Document:

<PAGE>

                                                                     Exhibit 4.7

                                                           Draft:  June 26, 2001

                     GRUPO INDUSTRIAL DURANGO, S.A. DE C.V.

                       GID UNSUBORDINATED PROMISSORY NOTE

U.S.$______________                                       Dated:________________

          FOR VALUE RECEIVED, the undersigned, GRUPO INDUSTRIAL DURANGO, S.A. de
C.V.,  a  variable  capital  company  (sociedad  anonima  de  capital  variable)
organized  under the laws of the United  Mexican States (the  "Borrower',  which
term  includes any  successor  person),  HEREBY  PROMISES TO PAY to the order of
CORPORACION DURANGO,  S.A. de C.V., a variable capital company (sociedad anonima
de capital variable)  organized under the laws of the United Mexican States (the
"Creditor",  which term includes any successor person or assignee) the principal
amount of  $____________,  or, if less, the unpaid principal of the indebtedness
evidenced hereby,  on ________,  __________ and to pay interest thereon from the
date hereof or the most recent interest  payment date to which interest has been
paid,  semiannually on______________ and _____________ in each year,  commencing
on  _____________  at the rate of _____% per annum,  until the principal  amount
hereof is paid in full.  Interest will be paid on the interest  payment date or,
if the  interest  payment  date is not a Business  Day,  on the next  preceeding
Business  Day.  Interest is  computed  on the basis of a 360-day  year of twelve
30-day months.  The term "Business Day" means any day except a Saturday,  Sunday
or other day on which commercial banks in The City of New York are authorized by
law to close.

          Both  principal and interest are payable in lawful money of the United
States of America to the Creditor at its principal office or such other location
or account as the Creditor may designate, in same day funds.

          Additional Amounts

          (a) Any and all payments by the Borrower  hereunder shall be made free
and clear of and  without  deduction  for any and all  present or future  taxes,
levies, imposts, deductions or charges or withholdings, and all liabilities with
respect thereto imposed by Mexico or any political  subdivision  thereof,  or by
any  other  jurisdiction  from  which  any  amounts  hereunder  are  paid by the
Borrower,  excluding,  taxes imposed on the Creditor's  overall net income,  and
franchise taxes imposed on it in lieu of net income taxes,  by the  jurisdiction
under the laws of which such Creditor is organized or any political  subdivision
thereof (all such non-excluded  taxes,  levies,  imposts,  deductions,  charges,
withholdings and liabilities in respect of payments  hereunder being hereinafter
referred to as "Taxes").  If the Borrower shall be required by law to deduct any
Taxes from or in respect of any sum payable hereunder, (i) the sum payable shall
be increased  as may be  necessary so that after making all required  deductions
(including   deductions   applicable  to  additional  sums  payable  under  this
paragraph)
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such Creditor  receives an amount equal to the sum it would have received had no
such  deductions  been made,  (ii) the Borrower  shall make such  deductions and
(iii) the Borrower shall pay the full amount  deducted to the relevant  taxation
authority or other authority in accordance with applicable law.

          (b) In addition,  the  Borrower  shall pay any  applicable  present or
future stamp or  documentary  taxes or any other  applicable  excise or property
taxes,  charges or similar  levies that arise from any payment made hereunder or
from the execution,  delivery or registration of, performing under, or otherwise
with respect to, this Unsubordinated Promissory Note.

          Representations and Warranties

          The Borrower represents and warrants as of the date hereof as follows:

          (a) The Borrower is a variable  capital company  (sociedad  anonima de
     capital variable) duly organized and existing under the laws of Mexico.

          (b) The  execution,  delivery and  performance by the Borrower of this
     Unsubordinated  Promissory Note are within the Borrower's corporate powers,
     have been duly  authorized by all necessary  corporate  action,  and do not
     contravene (i) the Borrower's charter or by-laws or (ii) applicable law or
     any material contractual restriction binding on or affecting the Borrower.

          (c) No  authorization or approval or other action by, and no notice to
     or filing with, any  governmental  authority or regulatory body is required
     for the due  execution,  delivery and  performance  by the Borrower of this
     Note.

          (d)  This  Unsubordinated  Promissory  Note is the  legal,  valid  and
     binding  obligation  of the  Borrower  enforceable  against the Borrower in
     accordance  with its terms  except  as the  enforceability  thereof  may be
     limited by  bankruptcy,  insolvency,  reorganiztion,  or other similar laws
     affecting the  enforcement  of creditors'  rights  generally and to general
     equitable principles  (regardless of whether the issue of enforceability is
     considered in a proceeding in equity or at law).

          Events of Default

          If any of the following  events  ("Events of Default") shall occur and
be continuing:

          (a) the Borrower  shall fail to pay any  principal of, or interest on,
     this Unsubordinated  Promissory Note when the same becomes due and payable;
     or

          (b) any event of default shall exist under any agreement or instrument
     relating  to  any  indebtedness  of  the  Borrower  having  an  outstanding
     principal  amount of US$25 million or more and such  indebtedness  shall be
     declared to be  immediately  due and payable,  or required to be prepaid in
     full (other than by a regularly scheduled required  prepayment),  redeemed,
     purchased or defeased, or an offer to prepay,  redeem,  purchase or defease
     such  indebtedness in full shall be required to be made, in each case prior
     to the stated maturity  thereof and such  acceleration  shall not have been
     waived or extended within 30 consecutive days of the acceleration; or

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          (c) the  Borrower  fails  to make a  principal  payment  at the  final
     maturity  of any loan  having  an  outstanding  principal  amount  of US$25
     million or more and such defaulted payment is not waived or extended within
     30 consecutive days of the payment default; or

          (d) an event of default  specified in clauses (a),  (b), (g) or (h) of
     Section  501  of  the  Indenture  dated  as  of  the  date  hereof  between
     Corporacion Durango, S.A. de C.V., as issuer, and The Chase Manhattan Bank,
     as trustee (the "Trustee"),  under which Corporacion Durango,  S.A. de C.V.
     issued its  __Senior  Notes due 2008 (the "Senior  Notes")  occurs and such
     notes are either automatically accelerated or accelerated by the holders of
     such notes;

then,  and in any such  event,  the  Creditor  may,  by notice to the  Borrower,
declare this Note, all interest thereon and all other amounts payable under this
Note to be forthwith due and payable, whereupon this Note, all such interest and
all  such  amounts  shall  become  and be  forthwith  due and  payable,  without
presentment,  demand,  protest or further  notice of any kind,  all of which are
hereby expressly waived by the Borrower; provided, however, that in the event of
an entry of an order for relief  with  respect  to the  Borrower  under  Mexican
bankruptcy  law,  this  Note,  all  such  interest  and all such  amounts  shall
automatically  become  and be due  and  payable,  without  presentment,  demand,
protest or any notice of any kind, all of which are hereby  expressly  waived by
the Borrower.

          Miscellaneous

          Consideartion.  This Unsubordinated Promissory Note has been issued to
the  Creditor  in  consideration  for  the  cancellation  or  discharge,  by the
Creditor,  of $______________ of the Borrower's 12 5/8% Notes due 2003 (the "GID
Notes")  tendered in an exchange offer launched by the Creditor on _____________
(the  "Exchange  Offer"),  and the payment by the Creditor of premium,  fees and
expenses related to the Exchange Offer.

          Amendments, Etc. (a) Prior to the date (the "Pledge Release Date") on
which  the  Trustee   terminates   the   security   interest   created  in  this
Unsubordinated  Promissory  Note by the  Pledge  Agreement  dated as of the date
hereof between the Trustee and Corporacion  Durango,  S.A. de C.V., no amendment
or waiver of any  provision  of this Note,  nor consent to any  departure by the
Borrower  herefrom,  shall in any event be effective unless the same shall be in
writing  and signed by the  Trustee  and then such  waiver or  consent  shall be
effective only in the specific  instance and for the specific  purpose for which
given.

          (b)  Subsequent to the Pledge  Release Date  and until the maturity of
the exchange notes,  this Unsubordinated Promissory Note may be modified so long
as the interest rate of this  Unsubordinated Promissory Note is no less than the
interest rate of the Senior Notes.

          Prepayments.  Prepayments  of principal  hereunder may be made so long
as, after giving effect to such  prepayment,  the outstanding  principal  amount
under the  Unsubordinated  Promissory Note would be no less than the outstanding
principal amount of the Senior Notes.

                                       3
<PAGE>

          Notices,  Etc.  All  notices  and other  communications  provided  for
hereunder shall be in writing (including telecopier, telegraphic, telex or cable
communication)   and  sent  via  reputable   commercial   courier,   telecopied,
telegraphed, telexed, cabled or delivered, if to the Borrower, at its address at
Grupo Industrial Durango, S.A. de C.V., Torre Corporacion Durango,  Potasio 150,
Ciudad Industrial,  Durango,  Durango, United Mexican States,  Attention:  Legal
Counsel,  or at such other  address as shall be  designated  by the  Borrower in
writing to the Creditor;  and if to the Creditor, as shall be designated by such
Creditor in a written  notice to Borrower.  All such notices and  communications
shall, when couriered, telecopied,  telegraphed, telexed or cabled, be effective
when picked up by  courier,  telecopied,  delivered  to the  telegraph  company,
confirmed by telex answerback or delivered to the cable company, respectively.

          No  Waiver;  Remedies.  No  failure  on the  part of the  Creditor  to
exercise,  and no delay in exercising,  any right  hereunder  shall operate as a
waiver thereof;  nor shall any single or partial exercise of any right hereunder
preclude  any other or further  exercise  thereof or the  exercise  of any other
right.  The remedies  herein  provided are  cumulative  and not exclusive of any
remedies provided by law.

          Costs and Expenses.  The Borrower  agrees to pay on demand all losses,
costs and expenses, if any (including reasonable counsel fees and expenses),  in
connection with the enforcement (whether through negotiations, legal proceedings
or otherwise) of this Unsubordinated Promissory Note.

          Binding  Effect.  This  Note  shall be  binding  upon and inure to the
benefit of the Borrower and the Creditor  and their  respective  successors  and
assigns,  except that the Borrower shall not have the right to assign its rights
hereunder.

          Jurisdiction.  Each party  hereto  irrevocably  agrees  that any legal
suit,  action or  proceeding  arising out of or relating to this  Unsubordinated
Promissory  Note may be  instituted in any federal or state court in the Borough
of Manhattan,  The City of New York,  waives any  objection  which it may now or
hereafter  have to the  laying of the venue of any such  legal  suit,  action or
proceeding,  waives any immunity from  jurisdiction  or to service of process in
respect of any such suit, action or proceeding, waives any right to which it may
be entitled on account of place of residence or domicile and irrevocably submits
to the  jurisdiction  of any such court in any such suit,  action or proceeding.
The Borrower agrees that a final judgment in any such suit, action or proceeding
shall be conclusive  and may be enforced in other  jurisdictions  by suit on the
judgment or in any other manner  provided by law in accordance  with  applicable
law. The Borrower  hereby appoints  Durango Paper Company,  1000 Osborne Street,
St. Marys, Georgia 31558, Attention: Prudencio Calderon, as its authorized agent
upon which process may be served in any legal suit, action or proceeding arising
out  of or  relating  to  this  Unsubordinated  Promissory  Note  which  may  be
instituted in any federal or state court in the Borough of  Manhattan,  The City
of New York,  and agrees that  service of process  upon such agent,  and written
notice of said service to the Borrower by the person serving the same,  shall be
deemed in every  respect  effective  service of process upon the Borrower in any
such suit,  action or  proceeding  and  further  designates  its  domicile,  the
domicile of Durango Paper Company specified above and any domicile Durango Paper
Company may have in the future as its  domicile to receive any notice  hereunder
(including service of process).  If for any reason Durango Paper Company (or any
successor  agent for this  purpose)  shall  cease to act as agent for service of

                                       4
<PAGE>

process as provided above,  the Borrower will promptly appoint a successor agent
for this purpose reasonably  acceptable to the Creditor.  The Borrower agrees to
take any and all actions as may be necessary to maintain  such  designation  and
appointment of such agent in full force and effect.

