance  with the  applicable
provisions of the General  Corporation  Law of the State of Delaware  ("DELAWARE
LAW") and the Ohio  General  Corporation  Law  ("OHIO  LAW")  upon the terms and
conditions set forth herein.

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

                                    ARTICLE I

                                   THE MERGER

         SECTION 1.1. THE MERGER.  Upon the terms and subject to the  conditions
set forth in this  Agreement,  and in accordance with Delaware Law and Ohio Law,
at the Effective  Time (as defined in Section 1.2), Sub shall be merged with and
into the Company. As a result of the Merger, the separate corporate existence of
Sub shall cease and the Company shall  continue as the surviving  corporation of
the Merger (the "SURVIVING CORPORATION").  The name of the Surviving Corporation
shall be Superior Pharmaceutical Company.

         SECTION 1.2.  EFFECTIVE TIME.  Unless this Agreement shall have earlier
terminated and the transactions  herein  contemplated  shall have been abandoned
pursuant to Section 9.1 hereof,  the closing of the Merger (the  "CLOSING") will
take place as  promptly as  practicable  (and in any event  within two  business
days) after the  satisfaction  or, if permissible,  waiver of the conditions set
forth in Article  VIII hereof,  at the offices of Taft,  Stettinius & Hollister,
1800 Star Bank Center, 425 Walnut Street, Cincinnati, Ohio 45202, unless another
date, time or place is agreed to in writing by the parties hereto. The date upon
which the Closing  occurs is herein  referred to as the  "CLOSING  DATE." On the
Closing Date,  the parties  hereto shall cause the Merger to be  consummated  by
filing a certificate of merger (the  "CERTIFICATE OF MERGER") with the Secretary
of State of the State of  Delaware  and the  Secretary  of State of the State of
Ohio,  in such form as required by Delaware  Law and Ohio Law (the date and time
of such filings being the "EFFECTIVE TIME").






                     Agreement and Plan of Merger - Page 2


         SECTION 1.3. EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger  shall be as provided  in the  Certificate  of Merger and  applicable
provisions  of Ohio  Law.  At the  Effective  Time,  all the  property,  rights,
privileges,  powers  and  franchises  of Sub and the  Company  shall vest in the
Surviving  Corporation,  and all  debts,  liabilities  and duties of Sub and the
Company  shall  become  the  debts,  liabilities  and  duties  of the  Surviving
Corporation.

         SECTION 1.4.  CERTIFICATE OF INCORPORATION;  BY-LAWS.  Unless otherwise
determined by Parent prior to the Effective  Time,  at the Effective  Time,  the
Articles of  Incorporation  and the  Regulations  of the  Company,  as in effect
immediately  prior to the Effective Time, shall be the Articles of Incorporation
and the Regulations of the Surviving Corporation.

         SECTION  1.5.  DIRECTORS  AND  OFFICERS.  Effective  as of the Closing,
Parent shall  appoint a total of five (5) directors to the board of directors of
the Surviving Corporation to hold office for one year and until their successors
shall  have been duly  elected  and  qualified.  Two of the  directors  shall be
Hagerstrand and Smith.  Parent shall select the remaining  directors in its sole
discretion.  Effective  as of the Closing,  Hagerstrand  and Smith shall also be
appointed officers of the Surviving Corporation.

         SECTION 1.6. [INTENTIONALLY OMITTED.]

         SECTION 1.7. CERTAIN OTHER AGREEMENTS.  Concurrently with the execution
and delivery of this Agreement or prior to the Closing, the following agreements
(collectively,  the  "Operative  Documents")  shall be executed and delivered by
Stockholders and Parent, as the case may be:

                  (i)      a Secured  Promissory  Note in the form of  Exhibit A
                           (the  "NOTE"),  duly executed by Parent and delivered
                           to each of the Stockholders;

                  (ii)     a  Pledge  Agreement  in the form of  Exhibit  B (the
                           "PLEDGE  AGREEMENT"),  duly executed and delivered by
                           each of the Stockholders and Parent;

                  (iii)    a  Registration  Rights  Agreement  in  the  form  of
                           Exhibit C (the "REGISTRATION  RIGHTS AGREEMENT") duly
                           executed and  delivered  by each of the  Stockholders
                           and Parent;

                  (iv)     Employment  Agreements  with each of Hagerstrand  and
                           Smith  in the  form  of  Exhibit  D (the  "EMPLOYMENT
                           AGREEMENTS"),  duly  executed  and  delivered  by the
                           Company and each of Hagerstrand and Smith; and

                  (v)      an Employment  Agreement  with Canning in the form of
                           Exhibit E (the  "CANNING  AGREEMENT"),  duly executed
                           and delivered by the Company and Canning.

         SECTION  1.8.  TAKING OF  NECESSARY  ACTION;  FURTHER  ACTION.  Each of
Parent,  Sub and the Company will take all such  reasonable and lawful action as
may be necessary or  appropriate in order to effectuate the Merger in accordance
with this Agreement as promptly as possible. If, at any time after the Effective
Time,  any such  further  action  is  necessary  or  desirable  to carry out the
purposes  of this  Agreement  and to vest the  Surviving  Corporation  with full
right, title and possession to all assets, property, rights, privileges,  powers
and franchises of the Company and Sub, the officers and directors of the Company
and Sub immediately prior to the Effective Time are fully authorized in the name
of their  respective  corporations or otherwise to take, and will take, all such
lawful and necessary action.





                     Agreement and Plan of Merger - Page 3


                                   ARTICLE II

               CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES

         SECTION 2.1.  DEFINITIONS.

                  "COMPANY  COMMON  STOCK" shall mean the Common  Stock,  no par
value, of the Company.

                  "MERGER CONSIDERATION" shall mean (i) $6,500,000 in cash, (ii)
Notes in the aggregate principal amount of $5,000,000 and (iii) 1,666,667 shares
of Parent Common Stock.

                  "OUTSTANDING SHARES" shall mean the aggregate number of shares
of Company Common Stock outstanding immediately prior to the Effective Time.

                  "PARENT  COMMON STOCK" shall mean the Common Stock,  par value
$.01 per share, of Parent.

         SECTION  2.2.  MERGER  CONSIDERATION;  CONVERSION  OR  CANCELLATION  OF
COMPANY  COMMON STOCK.  (a) At the  Effective  Time, by virtue of the Merger and
without any action on the part of Parent, Sub, the Company or the holders of any
shares  of  Company  Common  Stock,  each of the  Outstanding  Shares  shall  be
converted   into  the  right  to  receive  a  pro  rata  amount  of  the  Merger
Consideration, based on each Stockholder's equity interest in the Company.

                  (b) If between the date of this  Agreement  and the  Effective
Time, the outstanding shares of Parent Common Stock shall have been changed into
a different number of shares or a different class by reason of a stock dividend,
subdivision,  reclassification,  recapitalization,  split-up or combination, the
number of shares of Parent  Common  Stock  included in the Merger  Consideration
shall be appropriately adjusted.

                  (c) At the Effective  Time, each share of Company Common Stock
issued and outstanding and owned by Parent or any of its subsidiaries (including
Sub) or held in the treasury of the Company  immediately  prior to the Effective
Time  shall,  by virtue of the Merger and  without any action on the part of the
holder thereof, cease to be outstanding, be canceled and retired without payment
of any consideration therefor and cease to exist.

                  (d) At the Effective Time, each share of Sub Common Stock, par
value $.01 per share, issued and outstanding  immediately prior to the Effective
Time shall  thereupon be converted into and become one (1) share of Common Stock
of the Surviving Corporation.

         SECTION 2.3. EXCHANGE OF CERTIFICATES. (a) Prior to the Effective Time,
Parent will appoint its transfer agent (the "Exchange  Agent") to effectuate the
delivery of the consideration  provided for in Section 2.2 to holders of Company
Common  Stock upon  surrender of  certificates  which  immediately  prior to the
Effective  Time  represented  all  Outstanding  Shares of Company  Common  Stock
("Certificates").






                     Agreement and Plan of Merger - Page 4


                  (b) Upon surrender of a Certificate to the Exchange Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor the
Merger  Consideration  provided for in Section  2.2(a),  and the  Certificate so
surrendered shall forthwith be canceled.

                  (c)  Subject  to  Sections   2.4,  2.5  and  2.6,  all  Merger
Consideration  issued upon  conversion of the shares of Company  Common Stock in
accordance  with the terms  hereof  shall be deemed to have been  issued in full
satisfaction of all rights pertaining to such shares of Company Common Stock.

                  (d) Neither Parent, Sub nor the Company shall be liable to any
holder of shares of Company Common Stock for any Merger Consideration  delivered
to a public official pursuant to any abandoned property, escheat or similar law.
From and after the Effective Time, and until  surrendered in accordance with the
provisions  of Section 2.3, each  Certificate  representing  Outstanding  Shares
shall  represent,  for all  purposes,  only the  right  to  receive  the  Merger
Consideration.

                  (e) Parent shall be entitled to deduct and  withhold  from the
consideration  otherwise payable to any holder of shares of Company Common Stock
such  amounts as Parent is required to deduct and  withhold  with respect to the
making of any such payment  under the Internal  Revenue Code of 1986, as amended
(the "CODE"), or any provision of state, local or foreign tax law. To the extent
that amounts are so withheld by Parent,  such withheld  amounts shall be treated
for all  purposes  of this  Agreement  as having  been paid to the holder of the
shares  of  Company  Common  Stock  in  respect  of  which  such  deduction  and
withholding was made by Parent.

          SECTION 2.4 TANGIBLE NET WORTH REQUIREMENT

                  (a) As of the Closing  Date,  the Company  shall have Tangible
Net  Worth (as  defined  in this  Section  2.4) of at least  $2,750,000.  If the
Tangible Net Worth of the Company as set forth on the balance sheet contained in
the Closing  Financial  Statements (as defined in this Section 2.4) is less than
$2,750,000  as of the Closing  Date,  Parent  shall  withhold the amount of such
shortfall,  pro rata from the Stockholders,  from the first payment of principal
under the Notes.  If the  Tangible  Net Worth of the Company as set forth on the
balance  sheet  contained in the Closing  Financial  Statements  is greater than
$2,750,000 as of the Closing Date,  Parent shall  distribute  the amount of such
excess,  pro rata among the  Stockholders,  at the time of the first  payment of
principal under the Notes.

                  (b) For purposes  hereof,  the term "Tangible Net Worth" shall
mean the net worth of the Company as determined in the audited balance sheets of
the Company as of December 31, 1996 (under the caption "Stockholders'  Equity"),
as adjusted for transactions  through the Closing Date, in all cases of the type
which would be set forth on a balance  sheet of the Company in  accordance  with
generally accepted accounting principles consistently applied.

                  (c) As promptly as  practicable  after the Closing Date but in
no event later than  forty-five (45) days  thereafter,  Parent shall oversee and
cause  to be  prepared  by the  Company's  auditors  (Grant  Thornton  LLP)  and
delivered to Parent and the Stockholders a reviewed balance sheet of the Company
as at the close of  business  on the Closing  Date and a reviewed  statement  of
earnings and cash flows from January 1, 1997 to the Closing Date,  together with
the  review  report of the  Company's  auditors,  addressed  to  Parent  and the
Stockholders,  stating that its review of the Closing  Financial  Statements was
made in  accordance  with  statements  on standards  for  accounting  and review
services issued by the American Institute of Certified Public  Accountants.  The
reviewed  Closing  Statements  will be presented in  accordance  with  generally
accepted accounting  principles and applied on a basis consistent with such U.S.
generally  








                     Agreement and Plan of Merger - Page 5


accepted accounting  principles and the financial  statements of the Company for
the fiscal  years  December  31, 1994,  1995 and 1996,  previously  furnished to
Parent. Such financial statements, as so reviewed, are referred to herein as the
"Closing  Financial  Statements." The cost of such review and the preparation of
the Closing  Financial  Statements by the Company's  auditors  shall be borne by
Parent.

                  (d) The  calculation  of  Tangible  Net Worth set forth in the
balance sheet contained in the Closing  Financial  Statements shall be deemed to
be  conclusive  and binding  upon the  parties,  unless at or prior to the fifth
business day following the  completion of the Closing  Financial  Statements and
their delivery to Parent and the Stockholders,  Parent or the Stockholders shall
give written notice to the other that it objects to the valuation,  inclusion or
omission of any item.  Such notice shall specify  Parent's or the  Stockholders'
objections  to the  computation  of  Tangible  Net  Worth,  citing  the items or
principles disputed. In the event that Parent and the Stockholders are unable to
mutually  agree upon the  valuation or amount of any disputed  item set forth in
such  notice  within  twenty  (20)  days  after  the  receipt   thereof  by  the
non-objecting   party,   the  parties  shall  submit  the  unresolved  items  to
arbitration by a firm of independent  public  accountants to be selected jointly
by Parent and the  Stockholders.  Such  accounting  firm shall be  requested  to
consider the respective positions of the parties and render an opinion as to the
valuation or amount of the disputed  items.  The  determination  of such jointly
selected  accounting  firm shall be  conclusive  and  binding  upon the  parties
hereto.  The cost of such  accounting  firm shall be paid by the  non-prevailing
party. A party shall be deemed to have prevailed with regard to disputed matters
if its last offer or demand  immediately  prior to submission to such accounting
firm is closer to the final  resolution  of the disputed  matters than the other
party's offer or demand.

         SECTION  2.5.ADDITIONAL  CONSIDERATION.  If at the  first  twelve-month
anniversary of the Closing, the average closing bid price of Parent Common Stock
for the ten (10) trading days immediately  preceding such anniversary (the "FAIR
MARKET  VALUE")  multiplied by the  aggregate  number of shares of Parent Common
Stock  delivered  at the  Closing  equals an amount  less than  $5,000,000  (the
"DEFICIENCY"),  then Parent,  within  forty-five  (45) days of such  anniversary
shall deliver to the  Stockholders,  pro rata based on the  Outstanding  Shares,
that number of shares of Parent Common Stock equal to the Deficiency  divided by
the Fair Market  Value,  if the Fair Market Value is a trading price equal to or
greater  than $1.50 per share of DynaGen  Common  Stock.  To the extent the Fair
Market Value is less than $1.50 per share of DynaGen Common Stock,  Parent shall
also pay to the  Stockholders  in immediately  available funds the extent of the
additional  Deficiency below the $1.50 trading price. By way of illustration and
example:  (a) if the  Fair  Market  Value as  determined  above  is  $2.00,  the
aggregate  number of shares of DynaGen  Common  Stock to be issued  shall be the
product  obtained by dividing the  Deficiency  of  $1,666,666  [$5,000,000  less
1,666,667 x $2.00 (FMV) = $5,000,000 less $3,333,334 = $1,666,666 of Deficiency]
by the Fair Market Value of $2.00 ($1,666,666  (184) $2.00 = 833,333  additional
shares of DynaGen Common Stock); under such example,  Parent shall issue 833,333
additional shares of DynaGen Common Stock.

         (b) If the Fair Market Value is under $1.50 per share of DynaGen Common
Stock,  Parent  will  then  issue  (in the  aggregate  to all  Stockholders)  an
additional 1,666,667 shares of DynaGen Common Stock. The remaining amount of the
Deficiency, calculated following the issuance of the additional 1,666,667 shares
of DynaGen Common Stock,  shall be an amount equal to $5,000,000  less 3,333,334
shares of  DynaGen  Common  Stock  multiplied  by the Fair  Market  Value.  Such
remaining   Deficiency  amount  shall  be  then  paid  to  the  Stockholders  in
immediately available funds.

         The shares of Parent  Common Stock which may be issued  pursuant to the
foregoing provisions are referred to as the "ADJUSTMENT SHARES."






                     Agreement and Plan of Merger - Page 6


         SECTION 2.6. INCENTIVE  PAYMENTS.  (a) Subject to Section 2.6(b) below,
if the Surviving Corporation achieves Net Sales (as defined below) for the years
ending  December 31,  1997,  1998 and 1999 equal to or greater than $32 million,
$35 million, and $39 million respectively (the "NET SALES TARGETS"), then Parent
or the Surviving  Corporation shall pay to the  Stockholders,  pro rata based on
the Outstanding  Shares,  an aggregate of $550,000 for each such year that these
Net Sales Targets have been achieved ("TARGET PAYMENTS"). Any such payment shall
be  paid  to  the  Stockholders  within  forty-five  (45)  days  after  Parent's
independent  accountants  have  issued  their  report  on the  Parent's  audited
financial  statements  for such  period.  "NET SALES" means the net sales of the
Surviving   Corporation   determined  in  accordance  with  generally   accepted
accounting  principles  ("GAAP")  applied  on  the  basis  consistent  with  the
Company's  audited  statements of earnings for the year ended  December 31, 1996
attached hereto as part of Schedule 3.7.

                  (b) Upon a Change in Control (as  hereinafter  defined)  which
occurs prior to December 31, 1999, the Target Payments and all unpaid  principal
and interest on the Notes shall, immediately prior to consummation of the Change
in Control,  accelerate and become fully vested and payable to the Stockholders;
provided,  however,  that the  Parent  or  Surviving  Corporation  shall  not be
required to pay any Target  Payment with respect to any year which was completed
prior to the  Change in  Control  and for which the Net Sales  Targets  were not
achieved.  For  purposes of the  foregoing,  "CHANGE IN CONTROL"  shall mean the
acquisition  of the  Parent  or the  Surviving  Corporation  by  (i)  the  sale,
issuance,  exchange or transfer,  in a single transaction or a series of related
transactions,  of greater than fifty  percent (50%) of the  outstanding  capital
stock of the Parent or the Surviving  Corporation to a third party in connection
with any business combination or other acquisition and in which such third party
has the right to elect,  and does  elect,  a majority of the  Parent's  Board of
Directors, (ii) the sale of all or substantially all of the assets of the Parent
or the Surviving Corporation to a third party, or (iii) a merger,  consolidation
or other  reorganization  involving the Parent and one or more other entities in
which the shares of the Parent's or Surviving Corporation's  outstanding capital
stock immediately prior to such transaction are converted into, exchanged for or
represent less than a majority of the voting power of the surviving or resulting
entity.