          Judgment  Currency.  If for the purpose of  obtaining  judgment in any
court it is  necessary  to  convert  an  amount  due under  this  Unsubordinated
Promissory Note into any currency other than United States dollars,  the parties
hereto agree,  to the fullest extent  permitted  under  applicable law, that the
rate of  exchange  used shall be the rate at which,  in  accordance  with normal
banking procedures,  the Creditor could purchase United States dollars with such
other  currency in The City of New York on the  Business Day  preceding  that on
which final judgment is given. To the fullest extent  permitted under applicable
law,  the  obligation  of the  Borrower  with  respect to any sum due under this
Unsubordinated Promissory Note, notwithstanding any judgment in a currency other
than United States dollars,  shall not be discharged,  following  receipt by the
Creditor of such amount adjudged to be so due in such other currency,  until the
first  Business  Day on which (and only to the extent  that) the Creditor may in
accordance  with normal banking  procedures  purchase United States dollars with
such other currency,  and if the amount of United States dollars so purchased is
less than the amount  originally  due to the  Creditor  hereunder,  the Borrower
agrees,  as a separate  obligation and  notwithstanding  any such  judgment,  to
indemnify  the  Creditor  against  such loss.  If the United  States  dollars so
purchased are greater than the amount originally due to the Creditor  hereunder,
the  Creditor  agrees to pay the  Borrower an amount  equal to the excess of the
United States  dollars so purchased  over the sum originally due to the Creditor
hereunder.

          Governing  Law.  This Note  shall be  governed  by, and  construed  in
accordance with, the laws of the State of New York, United States.

          WAIVER OF JURY TRIAL.  THE BORROWER AND THE CREDITOR EACH  IRREVOCABLY
WAIVES  ALL RIGHT TO TRIAL BY JURY IN ANY  ACTION,  PROCEEDING  OR  COUNTERCLAIM
(WHETHER  BASED ON CONTRACT,  TORT OR  OTHERWISE)  ARISING OUT OF OR RELATING TO
THIS  UNSUBORDINATED  PROMISSORY  NOTE OR THE  ACTIONS  OF THE  CREDITOR  IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.

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<PAGE>

          IN  WITNESS  WHEREOF,  the  Borrower  has caused  this  Unsubordinated
Promissory Note to be executed by its officer  thereunto duly authorized,  as of
the date first above written.

                                          GRUPO INDUSTRIAL DURANGO, S.A. de C.V.

                                          By___________________________________
                                            Title:

This  Unsubordinated  Promissory  Note has been  endorsed to The Chase
Manhattan Bank, as trustee, by Corporacion Durango, S.A. de C.V. pursuant to the
terms of the 2008 Pledge Agreement dated as of the date hereof between The Chase
Manhattan  Bank  and  Corporacion  Durango,  S.A.  de C.V.  on this _____ day of
____________ in ____________________,  ____________________.

CORPORACION DURANGO, S.A. de C.V.

By___________________________________
  Title:<PAGE>

                                                                    Exhibit 10.2

                                                                  EXECUTION COPY

                            ASSET PURCHASE AGREEMENT

                                 BY AND BETWEEN

                         DURANGO GEORGIA CONVERTING LLC

                                       AND

                                TST IMPRESO, INC.

--------------------------------------------------------------------------------

                            Dated as of April 5, 2001
<PAGE>

                                TABLE OF CONTENTS

                                                                            Page

ARTICLE I.      DEFINITIONS...................................................1

       1.1      Certain Defined Terms.........................................1
       1.2      Certain Rules of Construction.................................8

ARTICLE II.     PURCHASE AND SALE.............................................8

       2.1      Purchase and Sale.............................................8
       2.2      Assumed Liabilities...........................................9
       2.3      Purchase Price...............................................10
       2.4      Purchase Price Adjustment....................................10
       2.5      Allocation of Purchase Price.................................11
       2.6      Taxes........................................................11
       2.7      The Closing..................................................12

ARTICLE III.    REPRESENTATIONS AND WARRANTIES OF THE SELLER.................12

       3.1      Organization; Power..........................................12
       3.2      Authorization; Effect of Agreement...........................12
       3.3      Subsidiaries and Equity Interests............................13
       3.4      Consents.....................................................13
       3.5      Financial Statements.........................................13
       3.6      Conduct in the Ordinary Course; Absence of Certain
                Changes, Events and Conditions...............................13
       3.7      No Undisclosed Liabilities...................................15
       3.8      Title to Assets..............................................15
       3.9      Permits......................................................16
       3.10     Real Property................................................16
       3.11     Compliance with Laws.........................................17
       3.12     Contracts....................................................17
       3.13     No Violations................................................18
       3.14     Intellectual Property........................................19
       3.15     Litigation...................................................19
       3.16     Employee Benefit Plans.......................................19
       3.17     Tax Matters..................................................21
       3.18     Environmental Matters........................................21
       3.19     Labor Matters................................................22
       3.20     Receivables..................................................23
       3.21     Inventories..................................................23
       3.22     Certain Interests............................................24
       3.23     Brokers......................................................24
       3.24     Accuracy of Information Furnished............................24

ARTICLE IV.     REPRESENTATIONS AND WARRANTIES OF THE BUYER..................24

       4.1      Organization; Power..........................................24
       4.2      Authorization; Effect of Agreement...........................24
       4.3      Consents.....................................................25
       4.4      No Violations................................................25
       4.5      Litigation...................................................25
       4.6      Availability of Funds........................................25
       4.7      Brokers......................................................26

ARTICLE V.      COVENANTS OF THE SELLER......................................26

       5.1      Action by the Seller.........................................26
       5.2      Conduct of the Sky Division's Business.......................26
       5.3      Access.......................................................27
       5.4      Publicity....................................................27
       5.5      Notices of Certain Events....................................27
       5.6      Exclusivity..................................................27
       5.7      Employees....................................................27

ARTICLE VI.     COVENANTS OF THE BUYER.......................................28

       6.1      Action by the Buyer..........................................28
       6.2      Publicity....................................................28
       6.3      Confidentiality..............................................28
       6.4      Notice.......................................................28

ARTICLE VII.    ADDITIONAL COVENANTS.........................................29

       7.1      Further Assurances...........................................29
       7.2      Books and Records............................................29
       7.3      Insurance....................................................29
       7.4      Payments from Third Parties..................................29
       7.5      Tax Matters..................................................29
       7.6      Covenant Not to Compete......................................29
       7.7      Emkay Assignment.............................................30

ARTICLE VIII.   CONDITIONS TO THE BUYER'S OBLIGATIONS........................31

       8.1      Representations and Warranties; Performance..................31
       8.2      Consents.....................................................31
       8.3      Absence of Certain Proceedings...............................31
       8.4      Environmental Assessment.....................................31
       8.5      Opinion of Counsel...........................................31
       8.6      Availability of Funds........................................31
       8.7      License Agreement............................................31
       8.8      Transamerica Lease...........................................32
       8.9      Assignment of Bank Accounts..................................32
       8.10     Warehouse Letters............................................32
       8.11     Payment of Aged Receivables..................................32

ARTICLE IX.     CONDITIONS TO THE SELLER'S OBLIGATIONS.......................32

       9.1      Representations and Warranties; Performance..................32
       9.2      Absence of Certain Proceedings...............................32
       9.3      Opinion of Counsel...........................................32
       9.4      Security Agreement...........................................32
       9.5      Supply Agreement.............................................33
       9.6      License Agreement............................................33
       9.7      Intercreditor Agreement......................................33

ARTICLE X.      EMPLOYMENT AND EMPLOYEE BENEFITS ARRANGEMENTS................33

       10.1     Transferred Employees........................................33
       10.2     Employee Benefit Plans.......................................33
       10.3     Worker's Compensation........................................34

ARTICLE XI.     TERMINATION..................................................34

       11.1     Termination and Abandonment..................................34
       11.2     Effect of Termination........................................35

ARTICLE XII.    SURVIVAL AND INDEMNIFICATION.................................35

       12.1     Survival.....................................................35
       12.2     Indemnification by the Seller................................35
       12.3     Indemnification by the Buyer.................................38
       12.4     Procedure for Indemnification................................38
       12.5     Payment......................................................39
       12.6     Adjustment Amounts...........................................39
       12.7     Indemnification..............................................39
       12.8     Exclusivity..................................................39
       12.9     Tax Treatment................................................40

ARTICLE XIII.   MISCELLANEOUS................................................40

       13.1     Fees and Expenses ...........................................40
       13.2     Amendments...................................................40
       13.3     Entire Agreement.............................................40
       13.4     Assignment, Binding Effect; Benefit..........................40
       13.5     Headings.....................................................41
       13.6     Governing Law; Arbitration...................................41
       13.7     Notices......................................................42
       13.8     Counterparts.................................................43
       13.9     Severability.................................................43

SCHEDULES

Schedule 2.1(a)    Tangible Personal Property
Schedule 2.1(c)    Real Property
Schedule 2.1(h)    Permits and Contracts
Schedule 2.4       Form of Closing Statement
Schedule 2.5       Allocation of Purchase Price
Schedule 3.1       Organization; Power
Schedule 3.4       Consents
Schedule 3.5       Financial Statements
Schedule 3.6       Conduct  in  the Ordinary Course; Absence of Certain Changes,
                   Events and Conditions
Schedule 3.7       No Undisclosed Liabilities
Schedule 3.8       Title to Assets
Schedule 3.9       Permits
Schedule 3.10(a)   Owned Real Property
Schedule 3.10(b)   Leases
Schedule 3.11      Compliance with Laws
Schedule 3.12(a)   Material Contracts
Schedule 3.12(b)   Material Contracts (Enforceability)
Schedule 3.12(c)   Material Contracts (Breach/Default)
Schedule 3.13      No Violations
Schedule 3.14      Intellectual Property
Schedule 3.15      Litigation
Schedule 3.16(a)   Employee Benefit Plans
Schedule 3.18      Environmental Matters
Schedule 3.19(a)   Labor Matters
Schedule 3.19(b)   Active Employees/Inactive Employees
Schedule 3.21      Inventories
Schedule 3.22      Certain Interests
Schedule 5.2       Conduct of the Sky Division's Business
Schedule 8.10      Warehouse Letters

EXHIBITS

Exhibit A-1       Form of Note
Exhibit A-2       Form of Press Note
Exhibit A-3       Form of Security Agreement
Exhibit B-1       Commitment Letter of Congress Financial Corporation
Exhibit B-2       Commitment Letter  of  General Electric Business Asset Funding
                  Corporation
Exhibit B-3       Commitment  Letter  of General Electric Business Asset Funding
                  Corporation
Exhibit C         Form of Opinion of Seller's Counsel
Exhibit D         Form of License Agreement
Exhibit E         Matters for Opinion of Buyer's Counsel
Exhibit F         Form of Supply Agreement
<PAGE>

                            ASSET PURCHASE AGREEMENT

     This  Asset   Purchase   Agreement,   dated  as  of  April  5,  2001  (this
"Agreement"),  by and between DURANGO GEORGIA CONVERTING LLC, a Delaware limited
liability company (the "Seller"),  and TST IMPRESO, INC., a Delaware corporation
(the "Buyer").  The Buyer and the Seller are referred to collectively  herein as
the "Parties."

                              W I T N E S S E T H:
                              - - - - - - - - - -

     WHEREAS,  the Seller owns and  operates a  converting  facility  located in
Greencastle,  Pennsylvania (the "Converting Facility"), which primarily produces
stock tab continuous feed computer paper (the "Sky Division"); and

     WHEREAS,  upon the terms and subject to the  conditions  contained  in this
Agreement,  the Seller  desires to sell to the Buyer,  and the Buyer  desires to
purchase  from the Seller,  substantially  all of the Sky  Division as set forth
herein.

     NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements  contained in this Agreement,  the Parties hereby agree
as follows:

                                   ARTICLE I.
                                   DEFINITIONS

     1.1 Certain Defined Terms.  As used in this Agreement,  the following terms
shall have the following meanings:

          "Acquired Assets" shall have the meaning set forth in Section 2.1.

          "Action" shall mean any action, suit, arbitration, inquiry, proceeding
or investigation by or before any Governmental Authority.

          "Active Employee" shall have the meaning set forth in Section 10.1.

          "Affiliate"  shall mean, with respect to any Person,  any other Person
directly or indirectly controlling,  controlled by, or under common control with
such Person.  A Person shall be deemed to control  another Person if such Person
possesses, directly or indirectly, the power to direct or cause the direction of
the management and policies of such other Person,  whether through the ownership
of voting securities, by contract or otherwise.

          "Agreement" shall have the meaning set forth in the Preamble.

          "Arbiter" shall mean KPMG LLP, or such other Person as may be mutually
agreed by the Parties.

          "Assumed Liabilities" shall have the meaning set forth in Section 2.2.
<PAGE>

          "Bank Accounts" shall means, collectively, the bank account maintained
by Durango Georgia Converting  Corporation at Mellon Bank N.A. (acct. # 2929016)
and the  bank  accounts  maintained  by the  Seller  at First  national  Bank of
Greencastle (acct. # 1-48202, acct. # 1-21983 and acct. # 1-66855).

          "Business Day" shall mean any day that is not a Saturday,  a Sunday or
other day on which banks are required or  authorized  by law to be closed in New
York, New York.

          "Business Intellectual  Property" shall mean all patents,  trademarks,
service marks,  trade names and copyrights and each registration and application
for any of the foregoing owned, used or held by the Seller for use in connection
with the conduct of the business of the Sky Division.

          "Buyer" shall have the meaning set forth in the Preamble.

          "Buyer  Indemnitees"  shall  have the  meaning  set  forth in  Section
12.2(a).

          "Buyer Material  Adverse Effect" shall mean a material  adverse effect
on (a) the business,  operations,  results of operations or condition (financial
or  otherwise)  of the  Buyer or (b) the  ability  of the Buyer to  perform  its
obligations under this Agreement,  the Note, the Security  Agreement,  the Press
Note or the Supply  Agreement or to  consummate  the  transactions  contemplated
hereby or thereby.

          "Buyer's  401(k)  Plan"  shall have the  meaning  set forth in Section
10.2(a).

          "Claimant" shall have the meaning set forth in Section 13.6(a)(ii).

          "Claims   Notice"   shall  have  the  meaning  set  forth  in  Section
12.2(b)(ii)(A).

          "Closing" shall have the meaning set forth in Section 2.7.

          "Closing Date" shall have the meaning set forth in Section 2.7.

          "Closing  Statement"  shall  have the  meaning  set  forth in  Section
2.4(a).

          "COBRA" shall have the meaning set forth in Section 10.2(c).

          "Code" shall mean the Internal Revenue Code of 1986, as amended.

          "Commercially  Reasonable" shall have the meaning set forth in Section
12.2(b)(ii)(E).

          "Commitment Letters" shall have the meaning set forth in Section 4.6.

          "Competing  Transaction"  shall have the  meaning set forth in Section
5.6.

          "Consents"  shall mean any consent,  approval,  authorization or other
order of, or action or  exemption  by, or filing  with or  notification  of, any
Person.
<PAGE>

          "Continuation  Coverage"  shall have the  meaning set forth in Section
10.2(c).

          "Contract" shall mean any agreement,  contract,  instrument,  license,
lease,  sublease,  or binding  understanding,  arrangement  or  commitment,  but
excluding  all  contracts  and  agreements  relating  to or forming a part of an
Employee Benefit Plan.

          "Converting  Facility"  shall  have  the  meaning  set  forth  in  the
Recitals.

          "Covered Persons" shall have the meaning set forth in Section 10.2(c).

          "Emkay  Agreement"  means the Master  Lease  between  Emkay,  Inc. and
Gilman Paper Company, dated September 15, 1976, as amended.

          "Employee  Benefit Plan" shall mean any: (a)  "employee  benefit plan"
within the meaning of Section 3(3) of the Employee  Retirement  Income  Security
Act of 1974, as amended  ("ERISA");  (b) bonus,  stock option,  stock  purchase,
restricted stock,  incentive,  fringe benefit,  voluntary employees' beneficiary
associations under Section 501(c)(9) of the Code,  profit-sharing,  pension,  or
retirement, deferred compensation,  medical, life, disability,  accident, salary
continuation,   severance,  accrued  leave,  vacation,  sick  pay,  sick  leave,
supplemental retirement and unemployment benefit plans (whether or not insured);
and  (c)  employment,  consulting,   termination,  and  severance  contracts  or
agreements,  in each case  maintained or  contributed  to by the Seller,  or any
other  corporation  or trade or business under common control with the Seller or
treated  as a single  employer  with the  Seller as  determined  under  Sections
414(b), (c), (m) or (o) of the Code (an "ERISA  Affiliate"),  or under which the
Seller or any ERISA Affiliate has any current or future  obligation or liability
with respect to a present or former  officer,  employee,  agent or consultant of
the Sky Division or under which any present or former officer,  employee,  agent
or  consultant  of the  Sky  Division,  or  such  present  or  former  officer's
employee's,  agent's  or  consultant's  dependents  or  beneficiaries,  have any
current or future right to benefits.

          "Employees"  shall  mean all  current  employees  (including  those on
layoff,  disability  or  leave  of  absence,  whether  paid or  unpaid),  former
employees and retired employees of the Sky Division.

          "Encumbrance"  shall  mean  any  lien,  security  interest,  mortgage,
pledge, adverse claim, title defect or other encumbrance.

          "Environmental  Claim"  shall  have the  meaning  set forth in Section
12.2(b)(ii)(A).

          "Environmental  Laws"  shall  mean  the  Comprehensive   Environmental
Response,  Compensation and Liability Act, 42 U.S.C.  Sections 9601 et seq., the
Emergency  Planning and Community  Right-to-Know Act of 1986,42 U.S.C.  Sections
11001 et seq., the Resource  Conservation  and Recovery Act, 42 U.S.C.  Sections
6901 et seq., the Toxic Substances Control Act, 15 U.S.C. Sections 2601 et seq.,
the Federal Insecticide,  Fungicide,  and Rodenticide Act, 7 U.S.C. Sections 136
et seq., the Clean Air Act, 42 U.S.C. Sections 7401 et seq., the Clean Water Act
(Federal Water Pollution Control Act), 33 U.S.C. Sections 1251 et seq., the Safe
<PAGE>

Drinking Water Act, 42 U.S.C. Sections 300f et seq., the Occupational Safety and
Health  Act,  29  U.S.C.   Sections  641,  et  seq.,  the  Hazardous   Materials
Transportation  Act, 49 U.S.C.  Sections  1801, et seq., the Safe Drinking Water
and Toxic  Enforcement Act of 1986,  California  Health and Safety Code Division
20, Chapter 6.6 Sections 25249.5-25249.13, the rules and regulations promulgated
pursuant to any of the above  statutes,  and any other  federal,  state or local
laws, statutes,  ordinances,  orders, directives, rules or regulations governing
Environmental  Matters, as the same have been amended and as in effect as of the
Closing Date.

          "Environmental  Matters"  shall  mean  any  matter  arising  out of or
relating to pollution or protection of the  environment,  human health or safety
of employees.

          "Environmental  Permits" shall mean all Permits  required  pursuant to
applicable  Environmental  Laws currently in effect for the operation of the Sky
Division.

          "Excluded   Assets"  shall  mean:  (a)  all  cash,  cash  equivalents,
securities  and  insurance  policies  and rights  thereunder;  (b) all assets or
properties  of the Seller that are not used or held for use in  connection  with
the Sky Division;  (c) all rights of the Seller  arising under this Agreement or
the transactions contemplated hereby; (d) all assets or properties of the Seller
that are sold or  otherwise  disposed  of in the  ordinary  course of  business,
consistent with the Seller's obligations hereunder, or as otherwise permitted by
this  Agreement  during the period from the date hereof until the Closing  Date;
(e) all  intercompany  receivables  (other than those  arising  through  product
sales);  (f) all  accounts  receivable  over ninety (90) days past due as of the
Closing  Date;  (g) all refunds,  credits and claims for refunds of any Taxes of
the Seller or any of its Affiliates;  and (h) all items of Business Intellectual
Property which incorporate "Durango",  "Gilman",  "Converting" or any derivation
in whole or in part thereof, individually or in combination.

          "Facility"  shall mean any real  property or  leasehold  currently  or
formerly owned or operated by the Seller in connection with the Sky Division.

          "Final Amount" shall mean the amount of the current assets included in
the  Acquired  Assets  as at the  Closing  Date less the  amount of the  current
liabilities  included in the Assumed  Liabilities as at the Closing Date, as set
forth on the Closing Statement.

          "Financial  Statements"  shall have the  meaning  set forth in Section
3.5(a).

          "Governmental  Authority"  shall  mean  any  governmental,  public  or
self-regulatory body or authority.

          "Governmental  Order"  shall  mean any  order,  judgment,  injunction,
decree or stipulation entered by or with a Governmental Authority.

          "Hazardous  Materials"  shall mean any substance or material  which is
defined as, or considered  to be, a "hazardous  waste,"  "hazardous  substance,"
"pollutant" or "contaminant"  under any Environmental Law, or which is otherwise
regulated  by  any  Environmental  Laws,  including  asbestos,   polychlorinated
biphenyls, petroleum and petroleum products.

          "Indebtedness"  of  any  Person  shall  mean  at  any  date,   without
duplication,  (a) all  obligations  of such Person for borrowed  money,  (b) all
obligations  of such Person  evidenced  by bonds,  debentures,  notes or similar
<PAGE>

instruments,  (c) all  obligations  of such Person to pay the deferred  purchase
price of property or services, except trade accounts payable or accruals arising
in the ordinary course of business, (d) all obligations of such Person as lessee
that are capitalized in accordance with applicable generally accepted accounting
principles,  (e) all  Indebtedness  of others  secured by an  Encumbrance on any
asset of such  Person,  whether  or not such  Indebtedness  is  assumed  by such
Person,  and (f) all  obligations  of such Person in the nature of guarantees of
the obligations described in clauses (a) through (e) above of any other Person.

          "Indemnified  Environmental  Losses" shall mean any Losses suffered by
the  Buyer as a  result  of any  breach  of  Section  3.18 or any  liability  or
obligation relating to Environmental Matters arising prior to the Closing Date.

          "Indemnitee"  shall have the  meaning set forth in the  definition  of
"Losses".

          "Indemnitor"  shall have the  meaning set forth in the  definition  of
"Losses".

          "Knowledge"  shall  mean,  with  respect  to any  Person,  the  actual
knowledge, after due inquiry, of the Officers of such Person.

          "Law" shall mean any federal,  state,  local or foreign statute,  law,
ordinance,  regulation, rule, code, order, judgment, decree or other requirement
or rule of law.

          "Leased  Real  Property"  shall have the  meaning set forth in Section
3.10(b).

          "Leases" shall have the meaning set forth in Section 3.10(b).

          "License Agreement" shall have the meaning set forth in Section 8.7

          "Loss" or "Losses" shall mean all claims, losses (net of any insurance
recovery  received),   liabilities,   obligations,   payments,  actual  damages,
judgments,  fines, penalties, Taxes, amounts paid in settlement, and any related
reasonable costs and expenses (including, without limitation, interest which may
be imposed in connection  therewith,  costs and expenses of  investigation,  and
remediation,  actions, suits, proceedings,  demands,  assessments and reasonable
fees and disbursements of counsel,  environmental consultants and other experts)
incurred  by the Person  seeking  indemnification  (the  "Indemnitee")  (whether
relating to claims  asserted by or against third  parties or to claims  asserted
against the Person providing indemnification (the "Indemnitor")).

          "Material  Contracts"  shall  have the  meaning  set forth in  Section
3.12(a).

          "Non-competition  Period"  shall have the meaning set forth in Section
7.6(b).

          "Note" shall have the meaning set forth in Section 2.3.

          "Notice" shall have the meaning set forth in Section 12.4.

          "Notification"   shall   have  the   meaning   set  forth  in  Section
12.2(b)(i)(B).

          "Officer" shall mean any executive officer or director of the Seller.
<PAGE>

          "Owned  Real  Property"  shall have the  meaning  set forth in Section
3.10(a).

          "Parties" shall have the meaning set forth in the Preamble.

          "Permit"  shall  mean any  permit,  license,  order  or  authorization
issued,  granted or given or otherwise  made available by or under the authority
of any Governmental Authority.

          "Permitted  Encumbrances"  shall  mean (a)  Encumbrances  set forth on
Schedule  3.8,  (b)  liens  of  Taxes  not yet due  and  payable  or due but not
delinquent or being  contested in good faith by appropriate  proceedings and (c)
Encumbrances  which  individually  or in the aggregate  could not  reasonably be
expected to have a Seller Material Adverse Effect.