         (c) In the  event any of  Hagerstrand  or Smith is  terminated  without
"cause"  under  such  Stockholder's  Employment  Agreement  (as  defined  in the
Stockholder's Employment Agreement), then the Target Payments shall, immediately
upon such  termination,  accelerate  and become  fully vested and payable to all
Stockholders;  provided, however, that the Parent or Surviving Corporation shall
not be required  to pay any Target  Payment  with  respect to any year which was
completed  prior to the date of termination  and for which the Net Sales Targets
were not achieved.  In the event of any  termination of Hagerstrand or Smith for
cause (as defined in such Stockholder's Employment Agreement),  such Stockholder
shall  continue  to be  entitled  to  receive  his pro rata  share of any Target
Payment  otherwise  payable in the  absence of any such  termination;  provided,
however,  that the Parent or Surviving  Corporation shall not be required to pay
any Target  Payment  with respect to any year which was  completed  prior to the
date of  termination  and for which the Net Sales Targets were not achieved.  In
the event of any voluntary  termination of employment by any  Stockholder,  such
Stockholder shall not receive his pro rata share of any Target Payment otherwise
payable in the absence of any such termination.

         SECTION  2.7.  NO  FRACTIONAL  SHARES.  No  certificates  or scrip  for
fractional  shares of Parent Common Stock will be issued,  no Parent stock split
or  dividend  shall  relate  to any  fractional  share  interest,  and  no  such
fractional  share  interest  shall  entitle the owner  thereof to vote or to any
rights of or as a  stockholder  of  Parent.  In lieu of such  fractional  shares
(after  taking into account all shares of Company  Common Stock then held by any
such holder), any holder of Company Common Stock who







                     Agreement and Plan of Merger - Page 7


would  otherwise be entitled to a fraction of a share of Parent Common Stock (or
any other Person who is the record holder of  certificates  for shares of Parent
Common Stock into which such shares of Company Common Stock have been converted)
will, upon surrender of his Certificate or Certificates,  be paid the cash value
of such fraction (without interest and rounded to the nearest cent), which shall
be equal to the fraction multiplied by the closing bid price per share of Parent
Common Stock on the day preceding the Closing.

         SECTION  2.8.CHECKS OR CERTIFICATES IN OTHER NAMES. If any check or any
certificate  evidencing  shares of Parent Common Stock is to be issued in a name
other than that in which the  Certificate  surrendered in exchange  therefore is
registered, it shall be a condition of the issuance thereof that the Certificate
so  surrendered  shall be properly  endorsed  and  otherwise  in proper form for
transfer  and  that  the  Person  requesting  such  exchange  establish  to  the
satisfaction  of the Exchange  Agent or of Parent acting solely in its corporate
capacity,  as the case may be,  that any  transfer  or other  taxes  required by
reason of the issuance of a check or a  certificate  for shares of Parent Common
Stock in any name other than that of the  registered  holder of the  Certificate
surrendered or otherwise required has been paid or is not payable.

         SECTION 2.9. DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES OF PARENT
COMMON  STOCK.  No dividends or other  distributions  declared or made after the
Effective  Time with respect to Parent Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent  Common Stock  evidenced  thereby,  and no other
part of the Merger  Consideration  shall be paid to any such  holder,  until the
holder of such  Certificate  shall  surrender such  Certificate.  Subject to the
effect of applicable laws,  following  surrender of any such Certificate,  there
shall be paid to the  holder  of the  certificates  evidencing  whole  shares of
Parent Common Stock issued in exchange therefor, without interest, (i) promptly,
the amount of any cash  payable  with  respect to a  fractional  share of Parent
Common  Stock to which such holder is  entitled  pursuant to Section 2.7 and the
amount  of  dividends  or other  distributions  with a  record  date  after  the
Effective  Time  theretofore  paid with  respect to such whole  shares of Parent
Common Stock, and (ii) at the appropriate  payment date, the amount of dividends
or other distributions, with a record date after the Effective Time but prior to
surrender and a payment date occurring after surrender,  payable with respect to
such whole share of Parent Common Stock.

         SECTION 2.10.  STOCK TRANSFER  BOOKS.  At the Effective Time, the stock
transfer  books of the  Company  shall be closed  and there  shall be no further
registration  of transfers of shares of Company  Common Stock  thereafter on the
records of the Company or the Surviving Company. On or after the Effective Time,
any Certificates  presented to the Exchange Agent or Parent for any reason shall
be converted into the Merger Consideration.

         SECTION 2.11. LOST, STOLEN OR DESTROYED CERTIFICATES.  In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
make payment in exchange for such lost, stolen or destroyed  Certificates,  upon
the making of an affidavit of that fact by the holder thereof,  for the pro rata
amount of the Merger Consideration;  provided,  however, that Parent may, in its
discretion  and as a condition  precedent to the issuance  thereof,  require the
owner of any such lost, stolen or destroyed  Certificate or Certificates  having
an  aggregate  value of $100,000 or more to deliver a bond in such sum as Parent
may  reasonably  direct as indemnity  against any claim that may be made against
Parent or the Exchange  Agent with respect to the  Certificates  alleged to have
been lost, stolen or destroyed.






                     Agreement and Plan of Merger - Page 8


                                   ARTICLE III

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY


         With the exceptions of the  representations and warranties set forth in
Section 3.22(d) and (e), 3.27 and 3.28, which are expressly stated to be made in
the respective  Stockholder's  individual capacity only, each of the Company and
the Stockholders  hereby  severally,  but not jointly,  represent and warrant to
each of  Parent  and Sub that  except  as set  forth in the  written  disclosure
schedule previously  delivered by the Company to Parent (the "Company Disclosure
Schedule"):

         SECTION  3.1.   CORPORATE   EXISTENCE  AND  POWER.  The  Company  is  a
corporation duly  incorporated,  validly existing and in good standing under the
laws of the State of Ohio and has all requisite corporate power and authority to
own,  lease or operate its properties and assets and to carry on its business as
now  being  conducted,  and is  duly  qualified  to do  business  and is in good
standing in each  jurisdiction  where the  character  of the  property  owned or
leased by it or the nature of its activities makes such qualification necessary,
other than in such jurisdictions where the failure to be so qualified would not,
individually  or in the  aggregate,  have a Material  Adverse Effect (as defined
below) on the Company.  The Company has  heretofore  delivered to Parent and Sub
true  and  complete  copies  of  its  Articles  of  Incorporation  and  Code  of
Regulations, as amended to date and as currently in effect. For purposes of this
Agreement,  a "MATERIAL  ADVERSE  CHANGE" or a "MATERIAL  ADVERSE  EFFECT" shall
mean,  with respect to Parent on the one hand and the Company on the other hand,
the result of one or more events,  changes or effects which,  individually or in
the aggregate,  would have a material  adverse effect or impact on the business,
assets,  results of operations,  prospects or financial  condition of such party
and its  subsidiaries,  taken  as a  whole,  or is  reasonably  likely  to delay
substantially  or prevent  the  consummation  of the  transactions  contemplated
hereby.

         SECTION  3.2.  CORPORATE  AUTHORIZATION.  The  execution,  delivery and
performance by the Company of this Agreement and the consummation by the Company
of the Merger  are  within the  Company's  corporate  power and  authority  and,
subject  to the  approval  of the  Merger  by the  Company's  stockholders  (the
"COMPANY  STOCKHOLDER  APPROVAL"),  have been duly  authorized  by all necessary
corporate  action of the  Company.  This  Agreement  has been  duly  authorized,
executed  and  delivered  by the  Company  and  constitutes  a valid and binding
obligation of the Company,  enforceable  against the Company in accordance  with
its terms, subject to the Company Stockholder Approval.

         SECTION  3.3.  GOVERNMENTAL  AUTHORIZATION.  Except  as  set  forth  on
Schedule 3.3, the  execution,  delivery and  performance  by the Company of this
Agreement  and  the  consummation  of the  Merger  and  the  other  transactions
contemplated  by this Agreement by the Company,  do not and will not require any
consent,  approval or action by or in respect of, or any declaration,  filing or
registration   with,  any   governmental  or  regulatory   authority   (each,  a
"GOVERNMENTAL AUTHORITY"),  other than (i) routine filings with the Secretary of
State of Ohio and the Secretary of State of Delaware necessary to consummate the
Merger and (ii) such filings or  notifications  which would not prevent or delay
consummation  of any of the  transactions  contemplated  hereby in any  material
respect,  or otherwise prevent the Company from performing its obligations under
this Agreement in any material respect.

         SECTION 3.4. NON-CONTRAVENTION. The execution, delivery and performance
by the  Company of this  Agreement  and the  consummation  by the Company of the
Merger and other  transactions  contemplated by this Agreement,  do not and will
not,  with or  without  the  giving of  notice,  the lapse of time or both:  (i)
contravene or conflict with the Articles of Incorporation or Code of 







                     Agreement and Plan of Merger - Page 9


Regulations of the Company,  (ii) assuming  compliance with the matters referred
to in Section 3.3,  contravene or conflict with or constitute a violation of any
provision of any law, rule, regulation,  judgment,  injunction,  order or decree
currently in effect and binding upon or applicable to the Company,  (iii) except
as set forth on Schedule 3.4,  require any consent,  approval or other action by
any  individual,  corporation,  partnership,  joint venture,  limited  liability
company,  limited liability partnership,  association,  trust or other entity or
organization,  including a  Governmental  Authority (a "PERSON"),  contravene or
conflict with or constitute a violation of or a default  under,  or give rise to
any  right  of  termination,  cancellation  or  acceleration  of  any  right  or
obligation  of the  Company or to a loss of any  benefit to which the Company is
entitled  under any  material  provision of (A) any  agreement  binding upon the
Company, or (B) assuming compliance with the matters referred to in Section 3.3,
any material license,  franchise,  permit or other similar authorization held by
the Company,  or (iv) create or result in any  mortgage,  lien,  pledge,  claim,
charge,   security  interest,   easement,   assessment,   restrictive  covenant,
reservation, restriction or encumbrance of any kind ("LIEN") on any asset of the
Company, except in the case of clauses (ii), (iii) and (iv), for such matters as
would not have a Material Adverse Effect on the Company.

         SECTION  3.5.  CAPITALIZATION.  The  authorized  capital  stock  of the
Company  consists of (i) 750 shares of Company  Common Stock,  no par value,  of
which 200 shares are issued and outstanding as of the date hereof.  Schedule 3.5
sets  forth the name and  address of all  stockholders  of the  Company  and the
number of shares of Common Stock held by each  stockholder  of the Company.  All
issued and  outstanding  shares of  Company  Common  Stock are duly  authorized,
validly  issued,  fully  paid and  nonassessable,  and have not been  issued  in
violation of any preemptive, first refusal or other rights of any stockholder of
the Company or any other Person.  Except as set forth in Schedule 3.5, there are
no  outstanding  (i) shares of capital  stock or other voting  securities of the
Company,  (ii) securities of the Company  convertible  into or exchangeable  for
shares of capital stock or voting  securities  of the Company or (iii)  options,
warrants, exchange rights, subscription rights or other agreements,  commitments
or rights to purchase or  otherwise  acquire from the  Company,  or  agreements,
commitments or obligations of the Company to issue or sell, any capital stock or
securities  convertible  into or  exchangeable  for capital stock of the Company
(the items in clauses (i), (ii) and (iii) being referred to  collectively as the
"COMPANY SECURITIES"). Except as set forth in Schedule 3.5 or as contemplated by
this  Agreement,  there are no  outstanding  obligations of the Company to sell,
issue or deliver,  or to  repurchase,  redeem or otherwise  acquire,  any of the
Company  Securities.  Schedule  3.5  sets  forth a  complete  and  correct  list
(including  number of shares  and  exercise  price)  of all  Company  Securities
described in clauses (ii) and (iii) of the definition of Company Securities.

         SECTION 3.6.  SUBSIDIARIES.  The Company does not hold or own, directly
or indirectly, any equity or ownership interest in any corporation, association,
partnership, joint venture or other Person.

         SECTION 3.7. FINANCIAL STATEMENTS.  Attached hereto as Schedule 3.7 are
the following financial statements of the Company (collectively,  the "Financial
Statements"):

                  (i)      the audited balance sheet as of December 31, 1994 and
                           the related audited statements of earnings,  retained
                           earnings  and cash flows for the year ended  December
                           31, 1994 (together  with the notes  thereto,  audited
                           by, and accompanied by the report  thereon,  of Grant
                           Thornton LLP);

                  (ii)     the audited balance sheet as of December 31, 1995 and
                           the related audited  statement of earnings,  retained
                           earnings  and cash flows for the year ended 







                     Agreement and Plan of Merger - Page 10


                           December 31, 1995  (together  with the notes thereto,
                           audited by, and accompanied by the report thereon, of
                           Grant Thornton LLP); and

                  (iii)    the audited  balance  sheet as of  December  31, 1996
                           (the  "BALANCE   SHEET")  and  the  related   audited
                           statements  of earnings,  retained  earnings and cash
                           flows for the year ended  December 31, 1996 (together
                           with the notes thereto,  audited by, and  accompanied
                           by the report thereon, of Grant Thornton LLP).

Each of the  Financial  Statements  has been  prepared in  accordance  with GAAP
applied on a consistent basis and fairly presents the financial  position of the
Company as of its date or the  results  of  operations  or changes in  financial
position of the Company for the periods  then ended.  Except as may be set forth
in the  Financial  Statements,  all of the  revenues and expenses of the Company
reflected in the Financial  Statements  were derived or incurred in the ordinary
course of business of the Company.  The account records underlying the Financial
Statements  accurately  and  fairly  reflect,  in  reasonable  detail and in all
material respects,  the transactions of the Company,  and the Company's books of
account have been  maintained  in  accordance  with GAAP applied on a consistent
basis.  All accounts,  notes and other  receivables of the Company are valid and
enforceable,  are not subject to any valid  defense,  set off,  counterclaim  or
claim for returns or refunds,  and are  collectible  in full in accordance  with
their terms in the  ordinary  course of business of the  Company,  except to the
extent of any reserves  therefor  reflected on the Balance Sheet or taken in the
ordinary  course  of  business  consistent  with  past  practice  which,  in the
aggregate, are not materially adverse to the Company.

         SECTION 3.8. ABSENCE OF UNDISCLOSED LIABILITIES.  To the best knowledge
of  the  Company  and  the  Stockholders,  the  Company  has no  liabilities  or
obligations  which are, or reasonably could be expected to be, in the aggregate,
material to the business,  assets, results of operation,  prospects or financial
condition of the Company,  except those liabilities or obligations which are (a)
fully  reflected  or  adequately  reserved  against in the  Balance  Sheet,  (b)
disclosed  in this  Agreement or in Schedule 3.8 or (c) incurred in the ordinary
course of business  consistent  with past practice  since December 31, 1996 (the
"BALANCE  SHEET  DATE").  For  the  purposes  of  this  Agreement,   the  phrase
"LIABILITIES OR OBLIGATIONS" shall include any direct or indirect  indebtedness,
claim, loss, damage, deficiency (including deferred income tax and other net tax
deficiencies), cost, expense, obligation, guarantee, or responsibility,  whether
accrued, absolute or contingent,  fixed or unfixed,  liquidated or unliquidated,
secured or unsecured.

         SECTION 3.9.  TITLE AND CONDITION OF ASSETS.  The assets and properties
owned,  leased or subleased by the Company  constitute,  and on the Closing Date
will  constitute,  all of the assets and properties  used or held for use in the
conduct of the  business of the  Company,  and are, and on the Closing Date will
be,  generally  adequate  to conduct the  business  of the Company as  currently
conducted.  The  Company  has,  and on the  Closing  Date will have  record  and
marketable  title to, or valid  leasehold  interests  in,  all of its assets and
properties, whether real, personal or mixed, tangible or intangible, and whether
now owned,  leased or  subleased or acquired  after the date of this  Agreement,
including all assets and properties  identified on the Balance Sheet, except for
assets and properties  sold since the Balance Sheet Date in the ordinary  course
of business  consistent  with past practices and as permitted by this Agreement.
Except as disclosed in the Financial Statements or in Schedule 3.9, none of such
assets and  properties is, or on the Closing Date will be, subject to any Liens,
except for (i) Liens  incurred in the ordinary  course of business which are not
yet due and payable,  (ii) Liens which do not materially  detract from the value
of or interfere with the present use of the property  affected thereby and which
do not, individually or in the aggregate,  have a Material Adverse Effect on the
Company and (iii) liens  securing the  repayment  of the Credit  Facility of the
Company (the "PERMITTED LIENS").







                     Agreement and Plan of Merger - Page 11


         SECTION 3.10. REAL PROPERTY.  Set forth on Schedule 3.10 is an accurate
and complete list and summary  description of all real property  currently owned
or leased by the Company and,  except as set forth on Schedule 3.10, none of the
described  leases require any consent to the  transactions  contemplated by this
Agreement.  The Company has previously  delivered to Parent and Sub accurate and
complete copies of all leases listed and described on Schedule 3.10. The Company
has possession of each of the aforementioned properties and, to the knowledge of
the Company,  no event has occurred  which,  with the lapse of time or notice or
both,  could reasonably be expected to result in a material default under any of
the described leases. All rents or other material payment obligations which have
become due in  respect of each of such  leased  properties  have been paid,  the
Company has complied in all material  respects  with its  obligations  under the
said  leases and the Company  has not  received  any notice of any breach of its
obligations under any covenants,  agreements,  statutory requirements,  planning
consents,  by-laws,  orders and  regulations  affecting  any of such  properties
(whether  owned or leased),  their use and any  business  of the  Company  there
carried on.