          "Person" shall mean any individual,  firm,  corporation,  partnership,
limited liability  company,  trust, joint venture,  association,  unincorporated
organization, Governmental Authority or other entity.

          "Preliminary Amount" shall mean $10,289,310.

          "Press"  shall mean that certain 1996  Hamilton  Press 33" by 48" wide
one color dry offset  press,  Wide Trac Model 110,  Hiline Press five forms wide
with serial number 595157 that is located at 151 Commerce  Avenue,  Greencastle,
Pennsylvania 17225 as of the date of this Agreement

          "Press Lease" shall mean that certain Master Lease between PNC Leasing
Corp. and Gilman Paper Company, dated April 24, 1995, as amended by that certain
Lease for Press between PNC Leasing  Corp.,  Kentucky and Gilman Paper  Company,
dated October 5, 1995.

          "Press Note" shall have the meaning set forth in Section 2.3.

          "Purchase Price" shall have the meaning set forth in Section 2.3.

          "Purchase  Price  Adjustment"  shall mean the  difference  between the
Preliminary Amount and the Final Amount, whether a positive or negative number.

          "Purchase  Price  Allocation"  shall  have the  meaning  set  forth in
Section 2.5.

          "Real Property" shall have the meaning set forth in Section 3.10(b).

          "Reference  Balance Sheet" shall have the meaning set forth in Section
3.5(a).

          "Request" shall have the meaning set forth in Section 13.6(a)(ii).

          "Respondent" shall have the meaning set forth in Section 13.6(a)(ii).

          "Response  Action"  shall mean any order,  directive,  decree,  claim,
demand, notice of potential liability, or complaint,  seeking monetary relief or
the  performance of any action to  investigate,  test,  monitor or remediate any
Hazardous Materials.
<PAGE>

          "Security  Agreement" shall mean the Security  Agreement,  dated as of
the Closing Date,  between the Buyer and the Seller,  substantially  in the form
attached hereto as Exhibit A-3.

          "Seller" shall have the meaning set forth in the Preamble.

          "Seller Indemnitees" shall have the meaning set forth in Section 12.3.

          "Seller  Material Adverse Effect" shall mean a material adverse effect
on (a) the business,  operations,  results of operations or condition (financial
or  otherwise)  of the Sky  Division or (b) the ability of the Seller to perform
its  obligations  under this Agreement or the Supply  Agreement or to consummate
the transactions contemplated hereby or thereby.

          "Seller's  401(k)  Plans"  shall have the meaning set forth in Section
10.2(a).

          "Sky Division" shall have the meaning set forth in the Recitals.

          "Straddle Taxes" shall have the meaning set forth in Section 2.6(a).

          "Subsidiary" shall mean any Person,  with respect to which a specified
Person owns 50% or more of the capital  stock or other equity  interests of such
Person,  the holders of which are generally entitled to vote for the election of
the board of  directors  or other  governing  body of such  Person,  directly or
through one or more Subsidiaries.

          "Supply Agreement" shall have the meaning set forth in Section 9.4

          "Tangible  Personal  Property"  shall mean all  machinery,  equipment,
vehicles,  office  furniture,  tools and other tangible  property owned, used or
held by the Seller for use  primarily  or  exclusively  in  connection  with the
business of the Sky Division.

          "Tax or Taxes" shall mean (a) any taxes,  assessments,  duties,  fees,
levies, imposts,  deductions,  withholdings or other governmental charges of any
nature  whatsoever  imposed by any taxing  authority of any country or political
subdivision of any country, including any interest, penalties,  additions to tax
or additional  amounts  imposed by any taxing  authority  with respect  thereto,
whether  disputed or not, and (b) any liability of the Seller for payment of any
amounts for the type described in clause (a) above as a result of being a member
of an affiliated, consolidated, combined or unitary group for any period of time
prior to Closing.

          "Tax Return"  shall mean any return,  declaration,  report,  claim for
refund or  information  return or  statement  relating to Taxes,  including  any
schedule or attachment thereto.

          "Third-Party Claim" shall have the meaning set forth in Section 12.4.

          "Trade Secrets" shall have the meaning set forth in Section 7.6(a).

          "Transamerica  Lease" shall mean the Schedule,  dated May 28, 1996, to
the Master Lease between PNC Leasing Corp. and Gilman Paper Company, dated April
24, 1995.
<PAGE>

          "Transfer Taxes" shall mean all transfer, transfer gains, documentary,
sales,  use,  stamp,  registration  and other similar Taxes and fees  (including
penalties,  interest  and  additions to tax  attributable  thereto and costs and
expenses relating to such Taxes).

          "Transferred  Employee"  shall have the  meaning  set forth in Section
10.1.

          "U.S.  GAAP" shall mean United States  generally  accepted  accounting
principles  applied on a basis  consistent  with the past  practices  of the Sky
Division.

          "WARN  Act"  shall  mean  the   Worker   Adjustment   and   Retraining
Notification Act of 1988, as amended.

     1.2 Certain Rules of Construction.

          (a) When used herein, the words "hereof," "herein" and "hereunder" and
words of similar  import shall refer to this Agreement as a whole and not to any
particular  provision of this Agreement.  References to the Preamble,  Recitals,
Articles,  Sections,  Schedules  or  Exhibits  shall refer  respectively  to the
Preamble, Recitals, Articles, Sections, Schedules or Exhibits of this Agreement,
unless otherwise expressly provided.

          (b) When used herein, the terms "include", "includes", and "including"
are not limiting.

          (c) Unless the context  requires  otherwise,  derivative  forms of any
term defined herein shall have a comparable meaning to that of such term.

          (d) When a Party's consent is required hereunder, such Party's consent
may be granted or withheld in such Party's  sole  discretion,  unless  otherwise
specified.

                                   ARTICLE II.
                                PURCHASE AND SALE

     2.1 Purchase and Sale. Upon the terms and subject to the conditions of this
Agreement,  the Seller shall sell, convey,  transfer,  assign and deliver to the
Buyer, and the Buyer shall purchase from the Seller, at the Closing,  all of the
Seller's  right,  title and  interest  in, to and  under all of the  assets  and
properties  used or held by the  Seller  for use  primarily  or  exclusively  in
connection  with the  business  of the Sky  Division  (other  than the  Excluded
Assets) (each and all of such assets and properties  being herein referred to as
the "Acquired  Assets"),  including,  without  limitation,  all right, title and
interest of the Seller in, to and under the following:

          (a) all  Tangible  Personal  Property,  which is set forth on Schedule
2.1(a), including the location thereof;

          (b) all raw materials,  inventories,  including inventories of work in
process,  samples and  finished  goods,  spare parts  relating to  manufacturing
equipment,  products and supplies  owned,  used or held by the Seller for use in
connection with the business of the Sky Division;
<PAGE>

          (c) all Real Property, which is set forth on Schedule 2.1(c);

          (d)  all  claims,  deposits,  prepayments,   refunds,  and  rights  of
recovery, set off and recoupment;

          (e) all  accounts,  notes and other  receivables  (other than accounts
receivable  that are over ninety  (90) days past due as of the Closing  Date and
intercompany receivables,  except those intercompany receivables arising through
product sales);

          (f) all Business  Intellectual  Property,  intangibles and goodwill of
the Sky Division;

          (g)  all  books,  records,  technical  manuals,  and  other  documents
necessary  to or  used  primarily  or  exclusively  in the  conduct  of the  Sky
Division's business;

          (h) all rights arising or otherwise relating to any period on or after
the Closing  Date in respect of all Permits  and  Contracts  obtained or entered
into regarding the Sky Division, which are set forth on Schedule 2.1(h);

          (i) all of  Seller's  right,  title  and  interest  in and to the Bank
Accounts.

     2.2 Assumed  Liabilities.  The Buyer shall  assume on and as of the Closing
Date, and shall  thereafter pay,  perform and discharge when due (or cause to be
paid,  performed  and  discharged  when  due),  the  following  liabilities  and
obligations of the Seller,  relating to or arising out of the conduct of the Sky
Division's business (collectively, the "Assumed Liabilities"):

          (a) all liabilities and obligations of the Seller arising or otherwise
relating  to any period on or after the  Closing  Date under or  pursuant to the
Contracts and the Permits included in the Acquired Assets; and

          (b) all accounts  payable of the Seller in respect of the Sky Division
(other  than  accounts  payable  that are over  thirty  (30)  days old as of the
Closing  Date and  intercompany  payables,  except those  intercompany  payables
arising through product sales).

          The  Buyer  shall  not  assume  or be  responsible  for  the  payment,
performance  and discharge of any obligations or liabilities of the Seller other
than the Assumed  Liabilities,  including  but not limited to any  liability  or
obligation  relating to or arising  from any  Employee  Benefit  Plan (except as
expressly  set  forth  in  Article  X),  or any  contract,  agreement  or  other
arrangement relating thereto or forming a part thereof.

     2.3 Purchase  Price.  The Buyer shall pay to the Seller or its designees at
the Closing  $12,340,231.50  (as adjusted pursuant to Section 2.4, the "Purchase
Price") by  delivery  of: (i) cash in an amount  equal to  $11,399,653,  by wire
transfer of immediately  available  funds to an account  specified in writing by
the Seller to the Buyer prior to the Closing Date (ii) the unsecured  promissory
note of the Buyer, in the principal  amount of $300,000 and bearing  interest at
the prime  rate of  interest  as quoted by The Chase  Manhattan  Bank on the day
<PAGE>

prior  to the  Closing  Date,  payable  in  twenty  (20)  consecutive  quarterly
principal  payments  of $15,000  each,  plus  accrued  interest,  in the form of
Exhibit A-1 (the "Note"), and (iii) the secured promissory note of the Buyer, in
the  principal  amount of  $640,578.50,  bearing  no  interest  and  payable  in
twenty-five  (25)  consecutive  monthly  payments of $16,024.10 each and a final
payment in the amount of  $239,976.00,  in the form of Exhibit  A-2 (the  "Press
Note").

     2.4 Purchase Price Adjustment.

          (a) Prior to the Closing  Date,  the Buyer shall retain the Arbiter to
prepare and deliver,  as promptly as practicable but in any event within 45 days
following the Closing Date, to the Seller and the Buyer an unaudited  statement,
substantially  in the form of Schedule  2.4,  setting  forth the current  assets
included  in the  Acquired  Assets and the current  liabilities  included in the
Assumed  Liabilities  as at the  Closing  Date (the  "Closing  Statement").  The
Closing Statement shall be prepared using the same accounting methods, policies,
practices  and  procedures,  with  consistent  classification,   judgments,  and
estimation  methodology,  as used in the  preparation  of the Reference  Balance
Sheet,  except that the Closing  Statement shall not include (i) any current Tax
assets  or  any  current  Tax  liabilities  or  (ii)  any  LIFO  reserve  or any
intercompany  profit on inventory reserve,  except to the extent included on the
balance  sheet of the Seller as at October 31,  2000.  Notwithstanding  anything
contained  herein to the  contrary,  for  purposes of the Closing  Statement,  ,
storeroom  inventory and spare parts will be  determined on the day  immediately
preceding the Closing Date and all inventory shall be valued at the invoice cost
of raw materials plus  manufacturing  costs with respect thereto,  determined in
accordance with U.S. GAAP.

          (b) The Closing  Statement  delivered  by the Arbiter to the Buyer and
the Seller shall be  conclusive  and binding upon the Parties,  absent  manifest
error. The fees, costs and expenses of the Arbiter shall be borne equally by the
Buyer and the  Seller.  The Buyer and the  Seller  shall make  available  to the
Arbiter  their   respective  work  papers   generated  in  connection  with  the
preparation or review of the Closing Statement.

          (c) If the Final  Amount  exceeds the  Preliminary  Amount,  the Buyer
shall pay to the Seller the dollar  amount of the Purchase  Price  Adjustment in
accordance  with the  provisions  of  paragraph  (d) of this Section 2.4. If the
Final Amount is less than the  Preliminary  Amount,  the Seller shall pay to the
Buyer the dollar amount of the Purchase Price  Adjustment in accordance with the
provisions of paragraph (d) of this Section 2.4.

          (d) Any amount payable as the Purchase Price  Adjustment shall be paid
by wire  transfer of  immediately  available  funds to an account  designated in
writing by the Buyer or the  Seller,  as the case may be,  except as provided in
Section 2.4 of the Note. The payments  contemplated in this Section 2.4(d) shall
be made prior to the tenth  Business Day  following the receipt of the report of
the Arbiter.

     2.5 Allocation of Purchase Price.  The Seller and the Buyer shall use their
reasonable  best efforts to agree upon an allocation  of the Purchase  Price and
other relevant items (the "Purchase Price Allocation") for Federal, state, local
and foreign tax purposes on or prior to the Closing,  which  allocation shall be
annexed as Schedule 2.5 of this  Agreement at the Closing.  Promptly,  after the
<PAGE>

date hereof, the Seller shall deliver to the Buyer a proposed  allocation of the
Purchase Price and other relevant items for the Buyer's review and approval, and
the Buyer shall promptly review and approve or disapprove of such allocation. If
the Buyer disapproves of the proposed allocation,  then the Buyer shall promptly
deliver to the Seller a written adjustment to the Seller's proposed  allocation.
The Seller and the Buyer shall use their  reasonable  best efforts to agree upon
any  adjustments to the Purchase Price  Allocation.  If the Buyer and the Seller
agree upon an allocation pursuant to this Section 2.5, neither the Buyer nor the
Seller shall take any position inconsistent with such allocation,  except as may
be required by law,  without the consent of the other Party.  The Purchase Price
Allocation determined in accordance with this Section 2.5 shall be appropriately
adjusted to reflect any  subsequent  adjustment to the Purchase Price based upon
the  particular  tax  asset to which  such  adjustment  relates.  Such  adjusted
Purchase Price  Allocation  shall be determined in a manner  consistent with the
procedures set forth in this Section 2.5.

     2.6 Taxes.  (a) Taxes that are imposed on a periodic  basis with respect to
the Sky Division and the Acquired  Assets and are payable for any taxable period
that begins on or before but ends after the Closing Date, other than Taxes based
on (or measured by) net income ("Straddle Taxes"),  shall (i) in the case of any
sales, use, employment, payroll and other similar Straddle Taxes which are based
on or related to sales,  receipts or  disbursements,  be  allocated  between the
Seller  and the Buyer  based  upon the  amount  which  would be  payable  if the
relevant  taxable period ended at the close of business on the Closing Date, and
(ii) in the case of all  other  Straddle  Taxes  (including  real  property  and
personal  property Taxes),  be allocated  between the Seller and the Buyer based
upon the relative  number of days in the portion of the taxable period up to and
including the Closing Date and the relative number of days in the portion of the
taxable period  subsequent to the Closing Date. Any refund or credit of Straddle
Taxes shall be allocated between the Seller and the Buyer in a manner consistent
with the preceding  sentence.  In the case of any Straddle  Taxes prepaid by the
Seller, the Buyer shall (after review and approval of such Taxes, which approval
shall  not be  unreasonably  withheld)  pay to the  Seller at the  Closing,  the
Seller's  allocable  share of such  Straddle  Taxes.  In the  case of all  other
Straddle  Taxes,  the Party paying such  Straddle  Taxes shall provide a written
notice to the other Party  indicating  the amount of such Straddle Taxes so paid
(including  a copy of any return  relating  to, and evidence of payment of, such
Straddle  Taxes) and such other Party shall  (after  review and approval of such
Taxes,  which approval shall not be unreasonably  withheld)  promptly pay to the
paying Party such other Party's allocable share of such Straddle Taxes.

     (b) All Transfer Taxes incurred in connection with the  consummation of the
transactions  contemplated by this Agreement  shall be borne by the Seller.  The
Seller  shall  prepare  and timely  file all  necessary  tax  returns  and other
documentation  with  respect  to  all  such  Transfer  Taxes.  The  Buyer  shall
reasonably  cooperate with the Seller in the  preparation and filing of any such
tax returns and other documentation.

     2.7 The  Closing.  The  closing of the  transactions  contemplated  by this
Agreement (the  "Closing")  shall take place at the offices of White & Case LLP,
200 South Biscayne Boulevard,  Miami, Florida 33131, or Gardere Wynne Sewell LLP
1601 Elm Street,  Suite 3000,  Dallas,  Texas 75201, as may be agreed to between
the  Parties,  at 10:00 a.m.  local  time,  on April 11,  2001 or as promptly as
practicable  following  the  satisfaction  or  waiver of all  conditions  to the
<PAGE>

obligations of the Parties to consummate the  transactions  contemplated  hereby
(other than  conditions  with  respect to actions  the Parties  will take at the
Closing  itself),  or at such other  place,  time and/or date as the Parties may
mutually agree (the date of the Closing,  the "Closing  Date").  At the Closing,
(a) the Seller shall deliver to the Buyer the various certificates,  instruments
and documents  referred to in Article  VIII,  (b) the Buyer shall deliver to the
Seller the  various  certificates,  instruments  and  documents  referred  to in
Article IX, (c) the Seller  shall  execute,  acknowledge  (if  appropriate)  and
deliver to the Buyer (i)  assignments  of the  Business  Intellectual  Property,
Permits and Contracts in form and substance reasonably satisfactory to the Buyer
and (ii) such other instruments of sale,  transfer  conveyance and assignment as
the Buyer may reasonably request,  (d) the Buyer shall execute,  acknowledge (if
appropriate)  and  deliver  to the  Seller  (i)  an  assumption  of the  Assumed
Liabilities in form and substance reasonably satisfactory to the Seller and (ii)
such other instruments of assumption as the Seller may reasonably  request,  and
(e) the Buyer shall pay  $12,340,231.50  to the Seller,  as set forth in Section
2.3.

                                  ARTICLE III.
                  REPRESENTATIONS AND WARRANTIES OF THE SELLER

     The Seller  represents  and warrants to the Buyer as of the date hereof and
as of the Closing Date as follows:

     3.1  Organization;  Power. The Seller is a limited  liability  company duly
organized,  validly existing and in good standing under the laws of the State of
Delaware, and has all requisite limited liability company power and authority to
carry on its  business as it is now being  conducted,  to  execute,  deliver and
perform this Agreement, the Supply Agreement and the License Agreement, to carry
out its obligations  hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby.  The Seller is duly licensed or qualified to do
business and is in good standing in each  jurisdiction  in which the  properties
owned or leased by it or the operation of its business  makes such  licensing or
qualification necessary, except to the extent that the failure to be so licensed
or qualified  would not adversely  affect the ability of the Seller to carry out
its obligations  under, and to consummate the transactions  contemplated by this
Agreement,  the Supply Agreement and the License Agreement. The jurisdictions in
which the Seller is qualified to transact business as a result of the operations
of the Sky Division are set forth on Schedule 3.1.

     3.2  Authorization;  Effect  of  Agreement.  The  execution,  delivery  and
performance  by the  Seller of this  Agreement,  the  Supply  Agreement  and the
License  Agreement,  the performance by the Seller of its obligations  hereunder
and  thereunder  and  the   consummation  by  the  Seller  of  the  transactions
contemplated  hereby and  thereby  have been duly  authorized  by all  requisite
limited liability  company action on the part of the Seller.  This Agreement has
been,  and upon its  execution the Supply  Agreement  and the License  Agreement
shall have been,  duly and validly  executed and  delivered by the Seller.  This
Agreement constitutes (assuming due authorization, execution and delivery by the
Buyer),  and upon its execution the Supply  Agreement and the License  Agreement
will  constitute  (assuming  due  authorization  execution  and  delivery by all
parties  other than the Seller),  a valid and binding  obligation of the Seller,
enforceable  against  the Seller in  accordance  with its  terms,  except to the
extent that such  enforceability  (i) may be limited by bankruptcy,  insolvency,
reorganization,  moratorium or other similar laws relating to creditors'  rights
generally, and (ii) is subject to general principles of equity.

     3.3  Subsidiaries  and Equity  Interests.  There are no Subsidiaries of the
Seller  included within the Sky Division and the Seller does not have any equity
interest  in any  other  Person  that is  material  to the  business  of the Sky
Division.

     3.4  Consents.  Except as set forth on Schedule 3.4, no Consent is required
to be obtained or made by the Seller in connection with the execution,  delivery
and  performance by the Seller of this Agreement,  the Supply  Agreement and the
License  Agreement,  or the consummation by it of the transactions  contemplated
hereby or thereby.

     3.5 Financial Statements.

          (a) The Seller has delivered to the Buyer (i) the  unaudited  combined
statements  of net assets of the Sky Division as of December 31, 2000,  December
31, 1999,  December 31, 1998 and December 31, 1997; (ii) the unaudited  combined
statements  of revenues  and  expenses of the Sky Division for each of the years
ended December 31, 2000,  December 31, 1999,  December 31, 1998 and December 31,
1997;  (iii) an  unaudited  combined  balance  sheet of the Sky  Division  as of
October  31,  2000  (the  "Reference  Balance  Sheet");  and  (iv) an  unaudited
statement  of revenues  and  expenses of the Sky  Division  for the period ended
October 31, 2000  (collectively,  with the notes and  supplementary  information
thereto, the "Financial  Statements"),  copies of which are included on Schedule
3.5.  Except  as set  forth on  Schedule  3.5 or in the  notes to the  Financial
Statements,  the Financial  Statements (w) were prepared in accordance  with the
books of account and other  financial  records of the Sky Division,  (x) present
fairly the combined  financial  condition  and results of  operations of the Sky
Division as of the dates thereof or for the periods  covered  thereby,  (y) have
been  prepared in  accordance  with U.S.  GAAP and (z)  include all  adjustments
(consisting  only of normal  recurring  accruals)  that are necessary for a fair
presentation  of the  financial  condition  and the  results  of the  operations
(subject,  in the case of the statements  referred to in clauses (iii) and (iv),
to normal year-end  adjustments) of the Sky Division as of the dates therefor or
for the periods covered thereby.

          (b) The  books of  account  and  other  financial  records  of the Sky
Division are in all material respects complete and correct.

     3.6 Conduct in the Ordinary Course; Absence of Certain Changes,  Events and
Conditions. Except as permitted or contemplated by this Agreement, since October
31, 2000 (a) the Sky  Division  has  conducted  its business in the ordinary and
usual  course  consistent  with  past  practice  and  there  has  not  been  any
development  or  combination  of  developments  that,  individually  or  in  the
aggregate, could reasonably be expected to have a Seller Material Adverse Effect
and (b) the Seller has not:

          (i) permitted or allowed any of the assets or properties  used or held
     for  use  in  connection  with  the  Sky  Division   (whether  tangible  or
     intangible)  to be  subjected  to any  Encumbrance,  except  for  Permitted
     Encumbrances;
<PAGE>

          (ii) except as set forth on Schedule  3.6,  permitted the Sky Division
     to enter into any Contract involving more than $250,000;

          (iii)  permitted the Sky Division to make any capital  investment  in,
     any loan to, or any  acquisition of the securities or assets,  of any other
     Person  outside the  ordinary  course of business  or  involving  more than
     $250,000;

          (iv)  permitted  the Sky  Division to delay or postpone the payment of
     any  accounts  payable  or  liabilities  outside  the  ordinary  course  of
     business;

          (v)  made  any  capital   expenditure  or  contract  for  any  capital
     expenditure  in  connection  with the Sky  Division  in excess of  $250,000
     individually or $1 million in the aggregate;

          (vi) except as set forth on Schedule  3.6,  issued any sales orders or
     otherwise agreed to make any purchases in connection with the Sky Division,
     other than in the ordinary course of business, involving exchanges in value
     in excess of $250,000 individually or $1 million in the aggregate;

          (vii) except as set forth on Schedule 3.6, sold, transferred,  leased,
     subleased,  licensed or otherwise disposed of any properties or assets used
     or held for use in  connection  with the Sky  Division,  real,  personal or
     mixed (including,  without  limitation,  leasehold interests and intangible
     assets) having a value in excess of $250,000  individually or $1 million in
     the aggregate,  other than the sale of inventories or obsolete equipment in
     the ordinary course of business;

          (viii)  except as set forth on  Schedule  3.6,  increased  the  wages,
     salaries,  compensation,  pension or other benefits  payable,  or to become
     payable by the Sky Division,  to any of its officers,  employees or agents,
     including,   without  limitation,   any  bonus  payments  or  severance  or
     termination  pay (other than  increases in wages and salaries  that are (y)
     required by employment arrangements existing on the date hereof or (z) made
     in the ordinary course of business and represent  increases of no more than
     ten percent (10%));