         SECTION  3.11.  CONDITION  OF TANGIBLE  ASSETS.  Except as set forth on
Schedule 3.11, all material tangible  property,  including the real property and
structures  thereon, of the Company is in good operating  condition,  reasonable
wear  and tear  excepted,  and the  operation  and use of such  property  in the
business of the  Company  conforms in all  material  respects to all  applicable
laws, ordinances, regulations, permits, licenses and certificates.

         SECTION 3.12.  SUBSEQUENT EVENTS. Except as disclosed in Schedule 3.12,
since the Balance Sheet Date,  the business of the Company has been conducted in
the ordinary  course of business  consistent with past practices and the Company
has not:

                  (a) Incurred any Material Adverse Change.

                  (b) Amended or otherwise changed its Articles of Incorporation
or Code of  Regulations  in any manner  which  would  reasonably  be expected to
result in a Material Adverse Change.

                  (c)  Declared,  set  aside  or  paid  any  dividend  or  other
distribution  with  respect to any of the Company  Securities,  or  repurchased,
redeemed or otherwise  acquired any outstanding shares of capital stock or other
securities of, or other equity or ownership interests in, the Company (including
the Company Securities) or issued or sold any Company Securities.

                  (d)  Amended the term of any outstanding security of the 
Company.

                  (e) Incurred any indebtedness for borrowed money or guaranteed
any such  indebtedness of another Person,  issued or sold any debt securities or
warrants  or other  rights  to  acquire  any  debt  securities  of the  Company,
guaranteed any debt securities of another  Person,  entered into any "keep well"
or other  agreement to maintain  any  financial  statement  condition of another
Person or entered into any arrangement  having the economic effect of any of the
foregoing,  except for borrowings  under its existing  credit  facility with The
Huntington Bank for secured indebtedness,  whether a term loan or line of credit
(the  "CREDIT  FACILITY"),  the  endorsement  of checks in the normal  course of
business,  and the extension of credit to the Company by suppliers in the normal
course of business.

                  (f) Created or assumed or permitted to exist any Lien on any 
asset, other than Permitted Liens .

                  (g) Made any loan or capital contribution to or investment in
 any Person.





                     Agreement and Plan of Merger - Page 12


                  (h) Entered into any lease or acquisition of any capital asset
or made any other investment for aggregate consideration in excess of $10,000.

                  (i) Sold, leased,  pledged,  transferred or otherwise disposed
of any capital asset with an aggregate fair market value in excess of $10,000.

                  (j) Entered  into any  agreement or  transaction,  or made any
commitment,  relating to its assets or business  (including  the  acquisition or
disposition  of any assets or  business) or  relinquished  any contract or other
right, other than transactions,  commitments and relinquishments in the ordinary
course of business consistent with past practices and those contemplated by this
Agreement.

                  (k)  Changed  any  method  or  practice  of  financial  or tax
accounting or any method of maintaining books and records.

                  (l)  (i)  Granted  any  severance  or  termination  pay to any
director or officer of the Company or, except in the ordinary course of business
consistent with past practice, to any employee of the Company, (ii) entered into
any employment,  severance,  consulting,  deferred compensation or other similar
agreement  (or any amendment to any  agreement)  with any director or officer of
the Company or, except in the ordinary  course of business  consistent with past
practice,  with any employee of the Company,  (iii) changed any benefits payable
under existing  severance or termination pay policies or employment,  severance,
consulting or other similar agreements, or (iv) changed the compensation,  bonus
or other  benefits  payable to  directors,  officers or employees of the Company
other than periodic increases in the ordinary course of business consistent with
past practice.

                  (m) Paid, discharged,  settled or satisfied any claim, Lien or
liability,  other than those (i) which were reflected or reserved against in the
Balance  Sheet and in the  ordinary  course  of  business  consistent  with past
practice,  or (ii)  which  were  incurred  since the  Balance  Sheet Date in the
ordinary course of business consistent with past practice.

                  (n) Written down the value of any  inventory or written off as
uncollectible  any notes,  accounts or other  receivables or any portion thereof
other than in the ordinary course of business consistent with past practice.

                  (o) Entered into any  transaction  with any  affiliates of the
Company,  other than in the ordinary  course of, and pursuant to the  reasonable
requirements  of, the  business  of the Company and upon terms that were no less
favorable to the Company than it could have obtained in a comparable transaction
with a Person who was not an affiliate.

                  (p) Entered into any  agreement,  undertaking or commitment to
do any of the foregoing.

                  (q) Suffered any damage,  destruction  or other  casualty loss
not covered by insurance  affecting  the business or assets of the Company which
has had or would  reasonably be expected to result in or have a Material Adverse
Effect on the Company.

         SECTION 3.13. LEGAL PROCEEDINGS.  Except as set forth on Schedule 3.13,
there  is no  action,  suit,  litigation,  governmental  investigation  or other
proceeding  pending or, to the knowledge of the Company,  threatened  against or
relating  to  the  Company  or  any  of its  properties  or  businesses,  or the







                     Agreement and Plan of Merger - Page 13


transactions contemplated by the Agreement which could reasonably be expected to
have a Material  Adverse  Effect and, to the knowledge of the Company,  no basis
for any such action exists.

         SECTION 3.14. MATERIAL CONTRACTS. (a) Except for agreements, contracts,
plans,  leases,  arrangements  or commitments  disclosed in Schedule 3.14 or any
other Schedule to this Agreement, the Company is not a party to or subject to:

                  (i)      any collective bargaining agreement;

                  (ii)     any  agreements  that  contain  any  material  unpaid
                           severance liabilities or obligations;

                  (iii)    any   bonus,   deferred    compensation,    incentive
                           compensation,  pension,  profit-sharing or retirement
                           plans,  or  any  other  employee   benefit  plans  or
                           arrangements;

                  (iv)     any employment or consulting  agreement,  contract or
                           commitment with an employee or individual  consultant
                           or  salesperson  or  consulting  or sales  agreement,
                           contract   or   commitment   with  a  firm  or  other
                           organization  not  terminable  by the  Company  on 90
                           days' notice without  liability  except to the extent
                           applicable  local law and/or  general  principles  of
                           wrongful  termination  law may  limit  the  Company's
                           ability to terminate  such  agreements,  contracts or
                           commitments;

                  (v)      agreement or plan, including, without limitation, any
                           stock option plan, stock  appreciation  right plan or
                           stock  purchase  plan,  any of the  benefits of which
                           will be  increased,  or the  vesting of  benefits  of
                           which will be  accelerated,  by the occurrence of any
                           of the transactions contemplated by this Agreement or
                           the  value of any of the  benefits  of which  will be
                           calculated  on the  basis of any of the  transactions
                           contemplated by this Agreement;

                  (vi)     any fidelity or surety bond or completion bond;

                  (vii)    any lease of  personal  property  having a  remaining
                           value individually in excess of $10,000;

                  (viii)   any agreement of indemnification or guaranty;

                  (ix)     any agreement,  contract or commitment containing any
                           covenant  limiting  the  freedom  of the  Company  to
                           engage in any line of  business  or compete  with any
                           Person;

                  (x)      any  agreement,  contract or  commitment  relating to
                           capital expenditures and involving future obligations
                           in excess of $10,000;

                  (xi)     any agreement, contract or commitment relating to the
                           disposition  or  acquisition  of  assets  not  in the
                           ordinary course of business or any ownership interest
                           in any  corporation,  partnership,  joint  venture or
                           other business enterprise;






                     Agreement and Plan of Merger - Page 14


                  (xii)    any   mortgages,    indentures,   loans   or   credit
                           agreements,  security  agreements or other agreements
                           or instruments  relating to the borrowing of money or
                           extension of credit, including guaranties referred to
                           in clause (viii) hereof;

                  (xiii)   any  purchase  order or contract  for the purchase of
                           raw  materials  or  acquisition  of assets  involving
                           $50,000 or more;

                  (xiv)    any   distribution,   joint   marketing,   supply  or
                           development agreement; or

                  (xv)     any other  agreement,  contract or  commitment  which
                           involves  payment  by the  Company of $25,000 or more
                           and is not cancelable  without  penalty within thirty
                           (30) days.

        The Company has not breached, or received in writing any claim or threat
that it has breached,  any of the terms or  conditions  of any other  agreement,
contract  or  commitment  in such a manner as would  permit  any other  party to
cancel or  terminate  the same or would  permit any other party to seek  damages
from the Company that could  reasonably  be expected to have a Material  Adverse
Effect. Each agreement, contract or commitment set forth in any of the Company's
schedules is in full force and effect and, except as otherwise disclosed in such
schedule,  to the  knowledge  of the  Company  and the  Stockholders,  each such
agreement,  contract  or  commitment  is not  subject  to any  material  default
thereunder by any party obligated to the Company pursuant  thereto.  The Company
has  obtained,  or will  obtain  prior  to the  Effective  Time,  all  necessary
consents,  waivers and approvals as are required in  connection  with the Merger
under any of the Company's material agreements.

                (b) There is no contract, agreement, commitment or obligation to
which the Company is a party or is bound that,  at the time it was entered  into
or made was, or is currently,  known or expected by the Company to result in any
material loss to the Company upon completion or performance thereof, or any bid,
offer or proposal which, if accepted would result in such a contract, agreement,
commitment or obligation.

                (c) Except as disclosed in Schedule  3.14,  the Company is not a
party to any agreement with any of its securityholders or optionholders,  or any
affiliate thereof, nor, to the knowledge of the Company,  without inquiry by the
Company,  is any  securityholder  or  optionholder of the Company a party to any
agreement with any other such  securityholder  or  optionholder  relating to the
Company or any of its securities.

        SECTION  3.15.  EMPLOYEES.  Schedule 3.15 sets forth a true and complete
list of (a) the names,  titles,  annual  salaries and other  compensation of all
employees  of the  Company  (the  "EMPLOYEES")  and the  location  at which such
Employees  regularly perform services for the Company and (b) the wage rates for
non-salaried  Employees  of the Company  (by  classification).  Any  agreements,
commitments or  understandings  between the Company and any Employee  concerning
such Employee's future salary, compensation or terms of employment are described
in Schedule 3.15.  Except as set forth on Schedule 3.15,  none of such Employees
has  indicated  to the  Company  that he or she intends to resign or retire as a
result of the  transactions  contemplated  by this  Agreement or otherwise.  The
Company  is  in  compliance  with  all  currently   applicable  laws  respecting
employment  and  employment  practices,  terms and  conditions of employment and
wages and hours,  and is not engaged in any unfair  labor  practice,  failure to
comply with which or engagement in which,  as the case may be, has had, or could
reasonably be expected to have, a Material Adverse Effect on the Company.  There
is no unfair  labor  practice 







                     Agreement and Plan of Merger - Page 15


complaint  pending or, to the knowledge of the Company,  threatened  against the
Company before the National Labor Relations Board.

         SECTION  3.16.  TRANSACTIONS  WITH  AFFILIATES.  Except as set forth in
Schedule 3.16,  since January 1, 1993,  there have been and are no agreements or
other  continuing  transactions  between the Company,  on the one hand,  and any
affiliate of the Company,  any of the stockholders of the Company, any affiliate
of any  stockholder  of the  Company,  or any  member of any such  stockholder's
family,  on the  other  hand.  Except  as set  forth in  Schedule  3.16,  to the
knowledge of the  Company,  none of the officers or directors of the Company (a)
has any material  direct or indirect  interest in any entity which does business
with the Company or any  property,  asset or right which is used by the Company;
or (b) has any contractual relationship with the Company.

         SECTION 3.17. INSURANCE COVERAGE. The Company has furnished to Parent a
list of, and true and complete  copies of, all  insurance  policies and fidelity
bonds  covering  the  assets,  business,  equipment,   properties,   operations,
employees,  officers and directors of the Company  (including without limitation
any policies pertaining to product liability).  There is no claim by the Company
pending  under  any of such  policies  or bonds as to  which  coverage  has been
questioned,  denied or disputed by the  underwriters  of such policies or bonds.
All premiums  payable  under all such  policies and bonds have been paid and the
Company is otherwise in compliance  in all material  respects with the terms and
conditions of all such policies and bonds.  Such policies of insurance and bonds
(or other policies and bonds providing substantially similar insurance coverage)
have been in effect since January 1, 1995 and remain in full force and effect.

         SECTION 3.18.  COMPLIANCE WITH LAWS. The Company is not in violation of
any applicable provisions of any law, statute, ordinance,  regulation, judgment,
order, injunction,  permit, license, certificate or other authorization,  or its
governing  instruments,  except for  violations  that have not had and could not
reasonably be expected to have a Material Adverse Effect on the Company.

         SECTION 3.19. ACCOUNTS RECEIVABLE; INVENTORIES. (a) Except as set forth
on Schedule  3.19(a),  the accounts  receivable  of the Company,  including  the
accounts  receivable  reflected  on the Balance  Sheet and  accounts  receivable
acquired by the Company between the Balance Sheet Date and the Closing Date, are
valid and existing and represent bona fide claims against  debtors for sales and
other  charges,  and were  acquired in the ordinary  course of business and have
been  collected,  or are  expected to be  collected  in the  ordinary  course of
business within a period not exceeding 90 days from invoice date, in full and in
accordance  with their  terms at their  recorded  amounts,  subject  only to the
reserve for  receivables  as  reflected  on the face of the Balance  Sheet,  and
(subject to the aforesaid reserves) are subject to no refunds, discounts (except
for normal cash and immaterial trade discounts) or other adjustments and, to the
best knowledge of the Company, to no defenses, rights of setoff,  counterclaims,
encumbrances or conditions  affecting any thereof.  The accounts receivable have
been  accrued on the books of the  Company in the  ordinary  course of  business
consistent  with past practices in accordance with GAAP, and the amount reserved
for doubtful  accounts and allowances  disclosed in the Balance Sheet or accrued
on such books is consistent with past practices.

              (b) Schedule  3.19(b) sets forth a detailed  list of all inventory
of the Company.  All of the inventories  that are reflected in Schedule  3.19(b)
(i) were purchased or acquired in the ordinary course of the Company's  business
and in a manner consistent with the regular inventory  practices of the Company,
(ii) have been or will be used or sold in the ordinary course of business and in
a manner  consistent  with its  regular  inventory  practices,  (iii) are not in
excess  of the  Company's  reasonable  requirements,  and  (iv)  are or  will be
reflected  in  the  Company's  financial  statements  in  accordance  with  GAAP
consistently






                     Agreement and Plan of Merger - Page 16


applied.  Since the Balance  Sheet Date,  due provision was made on the books of
the Company in the ordinary course of business consistent with past practices to
provide for all slow-moving, obsolete or unusable inventories to their estimated
useful or scrap values and such  inventory  reserves are adequate to provide for
such slow-moving, obsolete or unusable inventory and inventory shrinkage.

              (c) Except as disclosed on Schedule  3.19(b),  the inventory  does
not consist of any damaged or obsolete inventory or inventory not fit for use in
the ordinary course of business,  including without limitation (i) raw materials
or  work-in-process  that are not used in current  formulations of the Company's
products,  (ii) any raw  materials  or  work-in-process  that,  according to the
production schedule of the business, would not reasonably be expected to be used
within six months  after the Closing  Date or, if  earlier,  the end of such raw
material's  or  work-in-process'  useful  life,  (iii) any  finished  goods that
represent  products  returned prior to November 1, 1996, (iv) any finished goods
for which no sales are forecast in the  Company's  sales plan,  (v) any finished
goods not salable in the ordinary course of business at the Company's  published
prices without  additional  manufacturing  or packaging  cost, (vi) any finished
goods  that are  "remnant",  and (vii)  any raw  materials,  work-in-process  or
finished  goods that, as a result of any judgment,  order,  decree or settlement
relating to product  labeling or otherwise,  may not be used in current  product
formulation.  All  inventory has been stored,  shipped and otherwise  handled in
compliance in all material  respects with all applicable  federal and state law,
rules and regulations  (including,  without  limitation those promulgated by the
U.S. Food and Drug Administration ("FDA")).

         SECTION 3.20.  FINDERS' FEES.  There is no investment  banker,  broker,
finder or other  intermediary  that has been retained by or is authorized to act
on behalf of the Company who might be  entitled  to any fee or  commission  from
Parent or any of its subsidiaries or the Company upon consummation of the Merger
and the transactions contemplated by the Operative Documents.

         SECTION 3.21.  EMPLOYEE BENEFIT PLANS.  Except as set forth in Schedule
3.21 neither the Company nor any Person that  together with the Company would be
treated  as a  single  employer  under  Section  414  of  the  Code  (an  "ERISA
AFFILIATE") has  established or maintains or is obligated to make  contributions
to or under or otherwise participate in (a) any bonus or other type of incentive
compensation  plan,  program,   agreement,   policy,  commitment,   contract  or
arrangement  (whether or not set forth in a written document),  (b) any pension,
profit-sharing,  retirement or other plan,  program or  arrangement,  or (c) any
other employee  benefit plan,  fund or program,  including,  but not limited to,
those described in Section 3(3) of the Employment Retirement Income Security Act
of 1974,  as  amended  ("ERISA").  All such  plans  (individually,  a "PLAN" and
collectively,  the "PLANS") have been operated and  administered in all material
respects in accordance with, as applicable, ERISA, and the Code, and the related
rules and  regulations  adopted by those federal  agencies  responsible  for the
administration  of  such  laws.  No act or  failure  to act by the  Company  has
resulted in, nor does the Company have  knowledge of a "prohibited  transaction"
(as  defined  in ERISA)  with  respect  to the Plans  that is not  subject  to a
statutory or regulatory  exception.  No "reportable event" (as defined in ERISA)
has  occurred  with  respect to any of the Plans which is subject to Title IV of
ERISA.  At the Effective  Time,  the fair market value of the assets of any Plan
which is  subject  to Title IV of ERISA will  exceed  the  present  value of all
benefits  accrued under such Title IV Plan,  determined  on a termination  basis
using assumptions  established by the Pension Benefit Guaranty  Commission as in
effect on that date. Neither the Company nor any ERISA Affiliate has (i) engaged
in, or is a successor or parent  corporation to an entity that has engaged in, a
transaction  described in Section 4069 of ERISA, or (ii) incurred, or reasonably
expects to incur prior to the Effective  Time,  any liability  under Title IV of
ERISA  arising in  connection  with the  termination  of, or complete or partial
withdrawal  from,  any Plan covered or  previously  covered by Title IV or ERISA
that  could  become a  liability  of the  Parent  or Sub or any of  their  ERISA
Affiliates after the 






                     Agreement and Plan of Merger - Page 17


Effective  Time. The Company has not previously  made, is not currently  making,
and is not obligated in any way to make, any contributions to any multi-employer
plan within the meaning of the  Multi-Employer  Pension Plan  Amendments  Act of
1980.