          (ix)  allowed  any Permit or  Environmental  Permit that was issued or
     relates to the Sky  Division or  otherwise  relates to any  Acquired  Asset
     (other than any Permit or Environmental  Permit that is not material to the
     Sky  Division)  to lapse or terminate or failed to renew any such Permit or
     Environmental Permit or any insurance policy that is scheduled to terminate
     or expire within 45 calendar days prior to the Closing Date;

          (x) except as set forth on Schedule 3.6, materially amended,  modified
     or consented to the termination of any Material  Contract or any of the Sky
     Division's rights thereunder to the extent arising or otherwise relating to
     any period on or after the Closing Date;
<PAGE>

          (xi)  terminated,  discontinued,  closed  or  disposed  of any  plant,
     facility or other business operation relating to the Sky Division,  or laid
     off any  employees  (other than  layoffs of less than 50  employees  in any
     six-month  period in the ordinary  course of business  consistent with past
     practice)  or  implemented  any early  retirement,  separation  or  program
     providing  early  retirement  window benefits within the meaning of Section
     1.401(a)-4 of the Treasury Regulations promulgated under Section 401 of the
     Code or announced or planned any such action or program for the future;

          (xii)  permitted  to lapse or go abandoned  any Business  Intellectual
     Property (or any registration or grant thereof or any application  relating
     thereto) to which, or under which,  the Sky Division has any right,  title,
     interest  or  license,  except  for  lapses  that  individually  or in  the
     aggregate  could  not  reasonably  be  expected  to have a Seller  Material
     Adverse Effect;

          (xiii)  suffered any casualty loss or material  damage with respect to
     any of the  Acquired  Assets  which  has a  replacement  cost of more  than
     $250,000,  whether or not such loss or damage  shall  have been  covered by
     insurance; or

          (xiv)  agreed,  whether in writing  or  otherwise,  to take any of the
     actions  specified  in this Section 3.6 or granted any options to purchase,
     rights of first refusal,  rights of first offer or any other similar rights
     or contracts  with respect to any of the actions  specified in this Section
     3.6.

     3.7 No Undisclosed  Liabilities.  The Seller does not have any  liabilities
affecting the Sky  Division,  other than  liabilities  (i) reflected or reserved
against on the Reference  Balance  Sheet,  (ii) disclosed on Schedule 3.7, (iii)
incurred or arising since the date of this  Agreement in the ordinary  course of
business of the Sky Division or (iv) that are not material to the Sky Division.

     3.8 Title to Assets.

          (a) The Seller owns or leases the Acquired Assets. Except as set forth
on  Schedule  3.8,  the  Seller  has  good  and  marketable  title to all of the
properties  and assets  included in the  Acquired  Assets  other than any leased
property (including, without limitation, those properties and assets included in
the Acquired  Assets  which are  reflected as owned by the Seller on the balance
sheet as of October 31, 2000  included in the Financial  Statements,  except for
properties  and assets sold,  consumed or otherwise  disposed of in the ordinary
course of business or otherwise as permitted by this Agreement since October 31,
2000) or, in the case of the Leased Real Property and any other leased  property
included in the Acquired  Assets,  valid and subsisting  leasehold  interests in
such property free and clear of all Encumbrances other than the encumbrances set
forth on Schedule 3.8 and Permitted Encumbrances.

          (b) The Acquired Assets  constitute all properties,  assets and rights
which are  necessary  to conduct the  business of the Sky Division in the manner
conducted as of the date hereof,  and the Tangible  Personal Property is in such
physical condition and state of repair,  ordinary wear and tear excepted,  as to
<PAGE>

enable the Sky Division to conduct its operations as currently conducted without
material disruption.  Except as set forth in this Section 3.8, all machinery and
equipment is being sold "as is and where is".

          (c)  Immediately  following the Closing (and assuming the obtaining of
all  Consents),  the Buyer will own, free and clear of all  Encumbrances  (other
than Permitted  Encumbrances  and  Encumbrances  imposed at the direction of the
Buyer), or lease,  under valid and subsisting leases, the interest of the Seller
in, to and under the Acquired Assets.

     3.9 Permits. The Seller has all Permits that are required for the operation
of the Sky Division as presently conducted and for the ownership of the Acquired
Assets,  except where the absence thereof individually or in the aggregate could
not  reasonably  be expected to have a Seller  Material  Adverse  Effect,  which
Permits  are listed on Schedule  3.9.  The Seller has not  received  any written
notice  from  any  Governmental  Authority  revoking,   canceling,   rescinding,
materially  modifying or refusing to renew any Permit or advising of  violations
under  any Law  which  individually  or in the  aggregate  could  reasonably  be
expected  to have a Seller  Material  Adverse  Effect.  Except  as set  forth on
Schedule  3.9,  the Sky  Division  is in  compliance  with the  Permits  and the
requirements  of the  Permits,  except  where the  failure  to comply  therewith
individually  or in the  aggregate  could not  reasonably  be expected to have a
Seller Material Adverse Effect.  Schedule 3.9 identifies all Permits (other than
any Permit that is not material to the Sky Division) that are nontransferable or
which will require the consent of any Governmental Authority in the event of the
consummation of the transactions contemplated by this Agreement.

     3.10 Real Property.

          (a)  Schedule  3.10(a)  sets forth a list of all of the real  property
owned by the Seller in respect of the Sky Division  (the "Owned Real  Property")
on the date hereof.

          (b) Schedule 3.10(b) sets forth a list of all leases (the "Leases") of
real  property in respect of the Sky Division  (the "Leased Real  Property")  to
which  the  Seller  is a party on the date  hereof  (the  Leased  Real  Property
together with the Owned Real Property,  is collectively,  the "Real  Property").
Each  Lease  is in  full  force  and  effect  and,  to the  Seller's  Knowledge,
represents the entire agreement  between the respective  landlord and the Seller
with respect to the use and occupancy of such Leased Real Property. In addition,
the Seller has not (i) received any notice of cancellation or termination  under
any such  Lease,  (ii)  received  any notice of a breach or  default  under such
Lease,  which breach or default has not been cured,  and (iii) other than as set
forth on Schedule  3.10(b),  granted to any other Person any rights,  adverse or
otherwise, under any such Lease.

     3.11 Compliance with Laws. Except as set forth on Schedule 3.11, the Seller
is in compliance with all Laws  applicable with respect to the Sky Division,  in
each  case,  as in effect as of the date  hereof,  except  where the  failure to
comply  therewith  individually  or in the  aggregate  could not  reasonably  be
expected to have a Seller Material Adverse Effect.

     3.12 Contracts.
<PAGE>

          (a)  Schedule  3.12(a)  sets  forth a list  of  each of the  following
Contracts of the Sky Division (such Contracts, being the "Material Contracts"):

          (i) each  Contract for the purchase of inventory,  spare parts,  other
     materials or personal  property with any supplier or for the  furnishing of
     services to the Seller related to the Sky Division:  (A) under the terms of
     which the Seller may be required to purchase goods or services in an amount
     in excess of  $250,000 in the  aggregate  over the  remaining  term of such
     Contract and (B) which cannot be canceled by the Seller without penalty and
     without more than 90 days' notice;

          (ii)  each  Contract  for the  sale of  inventory  or  other  personal
     property or for the furnishing of services by the Seller related to the Sky
     Division:  (A)  under  the terms of which the  Seller  may be  required  to
     provide  goods or  services  in an  amount in  excess  of  $250,000  in the
     aggregate  over the remaining term of such Contract and (B) which cannot be
     canceled  by the Seller  without  penalty  and  without  more than 90 days'
     notice;

          (iii) all broker, distributor,  dealer, manufacturer's representative,
     franchise,  agency, sales promotion, market research,  marketing consulting
     and advertising contracts related to the Sky Division:  (A) under the terms
     of which the Seller may be required to purchase  goods or services,  or pay
     commissions or similar payments of more than $250,000 in the aggregate over
     the remaining term of such Contract and (B) which cannot be canceled by the
     Seller without penalty and without more than 90 days' notice;

          (iv)  all  management   Contracts  and  Contracts   with   independent
     contractors or  consultants  (or similar  arrangements)  related to the Sky
     Division:  (A) under the terms of which the Seller may be  required  to pay
     salaries or fees for services or similar  payments of more than $250,000 in
     the aggregate over the remaining term of such Contract and (B) which cannot
     be canceled by the Seller  without  penalty and without  more than 90 days'
     notice;

          (v) each Contract relating to the operation of the Real Property:  (A)
     under the terms of which the Seller may be required to make rental payments
     or other  payments for the  provision of services of more than  $250,000 in
     the aggregate over the remaining term of such Contract and (B) which cannot
     be canceled by the Seller  without  penalty and without  more than 90 days'
     notice;

          (vi) all Contracts relating to any Indebtedness of the Sky Division;

          (vii) all Contracts  related to the Sky Division with any Governmental
     Authority to which the Seller is a party;

          (viii) all Contracts related to the Sky Division that limit or purport
     to limit the ability of the Sky  Division to compete  with any Person or in
     any geographic area or during any period of time;
<PAGE>

          (ix) all  Contracts  related to the Sky Division  between or among the
     Seller or any Affiliate of the Seller; and

          (x) all  Contracts  related to the Sky Division  which are not made in
     the ordinary  course of business,  and which are material to the conduct of
     the Sky Division's business.

          (b) Except as disclosed on Schedule 3.12(b),  each Material  Contract:
(i) is valid and binding  and  enforceable  against  the  Seller,  except to the
extent that such  enforceability  (A) may be limited by bankruptcy,  insolvency,
reorganization,  moratorium or other similar laws relating to creditors'  rights
generally,  and (B) is subject to general principles of equity,  (ii) is in full
force and effect,  and (iii) upon consummation of the transactions  contemplated
by this Agreement,  except to the extent that any Consents set forth on Schedule
3.4 are not obtained, shall continue in full force and effect without penalty or
other adverse consequence. The Seller is not in breach of, or default under, any
Material Contract,  except for breaches or defaults which individually or in the
aggregate  could not  reasonably be expected to have a Seller  Material  Adverse
Effect.

          (c) Except as  disclosed  on  Schedule  3.12(c),  (i) to the  Seller's
Knowledge,  no other  party to any  Material  Contract  is in breach  thereof or
default  thereunder  and (ii) to the Seller's  Knowledge,  no other party to any
Material  Contract  has  indicated  in  writing  its  intention  not to  perform
thereunder.

          (d) The  Seller  has not  received  notice in  writing  of any plan or
intention of any other party to any  Material  Contract to exercise any right to
cancel or  terminate  such  Material  Contract.  Except as disclosed on Schedule
3.12, to the Seller's  Knowledge,  none of the customers or suppliers of the Sky
Division has refused,  or communicated in writing that it intends to refuse,  to
purchase or supply goods or  services,  or has  communicated  in writing that it
intends to  substantially  reduce the  amounts of goods or  services  that it is
willing to purchase from or sell to Seller.

     3.13 No  Violations.  Except as set forth on Schedule  3.13, the execution,
delivery  and  performance  by the  Seller  of this  Agreement  and  the  Supply
Agreement and the  consummation by the Seller of the  transactions  contemplated
hereby and thereby  will not,  with or without the giving of notice or the lapse
of time,  or both,  (a)  violate,  conflict  with or  result  in  breach  of any
provisions  of the  Certificate  of Formation or the Limited  Liability  Company
Agreement of the Seller,  (b) conflict  with or violate any Law or  Governmental
Order  applicable to the Seller or any of its respective  assets,  properties or
businesses,  including,  without  limitation,  the  Acquired  Assets and the Sky
Division,  (c) assuming the obtaining of all Consents,  conflict with, result in
any breach of, constitute a default (or event which with the giving of notice or
lapse of time,  or both,  would become a default)  under,  or give to others any
right of termination  or  acceleration  under,  or result in the creation of any
Encumbrance on any of the Acquired Assets pursuant to, any Contract to which the
Seller is a party or by which any of the  Acquired  Assets is bound or affected,
other than Permitted Encumbrances.
<PAGE>

     3.14 Intellectual Property. Schedule 3.14 sets forth a list of all items of
Business Intellectual Property.  Except as disclosed on Schedule 3.14, or except
as could not reasonably be expected to have a Seller  Material  Adverse  Effect:
(a) the  Seller  owns or  possesses  rights  to use  all  Business  Intellectual
Property and upon the consummation of this transaction,  the Buyer will own such
rights to use the Business Intellectual Property; (b) to the Seller's Knowledge,
no third party has questioned the validity of any Business Intellectual Property
or the Sky Division's  title  thereto;  and (c) to the Seller's  Knowledge,  the
conduct of the Sky Division  does not infringe  upon any  intellectual  property
rights of third parties.