         SECTION  3.22.  TAXES.  (a) The term  "TAXES" as used herein  means all
federal,  state,  local,  foreign  and other net  income,  gross  income,  gross
receipts, sales, use, ad valorem, transfer,  franchise, profits, license, lease,
service,  service use,  withholding,  payroll,  employment,  excise,  severance,
stamp, occupation, premium, property, windfall profits, customs duties, or other
taxes,  fees,  assessments or other charges of any kind whatever,  together with
any interest and any  penalties,  additions  to tax or  additional  amounts with
respect  thereto.  The  term  "Returns"  as  used  herein,  means  all  returns,
declarations,  reports,  statements and other documents  required to be filed in
respect of Taxes,  and  "RETURN"  means any one of the  foregoing  returns.  All
citations to the Code, or the Treasury regulations promulgated thereunder, shall
include any amendments or any substitute or successor provisions thereto.

                  (b) The Company has filed all Returns required to be filed and
has  paid  all  Taxes  owed  (whether  or not  shown  as due on  such  Returns),
including,  without  limitation,  all Taxes  which the Company is  obligated  to
withhold for amounts owing to employees,  creditors and third parties.  All such
Returns  were  complete  and correct in all  material  respects.  All Taxes with
respect to which the Company has become  obligated  have been paid and  adequate
reserves  have  been  established  for all  Taxes  accrued  but not yet  payable
(including  any  Taxes  arising  out of the  transactions  contemplated  by this
Agreement). To the knowledge of the Company and the Stockholders, no issues have
been raised (and are  currently  pending) by any taxing  authority in connection
with any of the Returns.  No waivers of statutes of  limitation  with respect to
any of the  Returns  have  been  given by or  requested  from the  Company.  All
deficiencies  asserted or assessments made as a result of any examinations  have
been  fully  paid,  or are  fully  reflected  as a  liability  in the  financial
statements  of the  Company,  or are being  contested  and an  adequate  reserve
therefor has been established and is fully reflected in the financial statements
of the Company.  There are no liens for Taxes (other than for current  Taxes not
yet due and payable) upon the assets of the Company. All material elections with
respect to Taxes affecting the Company,  as of the date hereof, are set forth in
the financial statements of the Company, or are annexed hereto in Schedule 3.22.
The Company is not a party to any agreement,  contract, arrangement or plan that
has resulted or would result, separately or in the aggregate, (i) in the payment
of any "excess  parachute  payments"  within the meaning of Section  280G of the
Code (without  regard to the exception in Sections  280G(b)(4) and 280G(b)(5) of
the Code) or (ii) in any payment  which would not be deductible  under  Sections
162 and 404 of the Code. The Company has not agreed to make any adjustment under
Section 481(a) of the Code (or any similar  provision of law or  regulations) by
reason of a change in accounting  method or otherwise,  and the Company will not
be  required to make any such  adjustment  as a result of the  transactions  set
forth in this  Agreement.  The Company does not have and has not had a permanent
establishment in any foreign country, as defined in any applicable Tax treaty or
convention  between the United States of America and such foreign  country.  The
Company  does not own any  interest in any entity  which is  characterized  as a
partnership  for  federal,  state,  local,  foreign or other Tax  purposes.  The
Company  is not  and  has  not  been  a  United  States  real  property  holding
corporation during the applicable period specified in Section  897(c)(1)(A)(ii).
The  Company  has not  participated  in or  cooperated  with  any  international
boycott, within the meaning of Section 999 of the Code.

                  (c) Set forth on  Schedule  3.22 is a  complete  and  accurate
description  of the Company's (i) tax basis in its assets,  (ii) tax  elections,
(iii) methods of accounting, and (iv) agreements with respect to Taxes.





                     Agreement and Plan of Merger - Page 18


                  (d) The Company has never filed a consent  pursuant to Section
341(f) of the Code,  relating to collapsible  corporations.  The Company and its
stockholders  made (i) a valid  election  for the Company to be treated as an "S
corporation",  as that term is defined in Section 1361(a) of the Code and (ii) a
similar  valid  election  under  the  laws of the  State  of  Ohio or any  other
applicable governmental  authority,  and all of such elections will be in effect
at the Effective  Time. An election  under Section  1362(a) of the Code (and any
similar  election  under the laws of the  State of Ohio or any other  applicable
Governmental  Authority) has been in effect with respect to the Company (and any
predecessor  corporation)  for each of its taxable  years (within the meaning of
Section 1374(c) of the Code).  Schedule 3.22 lists each such election and a true
copy of each such  election  is attached  thereto;  there are no grounds for the
revocation   of  any  such  election  and  no  such  election  will  be  revoked
retroactively or otherwise except at the Effective Time by reason of the Merger.
The Company has not taken any action that would  cause,  or would result in, the
termination of the S corporation  status of the Company,  other than pursuant to
this Agreement.  Each of the Stockholders hereby individually represents that he
has not taken any action that has caused,  would cause,  or would result in, the
termination of the S Corporation status of the Company prior to the date hereof,
other than pursuant to this  Agreement.  Neither the Company nor any predecessor
has  ever  (i)  been a  party  to  any  merger  or  consolidation  nor  acquired
substantially  all  of the  assets  of  any  Person,  (ii)  adopted  a  plan  of
liquidation,  or (iii) made any election  under  Section 936 or 992 of the Code.
There will be no tax imposed by Section  1374 of the Code and any  corresponding
provisions of the laws of the State of Ohio or any other applicable Governmental
Authority in connection with the Merger.

                  (e) Each of the Stockholders  hereby  individually  represents
that he has timely filed all Returns  with respect to Taxes  required to be paid
by a Stockholder  attributable to items of income, gain, deductions,  losses and
credits of the Company, and has timely paid all such Taxes (whether or not shown
on such  Returns);  there  has not been any  audit of any  Return  filed by such
Stockholder,  or to the Company's  knowledge,  any previous  shareholder  of the
Company,  with  respect  to, or which may  relate  to,  items of  income,  gain,
deduction,  loss or credit of the Company; no such audit of any such Stockholder
is in progress and such  Stockholder  has not been notified by any  Governmental
Authority that any such audit is contemplated or pending.

                  (f)  In the  event  that  it is  determined,  either  (i) by a
finding  or order  in  connection  with  any  government  or  judicial  audit or
proceeding to which the Company or the  Stockholders  are a party or (ii) by the
Company's  independent  accountants,  that the Company's S election  pursuant to
Section 1362 of the Code (or any  corresponding  election  under the laws of the
State of Ohio or any other applicable governmental authority) was not validly in
effect for any  period  after  such  election  was  purportedly  made,  then the
Stockholders  of the Company shall  promptly  remit to the Company in cash,  any
foreign,  federal,  state and/or local Tax liability  (including  any penalties,
additions to Tax or interest  assessed  with respect  thereto) of the Company in
connection  with any Taxes  which may be imposed  on the  Company as a result of
such  invalid  election.  To the extent  Tax  deductions  or losses,  which were
originally  treated as Company "S" corporation Tax deductions or losses,  become
Company Tax deductions or losses as a result of such invalid election and, under
the applicable Tax laws, are disallowed to the Company (but otherwise would have
been  allowed if the Company  had never made an S  election),  the  Stockholders
agree to pay to the Company in cash an amount  equal to the  difference  between
the  Company's  actual Tax  liability  and the  Company's Tax liability had such
amounts not been so disallowed. Such payment shall be made within 15 days of the
date  the  Company's  Tax  liability  has  been   determined  by  the  Company's
accountants.

         SECTION 3.23.  ENVIRONMENTAL  MATTERS.  Except as set forth in Schedule
3.23, and except in all cases as, in the  aggregate,  have not had and could not
reasonably be expected to have a Material









                     Agreement and Plan of Merger - Page 19


Adverse Effect,  the Company:  (i) has obtained all approvals which are required
to be obtained under all applicable federal, state, foreign or local laws or any
regulation, code, plan, order, decree, judgment, notice or demand letter issued,
entered,  promulgated or approved thereunder relating to pollution or protection
of the environment,  including laws relating to emissions,  discharges, releases
or  threatened  releases of  pollutants,  contaminants,  or  hazardous  or toxic
materials or wastes into ambient air,  surface water,  ground water,  or land or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage,  disposal,  transport,  or  handling  of  pollutants,  contaminants  or
hazardous   or  toxic   materials  or  wastes  by  the  Company  or  its  agents
("ENVIRONMENTAL LAWS"); (ii) are in compliance in all material respects with all
terms and conditions of such required  approvals,  and also are in compliance in
all material  respects  with all other  limitations,  restrictions,  conditions,
standards,  prohibitions,  requirements,  obligations,  schedules and timetables
contained in applicable  Environmental Laws; (iii) as of the date hereof, is not
aware  of nor  has  received  notice  of  any  past  or  present  violations  of
Environmental Laws or any event, condition,  circumstance,  activity,  practice,
incident, action or plan which is reasonably likely to interfere with or prevent
continued compliance with or which would give rise to any material common law or
statutory liability,  or otherwise form the basis of any material claim, action,
suit  or  proceeding,  against  the  Company  based  on or  resulting  from  the
manufacture,   processing,  distribution,  use,  treatment,  storage,  disposal,
transport  or  handling,  or  the  emission,   discharge  or  release  into  the
environment,  of any  pollutant,  contaminant  or hazardous or toxic material or
waste; and (iv) has taken all actions  necessary under applicable  Environmental
Laws to register  any  products or materials  required to be  registered  by the
Company (or any of their respective agents) thereunder.

      SECTION 3.24. INTELLECTUAL PROPERTY.  Schedule 3.24 lists all Intellectual
Property Rights owned and/or used by the Company in the conduct of its business.
The  Company  owns  or has a  valid  license  to use  from  third  parties  such
Intellectual  Property  Rights.  To the best  knowledge  of the  Company and the
Stockholders,  the  Company's  Intellectual  Property  Rights  do  not  violate,
infringe upon or misappropriate  the Intellectual  Property Rights of any Person
where such  violation  or  infringement  would have a Material  Adverse  Effect.
"INTELLECTUAL  PROPERTY RIGHT" means any trademark,  service mark,  registration
thereof or application for registration therefor, trade name, invention, patent,
patent application,  trade secret, know-how, copyright,  copyright registration,
application for copyright registration, or any other similar type of proprietary
intellectual  property  right,  in each case which is owned or  licensed  by the
Company and used or held for use by the Company.

      SECTION 3.25  (INTENTIONALLY OMITTED).

      SECTION 3.26. CERTAIN FDA MATTERS. (a) The Company has not made any untrue
statement  of a material  fact or  fraudulent  statement  to the FDA,  failed to
disclose a fact  required to be disclosed to FDA, or committed any act, made any
statement, or failed to make any statement that could provide a basis for FDA to
invoke its policy  respecting  "Fraud,  Untrue  Statements  of  Material  Facts,
Bribery, and Illegal Gratuities," set forth in 56 Fed.
Reg 46191 (September 10, 1991).

              (b)  The   Company  has   provided  to  Parent  for  review,   all
correspondence to or from FDA, the U.S. Drug Enforcement  Agency ("DEA") and any
other state agency regulating the affairs of the Company (the "LOCAL AGENCIES"),
minutes of meetings with FDA, the DEA and any Local Agency, any existing written
reports of phone conversations, visits or other contracts with FDA, the DEA, and
any Local Agency, notices of inspectional observations, establishment inspection
reports, and all other documents in its possession concerning  communications to
or from FDA, the DEA and any Local Agency,  (including  without  limitation  any
Form 482's issued by the FDA),  or prepared by FDA, the DEA and any Local Agency
which  bear in any way on the  Company's  compliance  with  FDA,  DEA and  state
regulatory requirements.






                     Agreement and Plan of Merger - Page 20


              (c) The Company has provided to Parent for review of all documents
reflecting conclusions, opinions, or suggestions of Company officers, employees,
or agents, in-house or outside attorneys, or outside consultants,  which bear in
any  way  on the  Company's  compliance  with  FDA,  DEA  and  state  regulatory
requirements.

              (d) The Company is not aware of any information, whether or not in
written form, that it has not provided in the course of the review,  which bears
in any way on the  Company's  compliance  with  FDA,  DEA and  state  regulatory
requirements.

      SECTION 3.27.  STOCKHOLDER  REPRESENTATIONS.  (a) Each Stockholder  hereby
individually  represents  and  warrants  that  (i) it is his  original,  present
intention  to acquire the Parent  Common  Stock for his own account and that the
Parent  Common Stock is being and will be acquired for the purpose of investment
and not with a view to  distribution or resale except as provided  herein;  (ii)
due to his business and financial  experience  and his status as an  "accredited
investor"  under  Regulation D of the  Securities  Act of 1933,  as amended (the
"SECURITIES ACT"), each Stockholder has the ability to protect his own interests
in  connection  with  the  transactions  contemplated  hereby  and is  generally
familiar with the business,  operations  and financial  condition of the Parent,
and (iii) he  understands  that the shares of Parent Common Stock being acquired
hereunder may only be resold in  compliance  with  applicable  federal and state
securities laws, including Rule 144 of the Securities Act.

              (b) Each  Stockholder  individually  understands  and agrees that,
until  registered  under  the  Securities  Act or  transferred  pursuant  to the
provisions of Rule 144 as promulgated by the Securities and Exchange Commission,
the Parent Common Stock issuable pursuant to this Agreement shall bear a legend,
prominently stamped or printed thereon, reading substantially as follows:

         "The  securities   represented  by  this   certificate  have  not  been
         registered  under the Securities  Act of 1933 and any applicable  state
         securities laws. These securities have been acquired for investment and
         not with a view to distribution or resale.  These securities may not be
         offered for sale,  sold,  delivered  after sale or  transferred  in the
         absence of an effective registration statement covering such securities
         under  the  Act  and  any  applicable  state  securities  laws,  or the
         availability,  in the opinion of counsel reasonably satisfactory to the
         Company, of an exemption from registration thereunder."

              (c) Each Stockholder,  in his individual capacity,  has had access
to  information  relative to the Parent's  business,  financial  condition,  and
results of operations  prior to the purchase of the Parent  Common  Stock.  Each
Stockholder,  in his individual  capacity,  has such knowledge and experience in
financial and business  matters that he is capable of evaluating  the merits and
risks of the acquisition of the Parent Common Stock.  Each  Stockholder,  in his
individual  capacity,  can bear the economic  risks of this  investment  and can
afford a complete loss of this investment.

              (d) Each  Stockholder,  in his  individual  capacity,  understands
that: the Parent Common Stock has not been  registered  under the Securities Act
and applicable state securities  laws, and,  therefore,  cannot be resold unless
they are  subsequently  registered under the Securities Act and applicable state
securities laws or unless an exemption from such registration is available;  and
no state  or  governmental  authority  has made  any  finding  or  determination
relating to the fairness of the terms of the  acquisition  of the Parent  Common
Stock. Each  Stockholder,  in his individual  capacity,  agrees not to resell or
otherwise  dispose of all or any part of the Parent  Common  Stock  purchased by
such Stockholder, except as permitted by law, including, without limitation, any
regulations  under the Securities Act and applicable







                     Agreement and Plan of Merger - Page 21


state  securities  laws.  Each  Stockholder,  in his individual  capacity,  also
understands  that any routine  sales of the Parent Common Stock in reliance upon
Rule 144 under the Act, if the  provisions  of Rule 144 should then be available
as to the  Parent  Common  Stock,  can be made  only  after the  holding  period
specified in Rule 144, in limited amounts,  and in accordance with all the terms
and conditions of Rule 144.

              (e) Each Stockholder hereby  individually  represents and warrants
that he has no present need for liquidity in connection with the purchase of the
Parent  Common  Stock.  The  acquisition  of the  Parent  Common  Stock  by each
Stockholder  is  consistent  with  the  general  investment  objectives  of each
Stockholder.  Each Stockholder hereby individually  represents and warrants that
he  understands  that the purchase of the Parent  Common  Stock  involves a high
degree of risk.

      SECTION  3.28.  TITLE.   Except  as  set  forth  on  Schedule  3.28,  each
Stockholder  hereby  individually  represents  and warrants  that he is the sole
record and beneficial owner of, and has good, valid and marketable title to, the
shares of Company  Common Stock to be sold by him, free and clear of any and all
liens, security interests, pledges,  encumbrances,  claims, equities, defects in
title, rights and other restrictions of any nature on transfer or voting held by
any third party  (collectively  "ENCUMBRANCES").  Each Stockholder  individually
represents and warrants that the performance by him of his obligations hereunder
will be effective to transfer good,  valid and marketable title to the shares to
be sold by him hereunder, free and clear of any and all Encumbrances, other than
those that may be imposed under federal or state  securities  laws, and that the
consummation of the transactions herein contemplated will not result in a breach
or default  of the terms and  provisions  of any  stockholder  agreement,  stock
pledge,  guaranty,  loan or other agreement to which the Stockholder is a party,
or  of  any  order,  rule  or  regulation  of  any  court,  regulation  body  or
administrative agency applicable to the Stockholder.