     3.15  Litigation.  Except as set forth on Schedule 3.15 (which with respect
to  each  Action  disclosed  therein  sets  forth  the  parties,  nature  of the
proceeding  and status  thereof),  there are no Actions by or against the Seller
affecting  any of the  Acquired  Assets or the Sky Division  pending  before any
Governmental Authority (or, to the Seller's Knowledge,  threatened to be brought
by or before any Governmental Authority). To the Seller's Knowledge, no facts or
circumstances  exist which could  reasonably be expected to result in the filing
of any Action  which could  reasonably  be  expected  to have a Seller  Material
Adverse Effect.  None of the matters disclosed on Schedule 3.15 could reasonably
be expected to have a Seller  Material  Adverse  Effect or could  reasonably  be
expected to affect the legality,  validity or  enforceability of this Agreement,
the Supply Agreement or the License Agreement.  Neither the Sky Division nor any
of the  Acquired  Assets is  subject  to any  Governmental  Order  (nor,  to the
Seller's  Knowledge,  are there any such  Governmental  Orders  threatened to be
imposed by any  Governmental  Authority)  which could  reasonably be expected to
have a Seller Material Adverse Effect.

     3.16 Employee Benefit Plans.

          (a) Schedule  3.16(a) sets forth a true,  complete and correct list of
each Employee Benefit Plan.

          (b) Neither the Seller nor an ERISA  Affiliate has within the past six
years had an obligation to contribute to a "defined benefit plan," as defined in
Section 3(35) of ERISA, a pension plan subject to the minimum funding  standards
of Section 302 of ERISA or Section 412 of the Code, or a  "multiemployer  plan,"
as  defined  in Section  3(37) of ERISA  with  respect to which the Buyer  could
reasonably be expected to have any liability or obligation.

          (c) The  Seller's  401(k)  Plans have been  maintained,  operated  and
administered in all material  respects in accordance with their respective terms
and in  compliance  with all  applicable  Laws.  All reports,  notices and other
documents  required to be filed or furnished under the Code,  ERISA or the terms
of the Seller's  401(k)  Plans set forth on Schedule  3.16(a) have been duly and
timely  filed or  furnished.  Neither  the  Seller nor any ERISA  Affiliate  has
participated in any voluntary compliance or self-correction programs established
by the Internal  Revenue Service,  or entered into a closing  agreement with the
Internal  Revenue  Service with respect to the form or operation of the Seller's
401(k) Plans.

          (d) The  Seller's  401(k) Plans have been  determined  by the Internal
Revenue Service to be qualified under Section 401(a) of the Code, and the trusts
created thereunder which are intended to be exempt from federal income tax under
<PAGE>

the  provisions  of  Section  501(a)  of the Code have  been  determined  by the
Internal  Revenue Service to be so exempt and no event has occurred or condition
exists that is reasonably likely to adversely affect the qualified status of the
Seller's  401(k)  Plans or the  exempt  status of such  trusts.  The  Seller has
delivered or made available to the Buyer a copy of the most recent determination
letter received with respect to the J.D. Sky  Corporation  401(k) Profit Sharing
Plan. The Seller has delivered or made available to the Buyer a copy of the most
recent determination letter received with respect to the 401(k) plan established
by the Gilman Paper Company.  The  Durango-Georgia  Paper Company 401(k) Plan is
substantially  identical  to the 401(k)  plan  established  by the Gilman  Paper
Company and Durango  Georgia  Paper  Company  intends to obtain a  determination
letter with  respect to the  Durango-Georgia  Paper  Company  401(k) Plan during
calendar  year 2001.  Durango  Georgia  Paper  Company  also intends to obtain a
determination   letter   during   calendar   year  2001  with   respect  to  the
Durango-Georgia  Paper  Company  Money  Purchase  Pension  Plan,  a  master  and
prototype  arrangement  sponsored  by T. Rowe  Price,  except to the extent that
Durango Georgia Paper Company  determines that it may rely on the  determination
letter obtained by T. Rowe Price with respect to such plan. Upon receipt of such
determination  letter,  the  Seller  will  deliver a copy of such  determination
letter to the Buyer. No event has occurred that is reasonably  likely to subject
the Seller's  401(k) Plans to tax under  Section 511 of the Code.  Each Employee
Benefit Plan that is intended to be qualified  under Section  401(a) of the Code
may be amended  currently  during an  applicable  remedial  amendment  period to
request and receive a favorable  determination  letter from the Internal Revenue
Service with respect to all provisions  applicable to each such Employee Benefit
Plan.

          (e) No lien has been filed by any person or entity and no lien  exists
by operation of law or  otherwise  on the Acquired  Assets  relating to, or as a
result of, the  operation or  maintenance  of any  Employee  Benefit Plan or any
other similar plan  maintained,  or  contributed  to, by the Seller or any ERISA
Affiliate,  and  neither  the  Seller  nor any ERISA  Affiliate  is aware of the
existence of facts or circumstances  that would reasonably be expected to result
in the imposition of such lien on such assets.

          (f) The Buyer will incur no liability,  cost or expense  arising from,
or with  respect to, any  Employee  Benefit  Plan or any other  similar  plan or
arrangement maintained, or contributed to, by the Seller or any ERISA Affiliate.

          (g) (i) The execution of this  Agreement and the  consummation  of the
transactions  contemplated hereby do not constitute a triggering event under any
Employee  Benefit  Plan which  will  result in the  payment of any  termination,
retention, severance or similar benefit or in any acceleration of the payment or
vesting of any benefits to any Employee or in any increase in benefits  provided
under  the  Employee  Benefit  Plans;  and  (ii) no  liability,  claim,  action,
litigation,  audit, examination,  investigation or administrative proceeding has
been made,  commenced or, to the Seller's Knowledge,  threatened with respect to
any Employee Benefit Plan (other than routine claims for benefits payable in the
ordinary  course)  which event under  clause (i) or (ii) above could result in a
liability for which the Buyer could reasonably be expected to be liable.

          (h) The Seller has delivered or caused to be delivered to the Buyer or
its counsel true and complete copies of (i) each Employee Benefit Plan, together
with all amendments thereto,  (ii) to the extent required by applicable Law, all
<PAGE>

current summary plan  descriptions  and (iii) each trust agreement and insurance
contract relating to the Seller's 401(k) Plans.

     3.17 Tax Matters.

          (a) The Seller has filed all Tax Returns that it was required to file,
and has paid all Taxes due,  with  respect to the Sky  Division and the Acquired
Assets, and such Tax Returns are accurate and complete in all material respects.

          (b)  Neither  the  Seller  nor any of its  Affiliates  has  waived any
statute of  limitations  in respect of Taxes relating to the Sky Division or the
Acquired  Assets or  agreed to any  extension  of time with  respect  to any Tax
assessment or deficiency relating to the Sky Division or the Acquired Assets.

          (c) Neither the Seller nor any of its Affiliates is a party to any Tax
allocation  or  sharing  agreement  which  relates  to the Sky  Division  or the
Acquired   Assets.   There  are  no  pending   audits,   actions,   proceedings,
investigations,  disputes  or claims  with  respect  to any Taxes  payable by or
asserted  in writing  against  the Seller  relating  to the Sky  Division or the
Acquired  Assets,  and the Seller has not  received  notice in writing  from any
taxing  authority of its intent to examine or audit any of its Tax  Returns.  No
material  claim has been  made in  writing  against  the  Seller  by any  taxing
authority  in any  jurisdiction  in which the  Seller did not file  sales,  use,
value-added or similar Tax Returns or did not pay sales, use, value-added, goods
and services,  or similar Taxes,  that the Seller is or may be subject to sales,
use, value-added, or similar Tax by that jurisdiction.

          (d)  There  are no liens  upon any of the  Acquired  Assets  that have
arisen as a result of any failure to pay any Tax.

          (e) All  Taxes  required  to be  withheld  and paid by the  Seller  in
connection with amounts paid or owing to any employee,  independent  contractor,
creditor,  stockholder or other third party have been timely  withheld and paid,
except  where the  failure to do so could not  reasonably  be expected to have a
Seller Material Adverse Effect.

     3.18 Environmental Matters.

          (a)  Except as set forth in  Schedule  3.18 or except  for such of the
following as  individually  or in the aggregate could not reasonably be expected
to have a Seller Material Adverse Effect:  (i) the Sky Division is in compliance
with  applicable  Environmental  Laws;  (ii) the  Seller  has all  Environmental
Permits  required under applicable  Environmental  Laws for the operation of the
Sky Division as presently conducted;  (iii) since January 1, 1997, in connection
with the Sky  Division,  the Seller has not received any written order or notice
or other written communication from any (A) Governmental  Authority,  (B) Person
purporting  to act pursuant to any citizen suit  provision of any  Environmental
Law, or (C) current or prior  owner or  operator of any  Facility;  in each case
alleging the violation of or failure to comply with any Environmental  Law; (iv)
there are no pending or, to the Seller's Knowledge,  threatened Actions, in each
case relating to any Environmental  Matters with respect to the Sky Division and
the Acquired Assets; and to the Seller's Knowledge (v) there has been no release
<PAGE>

of any  Hazardous  Materials  into the  environment  (A) at or from any Acquired
Assets or (B) any other location where the Sky Division generated,  transported,
stored or disposed of Hazardous Materials;  in each case requiring investigation
or remediation under any Environmental Law.

          (b) The  Seller  has made  available  to the Buyer  true and  complete
copies of any material reports, studies, Permits,  analyses, tests or monitoring
in the  possession  of the Seller,  in each case  relating to any  Environmental
Matters with respect to the Sky Division and the Acquired Assets.

     3.19 Labor Matters.

          (a) Except as set forth on  Schedule  3.19(a) and except as may result
from the  permitted  announcement  of the execution of this  Agreement:  (i) the
Seller is not a party to any  collective  bargaining  agreement  or other  labor
union contract applicable to persons employed by the Sky Division and currently,
to the Seller's Knowledge,  there are no organizational campaigns,  petitions or
other  unionization  activities seeking  recognition of a collective  bargaining
unit which  could  reasonably  be  expected  to have a Seller  Material  Adverse
Effect;  (ii) there are no controversies,  strikes,  slowdowns or work stoppages
pending or, to the Seller's  Knowledge,  threatened between the Sky Division and
any of its respective  employees,  and the Sky Division has not  experienced any
such  controversy,  strike,  slowdown  or work  stoppage  within the past twelve
months;  (iii) the Sky Division  has not breached or otherwise  failed to comply
with the provisions of any collective bargaining or union contract and there are
no grievances  outstanding  against the Sky Division under any such agreement or
contract which could have a Seller Material Adverse Effect; (iv) to the Seller's
Knowledge, there are no unfair labor practice complaints pending against the Sky
Division  before the National Labor  Relations  Board or any other  Governmental
Authority  involving  employees  of the Sky  Division;  (v) the Sky  Division is
currently  in  compliance  in all material  respects  with all  applicable  Laws
relating to the employment of labor,  including  those related to wages,  hours,
collective  bargaining  and the payment and  withholding of taxes as required by
the  appropriate  Governmental  Authority  and  has  withheld  and  paid  to the
appropriate  Governmental  Authority  or are  holding for payment not yet due to
such  Governmental  Authority all amounts required to be withheld from employees
of the Sky Division and are not liable for any material arrears of wages, taxes,
penalties  or other sums for  failure to comply with any of the  foregoing,  and
(vi) to the Seller's  Knowledge,  there are no pending charges of discrimination
with the Equal Employment Opportunity Commission, or any such charges which have
been  dismissed  within the  previous 90 days,  involving  employees  of the Sky
Division.