                                   ARTICLE IV

                REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB

         Parent and Sub hereby  jointly and  severally  represent and warrant to
the Company as follows:

         SECTION 4.1. CORPORATE EXISTENCE AND POWER. Each of Parent and Sub is a
corporation duly  incorporated,  validly existing and in good standing under the
laws of the State of Delaware and has all requisite  power and authority to own,
lease or operate its  properties  and assets and to carry on its business as now
being conducted.  Each of Parent and Sub is duly qualified to do business and is
in good standing in each jurisdiction  where the character of the property owned
or  leased  by it or the  nature  of its  activities  makes  such  qualification
necessary, other than in such jurisdictions where the failure to be so qualified
would not,  individually or in the aggregate,  have a Material Adverse Effect on
Parent. Each of Parent and Sub has heretofore made available to the Company true
and complete copies its Certificate of Incorporation and By-Laws,  as amended to
date and as currently in effect.

         SECTION  4.2.  CORPORATE  AUTHORIZATION.  The  execution,  delivery and
performance by Parent and Sub of this  Agreement and the Operative  Documents to
which they are parties and the  consummation by Parent and Sub of the Merger and
the  other  transactions  contemplated  by  this  Agreement  and  the  Operative
Documents  are within the  corporate  power and  authority of Parent and Sub and
have  been  duly  authorized  by all  necessary  corporate  action.  Each of the
Operative Documents has been duly authorized,  executed and delivered by each of
Parent  and Sub (to the  extent a party  thereto) 






                     Agreement and Plan of Merger - Page 22


and  constitutes a valid and binding  obligation of Parent and Sub,  enforceable
against each of Parent and Sub in accordance with its terms.

         SECTION 4.3. GOVERNMENTAL  AUTHORIZATION.  The execution,  delivery and
performance by Parent and Sub of this Agreement and the Operative  Documents (to
the extent a party thereto) and the consummation by Parent and Sub of the Merger
and  the  other  transactions  contemplated  by  this  Agreement  and  Operative
Documents, do not and will not require any consent,  approval or action by or in
respect  of, or any  declaration,  filing or  registration  with a  Governmental
Authority,  other  than  (i)  routine  filings  with the  Secretary  of State of
Delaware and the Secretary of State of Ohio  necessary to consummate the Merger,
(ii)  compliance  with the applicable  requirements  of the Securities  Act, the
Securities Exchange Act of 1934 (the "EXCHANGE ACT") and any applicable Blue Sky
Laws in connection with the offering,  sale and delivery of the shares of Parent
Common Stock to be issued in the Merger and filings with the NASD and the Nasdaq
SmallCap  Market in connection with listing the shares of Parent Common Stock to
be issued in the Merger on the Nasdaq SmallCap Market, and (iii) such filings or
notifications  which  would  not  prevent  or delay  consummation  of any of the
transactions  contemplated  hereby in any material respect, or otherwise prevent
Parent or Sub from  performing  its  obligations  under  this  Agreement  in any
material respect.

         SECTION 4.4. NON-CONTRAVENTION. The execution, delivery and performance
by Parent and Sub of this Agreement and the Operative Documents (to the extent a
party  thereto) and the  consummation  by Parent and Sub of the Merger and other
transactions  contemplated by this Agreement and the Operative  Documents do not
and will not,  with or without the giving of notice,  the lapse of time or both:
(i) contravene or conflict with the Certificate of  Incorporation  or By-Laws of
Parent or any of its  subsidiaries,  (ii) assuming  compliance  with the matters
referred  to in  Section  4.3,  contravene  or  conflict  with or  constitute  a
violation of any provision of any law, rule, regulation,  judgment,  injunction,
order or decree  currently in effect and binding upon or applicable to Parent or
any of its subsidiaries or any of their respective properties, (iii) require any
consent,  approval or other action by any Person, contravene or conflict with or
constitute  a  violation  of or a  default  under,  or give rise to any right of
termination,  cancellation  or acceleration of any right or obligation of Parent
or any of its subsidiaries or to a loss of any benefit to which Parent or any of
its subsidiaries is entitled,  under any material provision of (A) any agreement
binding upon Parent or any of its subsidiaries,  or (B) assuming compliance with
the matters referred to in Section 4.3, any license,  franchise, permit or other
similar authorization held by Parent or any of its subsidiaries,  or (iv) create
or result in any Lien on any asset of Parent or any of its subsidiaries,  except
in the case of clauses (ii),  (iii) and (iv), for such matters as would not have
a Material Adverse Effect on Parent.

         SECTION  4.5.  CAPITALIZATION.  (a) (i) As of  January  31,  1997,  the
authorized  capital  stock of  Parent  consisted  of (i)  10,000,000  shares  of
preferred stock, par value $.01 per share, although no shares of preferred stock
were issued and  outstanding  or held in the treasury of Parent as of such date,
and (ii)  75,000,000  shares of Common Stock,  of which  30,112,706  shares were
issued and outstanding and no shares were held in the treasury of Parent.  As of
January 31, 1997,  there were  reserved  for  issuance  pursuant to (a) Parent's
various stock plans and option  agreements  (the "PARENT PLANS") an aggregate of
up to 4,102,800  shares of Common  Stock,  (b) warrants  issued by Parent for an
aggregate of up to 2,178,588  shares of Common  Stock,  and (c) a note issued by
Parent which is convertible into  approximately  465,000 shares of Common Stock.
Except as provided in the immediately preceding sentence of this Section 4.5, as
of January 31, 1997, there were no outstanding options, warrants, calls, rights,
commitments or agreements to which Parent is a party or by which Parent is bound
obligating  Parent  to (x)  issue,  deliver  or sell,  or  cause  to be  issued,
delivered or sold,  additional  shares of capital 






                     Agreement and Plan of Merger - Page 23


stock of Parent or (y)  grant,  extend or enter into any such  option,  warrant,
call, right, commitment or agreement.

                  (b) All  outstanding  shares of Parent  Common  Stock are duly
authorized, validly issued, fully paid and nonassessable, and are not subject to
preemptive  rights. The shares of Parent Common Stock to be issued and exchanged
for shares of Company  Common  Stock in the Merger  pursuant  to this  Agreement
will, at the Effective Time, be (i) duly authorized,  validly issued, fully paid
and  nonassessable  and will  not be  subject  to  preemptive  rights,  and (ii)
authorized for listing on the Nasdaq SmallCap Market.

                  (c) The authorized capital stock of Sub consists of 100 shares
of Common  Stock,  par value $.01 per share,  all of which shares are issued and
outstanding and owned of record by Parent.  All issued and outstanding shares of
Common Stock,  par value $.01 per share, of Sub are validly  issued,  fully paid
and  nonassessable,  and have not been issued in  violation  of any  preemptive,
first  refusal or other  subscription  rights of any  stockholder  of Sub or any
other Person.

         SECTION 4.6. LEGAL PROCEEDINGS. There is no action, suit, investigation
or other proceeding  pending or, to the knowledge of Parent,  threatened against
or  relating  to Parent or any of its  subsidiaries  or any of their  respective
properties or businesses,  or the  transactions  contemplated  by this Agreement
which may have a Material  Adverse Effect,  and, to the knowledge of the Parent,
no basis for any action exists.

         SECTION 4.7.  COMPLIANCE  WITH LAWS.  Except as disclosed in the Parent
SEC Documents (as defined in Section 4.8 below),  neither  Parent nor any of its
subsidiaries  has  violated,  or  is  in  violation  of,  any  applicable  laws,
regulations  and  ordinances  relating to its  business and  operations,  or any
judgment,  order or injunction,  and to Parent's knowledge,  there is no pending
inspection  or  investigation  relating  to any  violation  thereof,  except for
violations  which have not had, and (if  determined  adversely to Parent and its
subsidiaries)  could not reasonably be expected to have,  individually or in the
aggregate, a Material Adverse Effect on Parent.

         SECTION 4.8. SEC DOCUMENTS.  Parent has made available to the Company a
true and complete copy of the following Parent documents:  (i) its annual report
on Form 10-K for the fiscal year ended June 30, 1996; (ii) its quarterly  report
on Form 10-Q for the fiscal quarter ended September 30, 1996;  (iii) its current
reports on Form 8-K dated (i) August 19, 1996, as amended,  and (ii) January 15,
1997;  (iv) the proxy  statement  dated  December 27, 1996; and (v) each report,
schedule,  registration  statement and definitive proxy filed by Parent with the
U.S.  Securities  and  Exchange  Commission  (the "SEC") since June 30, 1996 and
publicly  available prior to the Effective Date  (collectively,  the "PARENT SEC
DOCUMENTS"),  which are all of the documents (other than  preliminary  material)
that  Parent was  required  to file with the SEC since  such  date.  As of their
respective  dates,  the Parent SEC Documents  complied in all material  respects
with the  requirements  of the Securities  Act, or the Exchange Act, as the case
may be, and the rules and  regulations of the SEC thereunder  applicable to such
Parent  SEC  Documents,  and  none of the  Parent  SEC  Documents,  as of  their
respective  dates,  contained any untrue statement of a material fact or omitted
to state a material fact required to be stated  therein or necessary to make the
statements  therein,  in light of the circumstances  under which they were made,
not  misleading.  None of Parent's  subsidiaries  is required to file any forms,
reports or other documents with the SEC. The consolidated  financial  statements
of Parent and its subsidiaries  included in the Parent SEC Documents complied as
to form in all material respects with the published rules and regulations of the
SEC with respect  thereto,  were prepared in  accordance  with GAAP applied on a
consistent  basis during the periods involved (except as may be indicated in the
notes thereto or, in the case of the unaudited 








                     Agreement and Plan of Merger - Page 24


statements,  as permitted by Rule 10-01 of Regulation S-X of the SEC) and fairly
present in accordance with applicable requirements of GAAP (subject, in the case
of the unaudited statements, to normal recurring adjustments, none of which will
be material) the consolidated  financial position of Parent and its subsidiaries
as of their respective dates and the consolidated  results of operations and the
consolidated cash flows of Parent and its subsidiaries for the periods presented
therein.

         SECTION 4.9.  BOARD  RECOMMENDATION.  The Board of Directors of each of
Parent and Sub,  at a meeting  duly  called  and held,  has by the vote of those
directors   present   determined  that  this  Agreement  and  the   transactions
contemplated  hereby,  including  the Merger,  the execution and delivery of the
Operative  Documents  and the other  agreements  and  arrangements  contemplated
hereby and thereby, taken together, are fair to and in the best interests of the
stockholders of Parent and Sub and has approved the same.

         SECTION  4.10.  FINDERS'  FEES.  Except  for fees  payable by Parent to
Mazier  Partners,  there  is no  investment  banker,  broker,  finder  or  other
intermediary  that has been  retained  by or is  authorized  to act on behalf of
Parent or Sub who might be entitled to any fee or commission  from the Parent or
any  of  its  subsidiaries  upon  consummation  of  the  Merger  and  the  other
transactions contemplated by the Operative Documents.

         SECTION 4.11.  (INTENTIONALLY OMITTED).

         SECTION 4.12.  INTERIM OPERATIONS OF SUB. Sub was formed solely for the
purpose of engaging in the transactions  contemplated hereby and has not engaged
in any business  activities or conducted any operations other than in connection
with the transactions contemplated hereby.


                                    ARTICLE V

                            COVENANTS OF ALL PARTIES

         Each of the parties  hereto hereby  covenants and agrees with the other
parties as follows:

         SECTION  5.1.  COOPERATION.  It shall  cooperate  fully  with the other
parties hereto in furnishing any information or performing any action reasonably
requested  by any such party,  which  information  or action is necessary to the
speedy and successful  consummation  of the  transactions  contemplated  by this
Agreement or is necessary, appropriate or desirable for the respective corporate
purposes of Parent, Sub and the Company.

         SECTION 5.2. OTHER REQUIRED INFORMATION.  It shall furnish to the other
parties hereto any  application  or statement,  and all  information  concerning
itself and its  Affiliates as is required to be set forth in any  application or
statement to be filed with any  Governmental  Authority in  connection  with the
transactions contemplated by this Agreement.  "AFFILIATE" means, with respect to
a specified Person, any Person that directly,  or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with, the
Person specified.

         SECTION  5.3.  CONFIDENTIALITY.  (a) All  information  furnished by one
party (the  "DISCLOSING  PARTY") to any other party (the  "RECEIVING  PARTY") in
connection with this Agreement and the Operative  Documents and the transactions
contemplated  hereby and thereby  shall be kept  confidential  by the  receiving
party (and shall be used by it only in  connection  with this  Agreement and the
transactions  







                     Agreement and Plan of Merger - Page 25


contemplated  hereby),  except to the  extent  that such  information  (i) is or
becomes  generally  available  to the public  other than as a direct or indirect
result of disclosure by the receiving party (or any of its directors,  officers,
employees,  agents, advisors or Affiliates (the "AGENTS")),  (ii) was within the
possession of the receiving  party prior to its being furnished to the receiving
party by or on behalf of the disclosing  party (provided that the source of such
information is not known by the receiving party to be bound by a confidentiality
agreement  with  or  other  contractual,   legal  or  fiduciary   obligation  of
confidentiality to the disclosing party or any other Person with respect to such
information),   (iii)   becomes   available   to  the   receiving   party  on  a
non-confidential  basis from a source other than the disclosing  party or any of
its Agents  (provided that such source is not known by the receiving party to be
bound  by a  confidentiality  agreement  with or  other  contractual,  legal  or
fiduciary  obligation of  confidentiality  to the disclosing  party or any other
Person with respect to such information), or (iv) is required to be disclosed in
any document filed with the SEC or any other Governmental Authority.

                  (b) If the  receiving  party or any of its Agents is requested
or required (by oral  questions,  interrogatories,  requests for  information or
documents in legal proceedings,  subpoena,  civil investigative  demand or other
similar process) to disclose any of the confidential information,  the receiving
party  shall use all  reasonable  efforts to provide the  disclosing  party with
prompt  written notice of any such request or requirement so that the disclosing
party may seek a  protective  order or other  appropriate  remedy  and/or  waive
compliance  with the  provisions  of this  Agreement.  If, in the  absence  of a
protective  order or other  remedy or the receipt of a waiver by the  disclosing
party,  the receiving party or any of its Agents are  nonetheless,  based on the
advice of counsel, required to disclose confidential information to any tribunal
or else stand  liable for  contempt  or suffer  other  censure or  penalty,  the
receiving party or its Agents may, without liability hereunder, disclose to such
tribunal only that portion of the  confidential  information  which such counsel
advises the receiving party is legally  required to be disclosed.  The receiving
party shall  exercise its best efforts to preserve  the  confidentiality  of the
confidential information,  including by cooperating with the disclosing party to
obtain  an  appropriate  protective  order  or  other  reliable  assurance  that
confidential  treatment  will be accorded the  confidential  information by such
tribunal.

                  (c) If the  transactions  contemplated by this Agreement shall
fail to be  consummated,  the receiving party shall promptly cause all copies of
documents  or  extracts  thereof  containing  information  and  data  as to  the
disclosing party to be returned to the disclosing party.

         SECTION 5.4. PUBLIC ANNOUNCEMENTS. Parent and Sub, on the one hand, and
the Company, on the other hand, will consult with each other before issuing, and
provide each other the opportunity to review and comment upon, any press release
or other public statements with respect to the transactions contemplated by this
Agreement,  and shall not issue any such press  release or make any such  public
statement  prior to such  consultation,  except upon the advice of counsel  that
such a release is required by or is appropriate  under applicable law, policy or
regulation of the SEC, court process or by  obligations  pursuant to any listing
agreement with any national securities exchange or national securities quotation
system.

         SECTION 5.5.  MISCELLANEOUS  AGREEMENTS  AND  CONSENTS.  Subject to the
terms and  conditions  provided  in this  Agreement,  each  party  shall use all
reasonable  efforts to take,  or cause to be taken,  all  action,  and to do, or
cause  to  be  done,  all  things  necessary,  appropriate  or  desirable  under
applicable laws and regulations to consummate the  transactions  contemplated by
this Agreement. Each party shall, and shall cause each of its Affiliates to, use
their respective  reasonable efforts to obtain consents of all third parties and
Governmental   Authorities   necessary,   appropriate   or  desirable   for  the
consummation of the transactions contemplated by this Agreement.






                     Agreement and Plan of Merger - Page 26


         SECTION 5.6. BOARD REPRESENTATION.  Effective as of the Closing, Parent
shall appoint to Parent's  board of directors one (1)  individual  designated by
the Stockholders and reasonably acceptable to Parent to hold office for one year
or until the next annual meeting of stockholders of Parent. Any appointments for
a  succeeding  term  for  the  designee  of the  Stockholders  shall  be made in
accordance with Parent's By-Laws.

         SECTION 5.7. BEST EFFORTS AND FURTHER  ASSURANCES.  Each of the parties
to this  Agreement  shall use its best efforts to  effectuate  the  transactions
contemplated  hereby and to fulfill and cause to be fulfilled the  conditions to
closing under this Agreement.  Each party hereto,  at the reasonable  request of
another party hereto,  shall execute and deliver such other  instruments  and do
and perform  such other acts and things as may be  necessary  or  desirable  for
effecting  completely the  consummation  of this Agreement and the  transactions
contemplated  hereby.  Subject to its further rights under this Agreement,  each
party  shall use all  reasonable  efforts  to cause the  Closing to occur at the
earliest practicable time.

         SECTION 5.8. OPERATIONS FOLLOWING CLOSING.  From and after the Closing,
Parent agrees to establish a separate working capital account for the benefit of
the  operations  of the Surviving  Corporation.  Such account will be managed by
Dennis  Smith  and Eric  Hagerstrand;  provided  such  individuals  will  inform
Parent's  management of the status of such working  capital account as requested
from time to time by Parent.  All cash flow from the operations of the Surviving
Corporation  will be used to finance the continuing  operations of the Surviving
Corporation,  including accounts  receivable,  accounts payable and payroll. Any
capital   expenditures  and  extraordinary   expenses  (excluding  purchases  of
inventory)  not already  budgeted for or approved by the board of the  Surviving
Corporation  shall require the prior written consent of the Parent,  which shall
not be unreasonably  withheld or delayed.  At the end of each calendar  quarter,
and subject in all  instances to  compliance at all times with the financial and
other required  covenants of any holder of indebtedness  for borrowed money, and
the prior payment of principal and interest on such indebtedness,  the Surviving
Corporation shall pay to the Stockholders all required payments of principal and
interest on the Notes then payable to the  Stockholders.  To the extent there is
surplus cash flow from operations  following  payment of all required  principal
and interest on outstanding indebtedness (including the Notes), the surplus cash
flow from operations shall, at Parent's option, be transferred to Parent. To the
extent there is any working  capital  deficit,  including any deficit  regarding
payments of  outstanding  indebtedness  for borrowed  money and the Notes of the
Stockholders,  Parent shall advance funds to the Surviving Corporation from time
to time necessary to fund such working capital deficit.


         SECTION 5.9.  GUARANTIES OF THE COMPANY.  The parties  hereto shall use
their best efforts to obtain  terminations,  signed by the respective lender, of
the Company's guaranties,  other than in connection with the Credit Facility, in
favor of The Huntington  National Bank and Hamilton County Development Co., Inc.
In addition,  the parties  shall use their best efforts to obtain  amendments to
the 504 Loan Documents (as defined in Schedule 3.3 to this Agreement) which will
provide  that the  Surviving  Corporation  shall have no  liability  to Hamilton
County  Development  Co.,  Inc.  as a result of such loan.  If the  parties  are
unsuccessful in obtaining such  terminations  and amendments,  the  Stockholders
shall cause SPC Properties  Limited ("SPC") to enter into an amendment as of the
Closing (the "Lease Amendment") to the Commercial Lease Agreement dated March 9,
1995 (the "Lease") regarding the payment of the Surviving  Corporation's monthly
rental  obligation.  The  Lease  Amendment  shall  provide  that  the  Surviving
Corporation  shall pay  directly to the  mortgagees  of the leased  property the
Surviving  Corporation's rental obligation.  To the extent the rental obligation
exceeds  the  monthly  obligations  of  SPC  to the  mortgagees,  the  Surviving
Corporation  shall pay such excess to SPC.  







                     Agreement and Plan of Merger - Page 27


Notwithstanding  the  foregoing,  SPC must  ensure that by March 31,  2000,  the
Surviving  Corporation shall have no obligation to the Huntington  National Bank
and  Hamilton  County  Development  Co.  in  connection  with  the  loans to SPC
regarding the land associated with the Lease.

                                   ARTICLE VI

                            COVENANTS OF THE COMPANY

         The Company hereby  covenants and agrees with Parent and Sub that, from
and after the date hereof to the Closing Date:

         SECTION 6.1. PRESERVATION OF BUSINESS  ORGANIZATION.  The Company shall
use all reasonable efforts to preserve without material  impairment its business
organization and its goodwill as to suppliers,  distributors, clients and others
having business relations with the Company.

         SECTION 6.2. CARRY ON IN REGULAR COURSE. (a) The Company shall carry on
its business in the ordinary  and usual course in a manner  consistent  with its
past practices.  Notwithstanding the foregoing,  the Company shall not, directly
or indirectly,  do, or propose to do or make any commitment or obligation,  with
respect to (i) any act or activity  referenced in Section 3.12(a) - (p), or (ii)
enter into any  agreement,  undertaking or commitment to do any of the foregoing
without the prior  written  consent of Parent,  which shall not be  unreasonably
withheld or delayed, or except as specifically provided for in Section 6.2(b).

         (b) Between the date hereof and the  Closing,  the Company may make the
following  distributions to the  Stockholders:  (i) compensatory  bonuses to the
Stockholders  consistent with past practice;  (ii)  contributions  to the 401(k)
accounts of the  Company's  employees  consistent  with its 401(k) plan and past
practice;  (iii)  dividends to the  Stockholders in order to pay tax obligations
with  respect to the  subchapter S  corporation  earnings of the Company for the
year ended December 31, 1996 and the stub period ending immediately prior to the
Closing Date; and (iv) any payments  otherwise  required to be paid  (consistent
with past practice) to a former stockholder of the Company, Dennis Engel.

         In no event shall the Company  payout any  extraordinary  or additional
bonuses  nor shall the  Company  incur any  indebtedness  to satisfy the payouts
pursuant to this Section 6.2(b), except as set forth on Schedule 6.2(b).

         SECTION 6.3. CONSENTS.  The Company shall use all reasonable efforts to
obtain  consents in writing to the  transactions  contemplated by this Agreement
and/or such  amendments,  assignments  or  modifications  of such  documents  or
instruments  as may be required so that the  transactions  contemplated  by this
Agreement  shall not  result  in any  default  with  respect  to any law,  rule,
regulation, order, decree, license, agreement or commitment to which the Company
is a party or its assets is bound.  Without limiting the foregoing,  the Company
shall  use its  commercially  reasonable  efforts  to assist  Parent  and Sub to
transfer  the  rights and  obligations  of the  Revolving  Line of Credit to the
Surviving  Corporation  and to assist Parent and Sub in securing any replacement
or  additional  line of credit which Parent and Sub believes is required to fund
adequately the business of the Surviving Corporation.

         SECTION 6.4. COMPANY  STOCKHOLDERS  MEETING. The Company shall, as soon
as  practicable,  duly call,  give notice of,  convene and hold a meeting of its
stockholders  for  purposes  of  approving  this  Agreement,  the Merger and the
transactions  contemplated hereby and thereby,  or, if permitted under Ohio Law,
the  Stockholders  shall  approve  this  Agreement  and the Merger by  unanimous
written consent.






                     Agreement and Plan of Merger - Page 28


         SECTION 6.5. ACCESS. The Company shall (i) permit officers,  employees,
agents,  attorneys and accountants  and other Persons  designated by Parent full
access (after  reasonable notice to the Company) during normal business hours to
the properties, books, contracts,  commitments, tax returns, examination reports
and surveys of Governmental Authorities (including the IRS) and other records of
the Company,  and (ii) furnish to such  designees of Parent such  financial  and
operating data and other information  relating to the assets and business of the
Company as such designees may reasonably  request.  Unless  prohibited by law or
contract, such designees of Parent shall be furnished with accurate and complete
copies of such contracts,  commitments and other books and records and all other
information  with  respect  to the assets and  business  of the  Company as such
designees  may  reasonably  request.  The  Company  shall  cause its  respective
employees,  accountants,  attorneys,  financial  advisors  and  other  agents or
representatives  to cooperate  with Parent in its due  diligence  investigation.
From the date hereof  until the  Effective  Time,  Parent and the Company  shall
confer on a regular and frequent basis with one or more  representatives  of the
other party to report operational  matters of materiality and the general status
of ongoing operations.

         SECTION 6.6.  DOCUMENTS AND  INFORMATION TO BE FURNISHED.  Prior to the
Closing,  the Company shall deliver to Parent  promptly after such documents are
available  its  unaudited  monthly  financial  reports and all other  documents,
financial  statements,   budgets,  proxy  or  information  statements,  reports,
correspondence,  notices and other items it delivers, or is required to deliver,
to any of its stockholders or directors.

         SECTION 6.7.  NOTICES OF CERTAIN  EVENTS.  The Company  shall  promptly
notify Parent of: (i) any notice or other communication from any Person alleging
that the consent of such Person is or may be  required  in  connection  with the
transactions  contemplated  by this  Agreement,  which consent has not otherwise
been disclosed to Parent  pursuant to this  Agreement;  (ii) any notice or other
communication   from  any   Governmental   Authority  in  connection   with  the
transactions  contemplated by this  Agreement;  (iii) any action,  suit,  claim,
investigation  or  proceeding  commenced  relating to or  involving or otherwise
affecting  the Company  that,  if it had existed on the date of this  Agreement,
would have been required to have been disclosed  pursuant to this Agreement,  or
that  relates  to the  consummation  of the  transactions  contemplated  by this
Agreement;  or (iv) any  matter  arising  or  discovered  after the date of this
Agreement that, if existing or known on the date of this  Agreement,  would have
been required to be disclosed pursuant to this Agreement,  or that constitutes a
breach or prospective breach of this Agreement by the Company.

         SECTION 6.8. ACCURACY OF  REPRESENTATIONS  AND WARRANTIES.  The Company
shall  not take or  agree or  commit  to take  any  action  (or omit to take any
action) that would make any  representation  and warranty of the Company in this
Agreement inaccurate in any material respect as of the Closing Date.

         SECTION 6.9. NO SOLICITATION. From and after the date of this Agreement
until  the  earlier  of the  Effective  Time or  termination  of this  Agreement
pursuant  to its terms,  the Company and the  Stockholders  shall not,  and will
instruct  their  respective  directors,  officers,  employees,  representatives,
investment  bankers,  agents and  Affiliates  not to,  directly  or  indirectly,
initiate,  solicit,  encourage  or  participate  in  discussions  with,  provide
information to, or approve transactions with, any Person or group concerning any
merger,  purchase  or sale of  business  combination  assets,  sale of shares of
capital  stock  (or  securities   convertible  or   exchangeable   or  otherwise
evidencing,  or any  agreement or  instrument  evidencing,  the right to acquire
capital stock) or similar business  combination  involving the Company (all such
transactions being referred to herein as "ACQUISITION  PROPOSALS").  The Company
will 






                     Agreement and Plan of Merger - Page 29


immediately cease any and all existing  activities,  discussions or negotiations
with any parties conducted heretofore with respect to any of the foregoing.  The
Company  will (i) notify  Parent as  promptly as  practicable  if any inquiry or
proposal  is made or any  information  or  access is  requested  in  writing  in
connection with an Acquisition  Proposal or potential  Acquisition  Proposal and
(ii) as promptly as  practicable,  notify  Parent of the  significant  terms and
conditions of any such Acquisition Proposal.  In addition,  subject to the other
provisions of this Section 6.9, from and after the date of this Agreement  until
the earlier of the Effective Time and termination of this Agreement  pursuant to
its terms, the Company will not, and will instruct their  respective  directors,
officers, employees,  investment bankers, agents and Affiliates not to, directly
or  indirectly,  make or  authorize  any  public  statement,  recommendation  or
solicitation in support of any Acquisition Proposal made by any Person or group.

         SECTION 6.10 NON-DISTURBANCE  AGREEMENT. The Company shall use its best
efforts to obtain and  deliver to Parent an  agreement  from each  holder of any
mortgage or deed of trust  affecting  the  properties in which the Company has a
leasehold interest,  which provides that if such holder forecloses such mortgage
or deed of trust (or takes a deed in lieu of foreclosure  or otherwise  succeeds
to the rights of the landlord  thereunder)  or otherwise  exercises  its rights,
such holder shall (i) not disturb the Surviving  Corporation's  occupancy  under
its Lease,  (ii) shall not join the  Surviving  Corporation  in any  foreclosure
actions,  and (iii) shall be bound by the  obligations of the landlord under the
Lease between the Surviving  Corporation  and the landlord,  in each case for so
long as the Surviving Corporation continues to honor and fulfill in all material
respects its obligations under the Lease.

                                   ARTICLE VII

                           COVENANTS OF PARENT AND SUB

         Parent and Sub hereby covenant and agree with the Company as follows:

         SECTION  7.1.  PRESERVATION  OF  BUSINESS  ORGANIZATION.  Prior  to the
Closing,  Parent and Sub shall use all  reasonable  efforts to cause to preserve
without  material  impairment  the  business  organization  of  Parent,  Sub and
Parent's  subsidiaries  and their goodwill as to payors,  providers,  suppliers,
distributors,  clients and others having business relations with Parent, Sub and
Parent's subsidiaries.

         SECTION 7.2. CONSENTS.  Parent and Sub shall use all reasonable efforts
to obtain consents in writing to the transactions contemplated by this Agreement
and/or such  amendments,  assignments or modifications of such agreements as may
be required so that the  transactions  contemplated  by this Agreement shall not
result in any default with respect to any law, rule, regulation,  order, decree,
license,  agreement or  commitment to which Parent or Sub is a party or by which
any of their respective assets is bound.

         SECTION 7.3. NOTICES OF CERTAIN EVENTS. Prior to Closing,  Parent shall
promptly notify the Company of: (i) any notice or other  communication  from any
Person  alleging  that the  consent  of such  Person  is or may be  required  in
connection with the transactions  contemplated by this Agreement,  which consent
has not  otherwise  been  obtained or disclosed to the Company  pursuant to this
Agreement;  (ii)  any  notice  or  other  communication  from  any  Governmental
Authority in connection  with the  transactions  contemplated by this Agreement;
(iii) any action, suit, claim, investigation or proceeding commenced relating to
or involving or otherwise  affecting Parent or any of its subsidiaries  that, if
it had existed on the date of this  Agreement,  would have been required to have
been disclosed  pursuant to this Agreement,  or that relates to the consummation
of the transactions  contemplated by this Agreement;  or 






                     Agreement and Plan of Merger - Page 30


(iv) any matter arising or discovered after the date hereof that, if existing or
known on the date of this  Agreement,  would have been  required to be disclosed
pursuant to this Agreement,  or that constitutes a breach or prospective  breach
of this Agreement by Parent or Sub.

         SECTION  7.4.  NASDAQ  SMALLCAP  MARKET  LISTING.  Parent shall use all
reasonable efforts to have the shares of Parent Common Stock to be issued in the
Merger accepted for listing on the Nasdaq SmallCap Market within forty-five (45)
days following the Merger.

         SECTION 7.5. ACCURACY OF REPRESENTATIONS AND WARRANTIES. Parent and Sub
shall not (a) take or agree or commit  to take any  action  (or omit to take any
action) that would make any representation and warranty of Parent or Sub in this
Agreement inaccurate in any material respect as of the Closing Date.

         SECTION 7.6.  DOCUMENTS AND  INFORMATION TO BE FURNISHED.  Prior to the
Closing,  Parent shall deliver to the Company  promptly after such documents are
available all documents,  financial statements, proxy or information statements,
reports, correspondence,  notices and other items it delivers, or is required to
deliver, to its stockholders as a group.

         SECTION 7.7.  INDEMNIFICATION.  Subject to applicable law, Parent shall
and shall cause the Surviving  Corporation  to honor and fulfill in all respects
the obligations of the Company pursuant to  indemnification  agreements with the
Company's directors and officers existing at or before the Effective Time.

         SECTION 7.8. NON-SOLICITATION. If the transactions contemplated by this
Agreement are not consummated, Parent and its Affiliates shall not, for a period
of one year from the date of this Agreement,  directly or indirectly solicit any
employee  of the  Company  to  terminate  such  employee's  employment  with the
Company.  Nothing  herein  shall  prevent  Parent from hiring any such  employee
provided Parent has not violated the first sentence of this Section 7.8.

         SECTION  7.9.  COMPLIANCE  WITH LEASE  TERMS.  Parent  shall  cause the
Surviving  Corporation  to honor and fulfill in all respects the  obligations of
the Surviving Corporation pursuant to the Lease.


                                  ARTICLE VIII

                              CONDITIONS OF CLOSING

         SECTION 8.1. CONDITIONS TO OBLIGATIONS OF PARENT, SUB, STOCKHOLDERS AND
THE COMPANY.  The obligations of each of the parties hereto under this Agreement
to consummate  the Merger and the other  transactions  to be  consummated at the
Closing are subject to the satisfaction or waiver of the following conditions:

                  (a)  COMPANY  STOCKHOLDER  APPROVAL.  This  Agreement  and the
Merger shall have been adopted and approved by the  Stockholders  as required by
Ohio Law.

                  (b) GOVERNMENTAL APPROVALS.  Parent, Sub and the Company shall
have received all  approvals or  requirements  of  Governmental  Authorities  to
permit the consummation of the  transactions  contemplated by this Agreement and
the  Operative  Documents and to permit Parent and Sub to own the assets of, and
to operate the businesses of, the Company after the Closing.  Each such







                     Agreement and Plan of Merger - Page 31


approval shall be in form and substance  reasonably  satisfactory  to Parent and
shall remain in full force and effect at the Closing Date.

                  (c)  LITIGATION;  INJUNCTIONS.  No action,  suit,  litigation,
injunction,  restraining order,  proceeding or investigation shall (i) have been
instituted and be pending,  or (ii) be threatened by any Person or  Governmental
Authority,  which would materially and adversely affect the Merger and the other
transactions  contemplated by this Agreement and the Operative Documents. On the
Closing  Date,  there  shall  not be in force  any  proceeding,  order or decree
restraining or enjoining  consummation  of the Merger or the other  transactions
contemplated  by this  Agreement  or the  Operative  Documents,  or placing  any
limitation  upon  such  consummation  or  to  invalidate,   suspend  or  require
modification of any provision of this Agreement or the Operative Documents.

                  (d) PLEDGE AGREEMENT.  Parent and the Stockholders  shall have
executed and delivered the Pledge Agreement.

                  (e) REGISTRATION RIGHTS AGREEMENT. Parent and the Stockholders
shall have executed and delivered the Registration Rights Agreement.

                  (f) EMPLOYMENT AGREEMENTS. The Company shall have entered into
the Employment Agreements with each of Dennis Smith and Eric Hagerstrand.

                  (g) CANNING AGREEMENT. The Company shall have entered into the
Employment Agreement with Thomas Canning.

         SECTION 8.2.  ADDITIONAL  CONDITIONS  APPLICABLE TO PARENT AND SUB. The
obligations  of Parent and Sub under this Agreement to consummate the Merger and
the  other  transactions  contemplated  by  this  Agreement  and  the  Operative
Documents are subject to the satisfaction or waiver of the following conditions:

                  (a)  PERFORMANCE OF THIS AGREEMENT.  All the terms,  covenants
and  conditions  of this  Agreement  to be complied  with and  performed  by the
Company (and/or the  Stockholders) on or before the Closing Date shall have been
complied with and performed in all material respects.

                  (b)   ACCURACY  OF   REPRESENTATIONS   AND   WARRANTIES.   The
representations  and  warranties of the Company  (and/or the  Stockholders)  set
forth in this Agreement shall be true and correct in all material respects as of
the Closing Date with the same force and effect as if such  representations  and
warranties  were made anew at and as of the  Closing  Date,  except:  (i) to the
extent such  representations and warranties are by their express provisions made
as of the date of this  Agreement or another  specified  date;  and (ii) for the
effect of any  activities or  transactions  which may have taken place after the
date of this  Agreement  which are expressly  contemplated  by this Agreement in
order to effect the transactions contemplated by this Agreement.

                  (c) NO  MATERIAL  ADVERSE  CHANGE.  Since  the  date  of  this
Agreement,  there shall have been no material  adverse  change in the  business,
assets, results of operations,  prospects or financial condition of the Company,
other  than as a result of events  or  conditions  affecting  the  generic  drug
industry generally or general economic conditions.






                     Agreement and Plan of Merger - Page 32


                  (d)  CLOSING   CERTIFICATES.   Parent   shall  have   received
certificates  dated the Closing Date,  signed by the chief executive officer and
the chief  financial  officer of the Company,  to the effect that the conditions
set forth in Sections 8.2(a) through 8.2(c) have been satisfied.

                  (e)  OPINION  OF  COMPANY  COUNSEL.  Parent and Sub shall have
received  from  counsel to the Company an opinion  dated the  Closing  Date with
respect to matters  reasonably  requested by Parent,  which shall be in form and
substance reasonably satisfactory to Parent.

                  (f) REQUIRED CONSENTS.  The holders of any note,  guarantee or
other evidence of indebtedness  (whether for money borrowed or otherwise) of any
of the Company,  the lessors of any material real or personal property or assets
leased by the Company,  the parties to any  commitment or agreement to which the
Company is a party which is material to the conduct of the  Company's  business,
and any other Person  (other than  Governmental  Authorities)  which owns or has
authority to grant any material franchise,  license, permit, easement, rights or
other authorization  necessary for the business or operations of the Company, to
the extent that their consent or approval of the  transactions  contemplated  by
this Agreement is required under the pertinent  lease,  contract,  commitment or
agreement or other  document or instrument or under  applicable  laws,  rules or
regulations for the  consummation of the  transactions  contemplated  shall have
granted  such  consent or approval  and no condition to such consent or approval
shall exist which is materially adverse to the conduct of the Company's business
or results in additional material obligations to Parent.

                  (g) FINANCING OF PARENT.  Parent shall have received or have a
legally binding commitment to receive,  not less than an aggregate of $6,500,000
of equity capital or debt financing, or a combination thereof.

                  (h)  FINANCING OF THE  SURVIVING  CORPORATION.  Parent and the
Surviving  Corporation shall have secured,  or have a legally binding commitment
for, a line of credit or a similar arrangement for the Surviving  Corporation in
an amount equal to or exceeding $7,000,000.

                  (i) TAX MATTERS.  The Company  shall have provided to Parent a
clearance  certificate  or similar  document  that may be  required by any state
taxing authority and the  Stockholders  shall have provided to Parent a properly
executed Form W-8 or W-9, as applicable.

                  (j)  DECEMBER 31, 1996 AUDITED  FINANCIAL  STATEMENTS.  Parent
shall have  received the audited  balance  sheet as of December 31, 1996 and the
related audited statement of earnings,  retained earnings and cash flows for the
year ended December 31, 1996  (together with the notes thereto,  audited by, and
accompanied  by the report  thereon,  of Grant  Thornton  LLP) and such  audited
financial  statements  shall include an unqualified  opinion with respect to the
financial  statements  from Grant  Thornton  LLP and reveal no Material  Adverse
Change since the Balance Sheet Date.

                  (k) GUARANTY OF THE COMPANY.  The Company shall have delivered
to  Parent  a  termination,  signed  by The  Huntington  National  Bank,  of the
Company's  guaranty,  in favor of The Huntington  National Bank, relating to the
loan to the Stockholders to fund payments  required under the Stock Purchase and
Separation  Agreement and General Release of Claims dated January 13, 1995 among
the Stockholders, Dennis Engel, the Company and certain other parties.

                  (l) PLEDGE OF THE  OUTSTANDING  SHARES.  The  Company  and the
Stockholders  shall  have  delivered  to  Parent a  termination,  signed  by The
Huntington  National  Bank,  of the  pledge  of the  Outstanding  Shares  to The
Huntington National Bank.







                     Agreement and Plan of Merger - Page 33


                  (m) CONSENT OF LANDLORD.  The Company shall have  delivered to
Parent  a  consent  of SPC  Properties  Limited  to the  Merger  and  the  other
transactions  contemplated  by  this  Agreement,  which  consent  shall  contain
representations  that no Event of Default,  as defined in the  Commercial  Lease
Agreement  dated March 9, 1995 between SPC  Properties  Limited and the Company,
has  occurred or is  continuing  and that no  condition  exists  that,  with the
passage of time, will become an Event of Default.

         SECTION 8.3. ADDITIONAL  CONDITIONS  APPLICABLE TO THE STOCKHOLDERS AND
THE COMPANY.  The  obligations of the  Stockholders  and the Company (and/or the
Stockholders)  under  this  Agreement  to  consummate  the  Merger and the other
transactions  contemplated  to be  consummated at the Closing are subject to the
satisfaction or waiver of the following conditions:

                  (a)  PERFORMANCE OF THIS AGREEMENT.  All the terms,  covenants
and conditions of this Agreement to be complied with and performed by Parent and
Sub on or before the Closing Date shall have been complied with and performed in
all material respects.

                  (b)   ACCURACY  OF   REPRESENTATIONS   AND   WARRANTIES.   The
representations  and  warranties  of Parent and Sub set forth in this  Agreement
shall have been true and correct as of the Closing  Date with the same force and
effect as if such representations and warranties were made anew at and as of the
Closing Date, except: (i) to the extent such  representations and warranties are
by their  express  provisions  made as of the date of this  Agreement or another
specified date; and (ii) for the effect of any activities or transactions  which
may have  taken  place  after the date of this  Agreement  which  are  expressly
contemplated by this Agreement in order to effect the transactions  contemplated
by this Agreement.

                  (c) OFFICERS'  CERTIFICATE.  The Company shall have received a
certificate  dated the Closing Date,  signed by the chief  executive  officer of
Parent,  to the effect that the conditions set forth in Sections  8.3(a) and (b)
hereof have been satisfied.

                  (d) OPINION OF PARENT COUNSEL. The Company shall have received
from counsel to Parent and Sub an opinion dated the Closing Date with respect to
matters  reasonably  requested  by the  Company,  which  shall  be in  form  and
substance reasonably satisfactory to the Company.

                  (e) REQUIRED CONSENTS.  Parent and Sub shall have received all
material  consents  or  approvals  of  the  Merger  or  any  other  transactions
contemplated  by this  Agreement  required  under  any  material  commitment  or
evidence of indebtedness of Parent or any of its  subsidiaries,  or any lease of
any material real property of Parent and its  subsidiaries,  or under applicable
law for the consummation of the transactions contemplated hereby.

                  (f)  GUARANTIES  OF  THE   STOCKHOLDERS.   Parent  shall  have
delivered to the Stockholders  terminations of the  Stockholders'  guaranties in
favor of The Huntington National Bank relating to the Credit Facility.






                     Agreement and Plan of Merger - Page 34


                                   ARTICLE IX

                                   TERMINATION

         SECTION 9.1.  Termination.  This  Agreement may be  terminated  and the
transactions  contemplated  hereby  abandoned at any time prior to the Effective
Time,  whether before or after  approval of the matters  presented in connection
with the Merger by the stockholders of the Company:

                  (a) by written  mutual  consent of Parent and the  Company for
any reason, or by mutual action of their respective Boards of Directors;

                  (b) at the option of Parent,  by written notice from Parent to
the Company if (i) a material  breach by the Company or the  Stockholders of any
of their respective representations,  warranties or agreements contained in this
Agreement  occurs,  (ii)  Parent  has  notified  the  Company  in writing of the
existence of such breach,  and (iii) the Company or the Stockholders have failed
to cure such  breach  within 10 days  after  receiving  such  notice (or if such
breach is not capable of being cured  within such 10 day period,  but is capable
of being cured within 30 days,  the breaching  party shall have  commenced  good
faith steps to promptly cure such breach);

                  (c) at the  option  of the  Company  or the  Stockholders,  by
written notice from the Company to Parent if (i) a material  breach by Parent or
Sub of any of their representations,  warranties or agreements contained in this
Agreement occurs, (ii) the Company has notified Parent and Sub in writing of the
existence  of such  breach,  and (iii)  Parent and Sub have  failed to cure such
breach  within 10 days after  receiving  such  notice (or if such  breach is not
capable of being cured within such 10 day period,  but is capable of being cured
within 30 days,  the breaching  party shall have  commenced  good faith steps to
promptly cure such breach);

                  (d) at the  option of  Parent,  by Parent if the  Stockholders
fail to approve any matter required to be approved by such Stockholders in order
to consummate the transactions contemplated by this Agreement by April 30, 1997;

                  (e) by either  Parent or the  Company if a court of  competent
jurisdiction or  governmental,  regulatory or  administrative  agency shall have
issued a non-appealable final order, decree or ruling or taken any other action,
in each  case  having  the  effect  of  permanently  restraining,  enjoining  or
otherwise prohibiting the Merger;

                  (f) at the  option of  Parent,  by Parent if there  shall have
occurred a Material Adverse Change with respect to the Company;

                  (g) by the Company if the Closing has not  occurred by May 30,
1997 if the sole reason for the failure to close is due to Parent  having failed
to satisfy either condition to Closing set forth in Section 8.2(g) or (h); or

                  (h) by  Parent,  if the  results  of  Parent's  due  diligence
investigation of the Company and its business (to be completed prior to February
28, 1997) prove unsatisfactory in any material respect.

      SECTION 9.2.  CERTAIN  REMEDIES  UPON  TERMINATION.  If this  Agreement is
terminated:  (i)  pursuant to Section  9.1(a) (due to the mutual  consent of the
parties),  no special expense 







                     Agreement and Plan of Merger - Page 35


reimbursement  shall apply and all expenses  will be paid as provided in Section
11.2;  (ii)  pursuant  to Section  9.1(b),  9.1(d) or 9.1(f) [due to a breach of
representations and warranties by the Company or the Stockholders,  a failure by
the Stockholders to approve the transactions  contemplated herein, or a Material
Adverse Change in the business of the Company],  the Company shall pay to Parent
within five days of such termination,  an amount in cash sufficient to reimburse
Parent  and  Sub  for  all  reasonable  expenses  incurred  in  connection  with
attempting  to  consummate  the Merger and the other  transactions  contemplated
hereby (including without limitation reasonable legal, accounting and investment
banking  expenses)  (the  "TRANSACTION  EXPENSES")  up to a  maximum  amount  of
$50,000;   provided  that  Parent  shall  provide  reasonable  evidence  of  the
incurrence of such expenses.

              (b) If the Agreement is terminated  pursuant to Section  9.1(c) or
(g) [due to a breach of  Parent's  representations  or  warranties,  or Parent's
failure  to obtain  financing  for this  transaction],  Parent  shall pay to the
Company within five days of such termination the Company's  Transaction Expenses
up to a maximum  amount of  $50,000;  provided  that the Company  shall  provide
reasonable evidence of the incurrence of such expenses.

              (c) If the Agreement is terminated pursuant to Section 9.1(e), the
party not  principally  the cause of any  order  decree or ruling  shall pay the
Transaction Expenses of the other party;  provided that such party shall provide
reasonable evidence of the incurrence of such expenses.

         SECTION  9.3.   SURVIVAL  UPON   TERMINATION.   If  this  Agreement  is
terminated,  the agreements of the Company and Parent contained in Sections 5.3,
5.4, 9.1, 9.2, 9.3 and 11.2 shall survive such termination.

         SECTION 9.4. EFFECT OF TERMINATION.  In the event of the termination of
this Agreement,  nothing shall relieve any party from liability for any material
breach by any party hereof.


                                    ARTICLE X

                            SURVIVAL; INDEMNIFICATION

         SECTION 10.1. SURVIVAL. The covenants, agreements,  representations and
warranties  of the  Parent,  Company  and  the  Stockholders  contained  in this
Agreement  shall  survive  the  Closing  until the  earlier  to occur of (i) the
fifteenth  calendar  month  anniversary  of the  Closing or (ii) the  release by
Parent of audited financial  statements that include the combined  operations of
the Surviving  Corporation  and the Parent for the year ended December 31, 1997;
provided,  however,  that the  representations and warranties of the Company and
the  Stockholders  set forth in Sections  3.22(d) and (e) and 3.28 shall survive
until  the third  anniversary  of the  Closing.  Notwithstanding  the  preceding
sentences, any covenant, agreement, claim, representation or warranty in respect
of which a claim of indemnity may be sought under Section 10.2 shall survive the
time at which it would otherwise terminate pursuant to the preceding  sentences,
if notice of the  inaccuracy  or breach  thereof  giving rise to such right to a
claim of  indemnity  shall  have  been  given to the  party  against  whom  such
indemnity  may be sought  prior to such time,  and any  obligation  of indemnity
shall survive until such claim of indemnity is resolved.

         SECTION 10.2.  MUTUAL  INDEMNIFICATION.  (a) By their  approval of this
Agreement, the Stockholders, severally (based on their ownership interest in the
Company), agree to indemnify, defend, protect, and hold harmless each of Parent,
Sub and the Surviving Corporation (each in its capacity as an indemnified party,
and for purposes of this paragraph,  an  "INDEMNITEE"),  and shall reimburse the







                     Agreement and Plan of Merger - Page 36


Indemnitee  for, at all times from and after the date of this Agreement from and
against all claims, damages, losses,  liabilities,  actions, suits, proceedings,
demands, assessments,  adjustments,  costs and expenses (including specifically,
but   without   limitation,   reasonable   attorneys'   fees  and   expenses  of
investigation)  (collectively "DAMAGES") incurred by such Indemnitee as a result
of or  incident  to (i) any  breach of any  representation  or  warranty  of the
Company or any of the  Stockholders  set forth herein,  or in any other document
delivered  in  connection  herewith  or  with  respect  to  which  a  claim  for
indemnification  is brought by an  Indemnitee  within  the  applicable  survival
period  described in Section 10.1 (including any accounts  receivable  reflected
(net of reserves) on the balance  sheet of the Company  dated  December 31, 1996
which  are  not  collected  prior  to  April  30,  1997),  (ii)  any  breach  or
nonfulfillment by the Company or any of the  Stockholders,  or any noncompliance
by the Company or any of the  Stockholders  with,  any covenant,  agreement,  or
obligation  contained herein or other document delivered in connection herewith,
except to the extent waived by Parent, or (iii) any claim by a current or former
stockholder  of the Company or any other person,  firm,  corporation  or entity,
seeking to assert,  or based upon:  (A)  ownership or rights of ownership to any
shares of capital stock of the Company; (B) any rights of the stockholder (other
than the right to receive the Merger consideration pursuant to this Agreement or
appraisal  rights under the  applicable  provisions of Ohio Law),  including any
option,  preemptive rights, or rights to notice or to vote; (C) any rights under
the charter or bylaws of the Company;  (D) any claim that his, her or its shares
were  wrongfully  repurchased  by the Company,  regardless of whether an action,
suit or proceeding  can or has been made against the Company;  or (E) any Excess
Expenses, as defined in Section 11.2 below.

                  (b)  Parent   agrees  to   indemnify   the   Company  and  the
Stockholders  (for  purposes  of  this  paragraph,  each in its  capacity  as an
indemnified  party, an "INDEMNITEE")  and shall reimburse the Indemnitee for all
Damages incurred by such Indemnitee as a result of or incident to (i) any breach
of any  representation  or warranty of Parent set forth herein,  or in any other
document  delivered in connection  herewith or with respect to which a claim for
indemnification  is brought by the Company or the  Stockholder  as an Indemnitee
within the  applicable  survival  period  described in Section 10.1, or (ii) any
breach  or  nonfulfillment  by Parent or any  noncompliance  by Parent  with any
covenant,  agreement or obligation  contained herein required to be performed or
other document delivered in connection herewith,  except to the extent waived by
the  Company or  Stockholders  holding a majority of the  outstanding  shares of
Company Common Stock.

         SECTION 10.3.  THIRD PERSON  CLAIMS.  Promptly  after an Indemnitee has
received notice of or has knowledge of any claim by a person not a party to this
Agreement  ("THIRD PERSON") or the commencement of any action or proceeding by a
Third Person,  the Indemnitee  shall,  as a condition  precedent to a claim with
respect thereto being made under this Agreement,  give the Stockholders  written
notice of such claim or the commencement of such action or proceeding; provided,
however  that the failure to give such  notice will not affect the  Indemnitee's
right to indemnification  hereunder,  except to the extent that the Stockholders
have been actually  prejudiced as a result of such failure.  If the Stockholders
notify the  Indemnitee  within 30 days from the receipt of the foregoing  notice
that the Stockholders wish to defend against the claim by the Third Person, then
the  Stockholders  shall have the right to assume and control the defense of the
claim by  appropriate  proceedings  with counsel  reasonably  acceptable  to the
Indemnitee.  The Indemnitee may participate in the defense, at its sole expense,
of any such claim for which the  Stockholders  shall have  assumed  the  defense
pursuant to the preceding  sentence,  provided that counsel for the Stockholders
shall act as lead counsel in all matters pertaining to the defense or settlement
of such claims, suit or proceedings;  provided,  however,  that Indemnitee shall
control the defense of any claim or proceeding that in  Indemnitee's  reasonable
judgment  could  reasonably be expected to have a material and adverse effect on
Indemnitee's  business apart from the payment of money  damages.  The Indemnitee
shall be entitled to indemnification for the reasonable fees








                     Agreement and Plan of Merger - Page 37


and expenses of its counsel for any period  during which the  Stockholders  have
not assumed the defense of any claim. Whether or not the Stockholders shall have
assumed the defense of any claim,  neither the Indemnitee  nor the  Stockholders
shall make any  settlement  with respect to any such claim,  suit or  proceeding
without the prior consent of the other,  which consent shall not be unreasonably
withheld or  delayed.  It is  understood  and agreed  that in  situations  where
failure to settle a claim  expeditiously would reasonably be expected to have an
adverse effect on the party wishing to settle, the failure of the other party to
act upon a request for consent to such settlement  within ten (10) business days
of  receipt  of notice  thereof  shall be deemed to  constitute  consent to such
settlement for purposes of this Article X.

         SECTION 10.4.  LIMITATIONS ON INDEMNIFICATION.  (a) No Indemnitee shall
be entitled to  indemnification  for Damages pursuant to Sections  10.2(a)(i) or
10.2(a)(ii) until the aggregate amount of Damages incurred exceeds $100,000 (the
"THRESHOLD"), and then shall be entitled only to the amount of Damages in excess
of the  Threshold.  All claims for  Damages  shall be net of, and offset by, any
insurance  proceeds,  reduction  of tax  liabilities  or receipt of tax  benefit
actually  received by Parent or the Surviving  Corporation that are attributable
to such Damages. Any liability for indemnification under this Article X shall be
reduced to the extent any Damages are reduced by such a recovery or reduction.

                  (b) The Stockholders'  maximum aggregate  liability for claims
made pursuant to Section  10.2(a)(i) and (ii) shall not exceed $4,000,000 in the
aggregate;  provided,  however,  that such maximum aggregate  liability shall be
increased,  to not more than $6,500,000 in the aggregate,  to the extent of each
claim representing a breach or non-fulfillment pursuant to Section 10.2(a)(i) or
10.2(a)(ii)  which the  Stockholders  had  knowledge of prior to the Closing (or
after reasonable inquiry and  investigation,  should have had knowledge of prior
to the  Closing).  The  Parent's  maximum  aggregate  liability  for claims made
pursuant to Section 10.2(b) shall not exceed $4,000,000 in the aggregate.

                  (c)  The  limitations  provided  in  Section  10.4(a)  on  the
Threshold and Section 10.4(b) regarding  maximum  aggregate  liability and on an
Indemnitee's  right to  indemnification  under this Article X shall not apply to
Damages  for any  matters  set forth in  Section  10.2(a)(iii)  or any claim for
Damages under Sections 3.20, 3.22 and 3.28, or for Excess Expenses under Section
11.2.

         SECTION  10.5.  METHOD OF PAYMENT.  Subject to the  limitations  on the
amount of Damages set forth in Section  10.4,  and subject to the  provisions of
Section 10.6, any claims for indemnification pursuant to this Article X shall be
satisfied  by  withholding  the amount of the claim from any  remaining  payment
obligation  on the then  outstanding  principal  amount of the Notes in  inverse
order of maturity; provided, however, that no Stockholder shall be liable for an
amount in excess of the  value of the sum of the  Merger  Consideration  and the
additional consideration,  if any, paid pursuant to Section 2.5 received by such
Stockholder in the Merger.

         SECTION  10.6.  RESOLUTIONS  OF CONFLICTS;  ARBITRATION.  The following
provisions  shall  apply  with  respect  to the  assertion  of  claims  and  the
indemnification provisions of this Article X.

                  (a) The  Stockholders and Parent shall attempt promptly and in
good faith to agree upon the rights of the parties  with respect to any disputed
claims. If the Stockholders and the Parent should so agree, a memorandum setting
forth  such  agreement  shall be  prepared  and signed by both  parties  and the
Stockholders shall satisfy the claim in accordance with the terms thereof.

                  (b)  Any  dispute  or  controversy  concerning  the  indemnity
obligations  of this Article X not agreed to by the parties  pursuant to Section
10.6(a) shall be resolved in good faith by mediation among the  Stockholders and
the senior executive  officers of Parent. If such dispute can not be 







                     Agreement and Plan of Merger - Page 38


resolved by mediation  within 30 days, then except for the right of either party
to apply to a court of competent jurisdiction for a temporary restraining order,
preliminary injunction,  or other equitable relief to preserve the status quo or
prevent   irreparable   harm  pending  the  selection  and  confirmation  of  an
arbitrator,  any  continuing  dispute,  controversy  or claim arising out of, in
connection with, or in relation to the indemnity  obligations under this Article
X shall be settled by arbitration in accordance with Section 10.6(c) below.

                  (c) If no agreement can be reached  after good faith  attempts
pursuant to Section 10.6(a) and 10.6(b) within 90 days from the  commencement of
any  dispute  or  controversy,  either  Parent or the  Stockholders  may  demand
arbitration of the matter unless the amount of the damage or loss is at issue in
pending  litigation with a third party, in which event  arbitration shall not be
commenced until such amount is ascertained or both parties agree to arbitration;
and in any such event the matter shall be settled by arbitration  conducted by a
single arbitrator mutually agreeable to the Stockholders and the Parent, or if a
single  arbitrator  cannot be agreed to by the parties  within thirty (30) days,
then by three  arbitrators.  In the event of three  arbitrators,  Parent and the
Stockholders  shall  each  select one  arbitrator,  and the two  arbitrators  so
elected  shall select a third  arbitrator.  The decision of the  arbitrators  so
selected as to the validity and amount of any claim in dispute  shall be binding
and conclusive upon the parties to this Agreement,  and the parties shall act in
accordance  with  such  decision  and  satisfy  any  such  claim  in  accordance
therewith. Judgment upon any award rendered by the arbitrators may be entered in
any court having  jurisdiction.  Any mediation or  arbitration  shall be held in
Cincinnati,  Ohio. Any  arbitration  shall be conducted  under the rules then in
effect  of the  American  Arbitration  Association,  and  shall  be based on the
provisions  and  limitations  of this  Article  X. The  arbitrators  shall  have
relevant  experience in the industry of the Company and, to the extent possible,
familiarity with  acquisitions and business  combinations.  The parties agree to
compel the  arbitrator(s)  to  resolve  the  arbitration  within 120 days of the
commencement of arbitration.

         Notwithstanding anything contained herein to the contrary, no claim for
Damages,  nor ability of Parent to settle any claim  against  the Parent  Common
Stock or payment  obligations on the Notes under Section 10.5, may be made until
such claim is finally resolved  pursuant to the process and procedures set forth
above in this Section.

         SECTION 10.7 REMEDIES. The indemnification provisions of this Article X
are the sole and exclusive remedy of any party to this Agreement for a breach of
any representation,  warranty or covenant contained herein,  except with respect
to any claim based on intentional misrepresentation, fraud in the inducement, or
a similar theory.  Notwithstanding  the preceding  sentence,  from and after the
execution  and delivery of this  Agreement  and until the  Closing,  each of the
parties  acknowledges  and agrees that the other parties hereto would be damaged
irreparably  in the  event  any of the  provisions  of  this  Agreement  are not
performed in  accordance  with their  specific  terms or otherwise are breached.
Accordingly, each of the parties hereto agrees the other parties hereto shall be
entitled to an injunction to prevent  breaches of the provisions of this Article
X and to enforce  specifically  this  Agreement and the terms and  provisions of
Article X in any  competent  court  having  jurisdiction  over the  parties,  in
addition to any other remedy to which they may be entitled at law or in equity.







                     Agreement and Plan of Merger - Page 39


                                   ARTICLE XI

                                  MISCELLANEOUS

         SECTION  11.1.  SPECIFIC  PERFORMANCE.  Each  of the  parties  to  this
Agreement  hereby  acknowledges  that the other  parties  will have no  adequate
remedy  at  law if it  fails  to  perform  any of  its  obligations  under  this
Agreement.  In such  event,  each of the parties  agrees that the other  parties
shall have the right,  in addition to any other  rights it may have  (whether at
law or in equity),  to specific  performance  of this  Agreement,  except as set
forth to the contrary herein.

         SECTION 11.2.  EXPENSES.  Except as set forth in Section 9.2, all costs
and expenses  incurred in connection  with this  Agreement and the  transactions
contemplated hereby shall be paid by the party incurring such expense; provided,
however that if this  Agreement is not  terminated  and the Closing shall occur,
all such costs and expenses incurred directly on behalf of the Company and which
are  customarily  incurred  by and on behalf of the Company  (including  without
limitation  accounting,  legal and other professional  services of a routine and
recurring  nature (for  example,  annual  auditing  expenses))  shall be paid or
reimbursed by the Parent.  The Parent will  reimburse the Company  following the
Closing  for all  reasonable  and  itemized  fees and  expenses  incurred by the
Company to Taft, Stettinius & Hollister relating to the resolution of tax issues
of this  transaction  beneficial to the  Stockholders  (including,  for example,
subchapter S distributions, depreciation recapture, Section 338(h)(10) Election,
401-K distributions and similar tax issues) if the transactions  contemplated by
this  Agreement are  consummated.  All other costs and expenses  incurred by the
Company  for  the  benefit  of  the  Stockholders  or  the  Company,  or by  the
Stockholders  directly (including without limitation legal and professional fees
incurred by the Company or the  Stockholders  in connection with the negotiation
of the transactions contemplated by this Agreement), shall be paid or reimbursed
by the  Stockholders  from the Merger  Consideration  to be delivered at Closing
(the "EXCESS EXPENSES").

         SECTION  11.3.  FURTHER  ASSURANCES.  If at any time after the Closing,
Parent  or  Sub  shall  consider  it  advisable  that  any  further  conveyance,
agreements,  documents  or  instruments  or any other  things are  necessary  or
desirable to vest, perfect, confirm or record in the Surviving Corporation,  the
title to any property, rights, privileges, powers and franchises of the Company,
the  officers of the Company last in office and such other  Persons,  if any, as
the Board of  Directors  of the  Company  last in office  may  authorize,  shall
execute  and  deliver,  upon  Parent's  reasonable  request,  any and all proper
conveyances,  agreements, documents and instruments, and do all things necessary
or proper to vest,  perfect,  confirm or record title to such property,  rights,
privileges, powers and franchises in the Surviving Corporation, and otherwise to
carry out the provisions of this Agreement.

         SECTION 11.4. PARTIES IN INTEREST. All the terms and provisions of this
Agreement  shall be binding  upon,  shall  inure to the  benefit of and shall be
enforceable  by the respective  successors and permitted  assigns of the parties
hereto.  Except as set forth in Section 7.8(e),  nothing expressed or implied in
this  Agreement  is  intended or shall be  construed  to confer upon or give any
Person other than the parties hereto, their permitted successors or assigns, and
their respective  stockholders any rights or remedies under or by reason of this
Agreement or any transaction contemplated hereby or thereby.

         SECTION 11.5. ENTIRE AGREEMENT.  This Agreement and the other Operative
Documents,  together  with  the  Exhibits  and  Schedules  hereto  and  thereto,
supersede any other agreement,  whether written or oral, that may have been made
or entered into by Parent,  Sub and the Company (or by any officers,  directors,
stockholders  or  partners  of any of  such  parties)  relating  to the  matters
contemplated hereby. This Agreement and the other Operative Documents,  together
with the  Exhibits  and  Schedules






                     Agreement and Plan of Merger - Page 40


hereto and thereto,  constitute the entire  agreement by the parties,  and there
are no agreements or commitments except as set forth herein or therein.

         SECTION 11.6 AMENDMENT OR  MODIFICATION.  This Agreement may be amended
only with the written consent of Parent, Sub, the Stockholders and the Company.

         SECTION  11.7.  WAIVER.  Any party to this  Agreement  may,  by written
notice to the other  parties  to this  Agreement,  (a)  extend  the time for the
performance of any of the  obligations or other actions of the other parties for
its  benefit  under  this   Agreement;   (b)  waive  any   inaccuracies  in  the
representations  or warranties of the other parties made to it contained in this
Agreement;  (c) waive  compliance with any of the conditions or covenants of the
other  parties  for its benefit  contained  in this  Agreement;  or (d) waive or
modify  performance  of any of the  obligations  of the  other  parties  for its
benefit under this Agreement.  Except as provided in the preceding sentence,  no
action taken pursuant to this  Agreement  including any  investigation  by or on
behalf of any party,  shall be deemed to constitute a waiver by the party taking
such  action of  compliance  with any  representations,  warranties,  covenants,
conditions or agreements  contained in this Agreement.  The failure of any party
hereto to enforce at any time any of the provisions of this  Agreement  shall in
no way be  construed  to be a waiver  of any such  provision,  nor in any way to
affect the validity of this Agreement or any part hereof or thereof or the right
of such party thereafter to enforce each and every such provision.  No waiver of
any breach of or non-compliance with this Agreement shall be held to be a waiver
of any other or subsequent breach or non-compliance.

         SECTION  11.8.  ASSIGNABILITY.  Neither this  Agreement  nor any rights
hereunder shall be assignable,  except (i) by the Company with the prior written
consent of Parent, or (ii) by Parent or by Sub with the prior written consent of
the Company.

         SECTION 11.9.  HEADINGS AND  INTERPRETATION.  The headings contained in
this Agreement are for reference  purposes only and shall not affect the meaning
or  interpretation  of  this  Agreement.  Terms  such  as  "herein",   "hereof",
"hereinafter" refer to this Agreement in which they appear as a whole and not to
the  particular  sentence or  paragraph  where they  appear,  unless the context
otherwise requires. Unless the context otherwise requires, (i) terms used in the
plural  include the  singular,  and vice versa,  and (ii) words in the masculine
gender  include the feminine,  and vice versa.  References in this  Agreement to
Articles,  Sections,  Exhibits or the Schedules shall be to Articles,  Sections,
Exhibits or the Schedules in this Agreement, unless otherwise indicated.

         SECTION 11.10. NOTICES. All notices and other communications under this
Agreement  shall be in  writing  and  shall be  delivered  by hand or  overnight
courier  service,  mailed  or sent by  graphic  scanning  or  other  telegraphic
communications equipment of the sending party, as follows:

         If to Parent or Sub:

                  c/o DynaGen, Inc.
                  99 Erie Street
                  Cambridge, MA  02139
                  Attention:  Indu A. Muni
                  Telecopy No.:  (617) 354-3902






                     Agreement and Plan of Merger - Page 41


         with a copy to:

                  Testa, Hurwitz & Thibeault, LLP
                  High Street Tower
                  125 High Street
                  Boston, MA 02110
                  Attention:  John Hession, Esq.
                  Telecopy:  (617) 248-7100

         If to the Company:

                  Superior Pharmaceutical Company
                  1385 Kemper Meadow Drive
                  Cincinnati, Ohio 45240-1635
                  Attention:  Eric C. Hagerstrand
                  Telecopy No.: (513) 742-6474

         with a copy to:

                  Taft, Stettinius & Hollister
                  1800 Star Bank Center
                  425 Walnut Street
                  Cincinnati, OH 45202-3957
                  Attention:  Phil Schultz
                  Telecopy No.: (513) 381-0205

or to such  other  address  as any party  may have  furnished  to the  others in
writing in accordance  herewith,  except that notices of change of address shall
only be effective upon receipt.  All notices and other  communications  given to
any party hereto in accordance  with the provisions of this  Agreement  shall be
deemed  to have  been  given  on the date of  receipt  if  delivered  by hand or
overnight  courier  service or sent by  facsimile,  or on the date five business
days after  dispatch by certified  or  registered  mail if mailed,  in each case
delivered, sent or mailed (properly addressed) to such party as provided in this
Section 11.10 or in accordance  with the latest  unrevised  direction  from such
party given in accordance with this Section 11.10.

         SECTION 11.11.  LAW GOVERNING.  This Agreement shall be governed by and
construed  and  enforced in  accordance  with the laws of the State of Delaware,
without giving effect to the principles of conflicts of law thereof.

         SECTION  11.12.  INVALIDITY  OF  PROVISIONS.  Each  of  the  provisions
contained in this  Agreement  is distinct and  severable  and a  declaration  of
invalidity or  unenforceability of any such provision or part thereof by a court
of competent jurisdiction shall not affect the validity or enforceability of any
other provision hereof or thereof.

         SECTION   11.13.   COUNTERPARTS.   This   Agreement   may  be  executed
simultaneously in one or more counterparts,  each of which shall be deemed to be
an  original  but all of  which  together  shall  constitute  one  and the  same
instrument.









         IN WITNESS  WHEREOF,  this  Agreement  and Plan of Merger has been duly
executed and delivered by the parties on the date first above written.


                                           DYNAGEN, INC.
Attest:

/s/ Cynthia Kiley                               /s/ Dhananjay G. Wadekar
______________________________             By:  _______________________________
                                                Name: Dhananjay G. Wadekar
                                                Title: Executive Vice President


                                           DYNAGEN ACQUISITION CORP.
Attest:

/s/ Cynthia Kiley                               /s/ Dhananjay G. Wadekar
______________________________             By:  _______________________________
                                                Name: Dhananjay G. Wadekar
                                                Title: Executive Vice President


                                           SUPERIOR PHARMACEUTICAL COMPANY
Attest:

/s/ Thomas Canning                              /s/ Eric Hagerstrand 
______________________________             By:  _______________________________
                                                Name: Eric Hagerstrand 
                                                Title: Vice President and CFO


                                           STOCKHOLDERS:
                                           
                                           
                                           /s/ Eric C. Hagerstrand
                                           ------------------------------------
                                           Eric C. Hagerstrand

                                           /s/ Dennis Smith
                                           ------------------------------------
                                           Dennis Smith

                                           /s/ Thomas Canning
                                           ------------------------------------
                                           Thomas Canning