          (b) Schedule 3.19(b) contains, under the caption "Active Employees," a
list of all Active  Employees  as of March 22, 2001,  setting  forth each Active
Employee's name, title,  base compensation  level, and accrued vacation and sick
leave. Schedule 3.19(b) also contains, under the caption "Inactive Employees," a
list of all Inactive Employees as of March 22, 2001, setting forth each Inactive
Employee's  name,  title,  base  compensation  level,  accrued vacation and sick
leave,  and a brief  description of the event or events resulting in such person
becoming an Inactive  Employee  (including the length of such person's status as
an Inactive Employee).
<PAGE>

          (c) None of the Officers of the Seller nor Dwight Staubs,  the General
Manager  of the  Sky  Division,  has  actual  knowledge  that  any  Employee  or
consultant  of the Sky  Division  will not  accept  employment  or a  consulting
arrangement  with the Buyer following the Closing Date, if offered on a basis no
less  favorable  than that upon which such  Employee or  consultant is currently
retained by the Seller.

     3.20  Receivables.  Except  to the  extent,  if  any,  reserved  for on the
Reference  Balance  Sheet,  all accounts  receivable  reflected on the Reference
Balance Sheet arose from,  and the accounts  receivable  existing on the Closing
Date will have arisen  from,  the sale of  inventory  or services to Persons not
affiliated  with the Sky Division and in the ordinary  course of the business of
the Sky Division.

     3.21 Inventories.

          (a)  Subject to amounts  reserved  therefor on the  Reference  Balance
Sheet, the values at which all inventories are carried on the Reference  Balance
Sheet reflect the inventory valuation policy of the Sky Division of stating such
inventories at the lower of cost (determined on the last-in,  first-out  method)
or market value. Except as set forth on Schedule 3.21, the Sky Division has good
and marketable title to the inventories free and clear of all Encumbrances other
than Permitted Encumbrances. The inventories do not consist of any items held on
consignment.  The Sky Division is under no obligation or liability  with respect
to accepting  returns of items of inventory or  merchandise in the possession of
its customers other than in the ordinary course of business consistent with past
practice.  No clearance sale of the inventories has been conducted since October
31,  2000.  The Sky  Division  has not  acquired  or  committed  to  acquire  or
manufacture  inventory for sale which is not of a quality and quantity usable in
the ordinary  course of the business of Sky  Division,  nor has the Sky Division
changed the price of any  inventory  except for (i) price  reductions to reflect
any  reduction  in the cost thereof to the Sky  Division,  (ii)  reductions  and
increases  responsive to normal  competitive  conditions and consistent with the
Sky Division's  past sales practices and (iii) increases to reflect any increase
in the cost thereof to the Sky Division.

          (b) The  inventories  are in good and  merchantable  condition  in all
material  respects,  are suitable and usable for the purposes for which they are
intended  and are in a  condition  such  that  they can be sold in the  ordinary
course of the business of the Sky Division.

     3.22 Certain Interests. Except as set forth on Schedule 3.22, no Officer of
the Seller or the Sky  Division  and no relative or spouse (or  relative of such
spouse) who resides with, or is a dependent of, any such Officer:

          (a) has any direct or indirect  financial  interest in any competitor,
supplier or customer of the Sky Division;  provided,  however, that ownership of
shares  representing  less  than  5% of  the  outstanding  voting  power  of any
competitor,  supplier or customer,  which are listed on any national  securities
exchange or traded actively in the national  over-the-counter  market, shall not
be  deemed  to be a  "financial  interest"  so long as the  Person  owning  such
securities  has no  other  connection  or  relationship  with  such  competitor,
supplier or customer; or
<PAGE>

          (b) owns,  directly  or  indirectly,  in whole or in part,  or has any
other  interest in any tangible or intangible  property which the Seller uses or
has used in the conduct of the business of the Sky Division or otherwise.

     3.23  Brokers.  Except for the fees  payable to Banc of America  Securities
LLC, which are the sole responsibility of the Seller, the Seller has not paid or
become  obligated  to pay  any  fee or  commission  to any  broker,  finder,  or
intermediary in connection with the transactions  contemplated hereby. The Buyer
shall not,  through the transfer of the Acquired  Assets,  the assumption of the
Assumed  Liabilities or otherwise,  have any  obligations in respect of any such
fees or commissions.

     3.24 Accuracy of  Information  Furnished.  To the Seller's  Knowledge,  all
information  furnished in writing to the Buyer by the Seller in connection  with
the transactions  contemplated herein was, as of the date thereof, true, correct
and complete in all material respects.

                                   ARTICLE IV.
                   REPRESENTATIONS AND WARRANTIES OF THE BUYER

     The Buyer  represents  and warrants to the Seller as of the date hereof and
as of the Closing Date as follows:

     4.1 Organization; Power. The Buyer is a corporation duly organized, validly
existing  and in  good  standing  under  the  laws  of the  jurisdiction  of its
incorporation  and has all requisite  corporate  power and authority to carry on
its business as it is now being conducted, to execute,  deliver and perform this
Agreement,  the Supply Agreement,  the License Agreement, the Note, the Security
Agreement  and the  Press  Note,  to carry  out its  obligations  hereunder  and
thereunder and to consummate the transactions contemplated hereby and thereby.

     4.2  Authorization;  Effect  of  Agreement.  The  execution,  delivery  and
performance by the Buyer of this Agreement,  the Supply  Agreement,  the License
Agreement,  the Note, the Security Agreement and the Press Note, the performance
by the Buyer of its obligations hereunder and thereunder and the consummation by
the Buyer of the  transactions  contemplated  hereby and thereby  have been duly
authorized  by all  requisite  corporate  action on the part of the Buyer.  This
Agreement has been,  and upon its execution  the Supply  Agreement,  the License
Agreement,  the Note, the Security Agreement and the Press Note shall have been,
duly and validly executed and delivered by the Buyer. This Agreement constitutes
(assuming due  authorization,  execution  and delivery by the Seller),  and upon
their  execution the Supply  Agreement,  the License  Agreement,  the Note,  the
Security   Agreement   and  the  Press  Note  will   constitute   (assuming  due
authorization  execution  and delivery by all parties  other than the Buyer),  a
valid and  binding  obligation  of the Buyer,  enforceable  against the Buyer in
accordance with its terms, except to the extent that such enforceability (i) may
be  limited  by  bankruptcy,  insolvency,  reorganization,  moratorium  or other
similar laws relating to  creditors'  rights  generally,  and (ii) is subject to
general principles of equity.

     4.3 Consents. No Consent is required to be obtained or made by the Buyer in
connection  with the  execution,  delivery and  performance by the Buyer of this
<PAGE>

Agreement,  the Supply Agreement,  the License Agreement, the Note, the Security
Agreement  or the  Press  Note  or the  consummation  by it of the  transactions
contemplated hereby or thereby.

     4.4 No Violations. The execution,  delivery and performance by the Buyer of
this Agreement,  the Supply Agreement,  the Note, the Security Agreement and the
Press Note and the  consummation by the Buyer of the  transactions  contemplated
hereby and thereby  will not,  with or without the giving of notice or the lapse
of time,  or both,  (a)  violate,  conflict  with or result in the breach of any
provision  of the  Certificate  of  Incorporation  or By-laws of the Buyer,  (b)
conflict with, or violate any Law or Governmental  Order applicable to the Buyer
or any of its respective assets,  properties or businesses,  or (c) assuming the
obtaining of all Consents,  conflict with, result in any breach of, constitute a
default  (or event  which with the  giving of notice or lapse of time,  or both,
would become a default)  under,  or give to others any right of  termination  or
acceleration  under,  or result in the creation of any Encumbrance on any of the
Acquired Assets pursuant to, any Contract to which the Buyer is a party.

     4.5 Litigation. There are no Actions by or against the Buyer pending before
any  Governmental  Authority  (or, to the Buyer's  Knowledge,  threatened  to be
brought by or before any  Governmental  Authority)  which  could  reasonably  be
expected to have a Buyer Material Adverse Effect or could reasonably be expected
to affect the legality, validity or enforceability of this Agreement, the Supply
Agreement,  the License Agreement, the Note, the Security Agreement or the Press
Note.  The Buyer is not subject to any  Governmental  Order (nor, to the Buyer's
Knowledge,  are there any such  Governmental  Orders threatened to be imposed by
any  Governmental  Authority) which could reasonably be expected to have a Buyer
Material  Adverse Effect or could reasonably be expected to affect the legality,
validity or enforceability of this Agreement,  the Supply Agreement, the License
Agreement, the Note, the Security Agreement or the Press Note.

     4.6 Availability of Funds. The Buyer has received  commitment  letters from
Congress Financial  Corporation (a copy of which is attached as Exhibit B-1) and
General  Electric  Business  Asset  Funding  Corporation  (copies  of which  are
attached as Exhibit B-2 and Exhibit B-3) (the "Commitment  Letters"),  and, upon
the  satisfaction  of the  conditions  set forth  therein,  the Buyer  will have
sufficient funds on the Closing Date to enable it to pay the Purchase Price.

     4.7 Brokers.  The Buyer has not paid or become  obligated to pay any fee or
commission  to any  broker,  finder  or  intermediary  in  connection  with  the
transactions  contemplated hereby. The Seller shall not, through the transfer of
the Acquired  Assets or otherwise,  have any  obligations in respect of any such
fees or commissions.

                                   ARTICLE V.
                             COVENANTS OF THE SELLER

     The Seller hereby covenants and agrees with the Buyer as follows:

     5.1 Action by the  Seller.  From the date  hereof  until the  Closing,  the
Seller will use commercially  reasonable efforts,  and the Buyer will reasonably
cooperate  with the  Seller,  to secure all  Consents  of the Seller  from third
<PAGE>

parties as shall be  required,  on behalf of the Seller,  in order to enable the
Seller  to  effect  the  transactions  contemplated  hereby  and by  the  Supply
Agreement,  the Note, the Security  Agreement and the Press Note, and the Seller
will otherwise use its commercially reasonable efforts to cause the consummation
of such  transactions  in accordance  with the terms and  conditions  hereof and
thereof.

     5.2 Conduct of the Sky Division's  Business.  Except as otherwise permitted
by this  Agreement  or consented  to by the Buyer  (which  consent  shall not be
unreasonably  withheld or delayed),  from the date hereof until the Closing, the
Seller  shall not conduct the  business  of the Sky  Division  other than in the
ordinary  course  and  consistent  with the  Seller's  prior  practice.  Without
limiting the generality of the  foregoing,  except as set forth on Schedule 5.2,
the Sky Division shall (i) continue its advertising and promotional  activities,
and pricing and  purchasing  policies,  substantially  in  accordance  with past
practice;  (ii) not materially  shorten or lengthen the customary payment cycles
for any of its payables or receivables;  (iii) use its  commercially  reasonable
best efforts to (A) preserve intact its business  organization  and the business
organization of the Sky Division, (B) retain the services of the employees (as a
group) of the Sky  Division,  (C)  continue  in full  force and  effect  without
material  modification all existing  policies or binders of insurance  currently
maintained  in  respect  of the  Sky  Division  and  (D)  preserve  its  current
relationships with its customers,  suppliers and other persons with which it has
significant business relationships,  (iv) exercise, but only after notice to the
Buyer and receipt of the Buyer's prior Consent,  any rights of renewal  pursuant
to the terms of any of the leases or  subleases  set forth on  Schedule  3.10(b)
which by their terms would otherwise expire; and (v) not engage in any practice,
take any  action,  fail to take any action or enter into any  transaction  which
could cause any  representation or warranty of the Seller or the Sky Division to
be  untrue or result  in a breach  of any  covenant  made by the  Seller in this
Agreement. Notwithstanding the foregoing, the Buyer agrees and understands, that
the Seller is entitled to (i) transfer  cash out of the Sky Division and that it
is  intended  that at the Closing  there shall be a cash  balance of zero in the
accounts of the Sky Division, (ii) terminate,  satisfy and/or settle any and all
transactions with any Affiliate of the Sky Division, (iii) assume all rights and
obligations of any Affiliate of the Sky Division  under the Contracts  listed on
Schedule  3.12(a),  and (iv)  terminate the  Transamerica  Lease and acquire the
assets leased thereunder.

     5.3  Access.  From the date  hereof  until the  Closing,  the Seller  shall
provide  the  Buyer  with  such  information  as the Buyer may from time to time
reasonably  request  with  respect  to the Sky  Division  and  the  transactions
contemplated by this Agreement and the Supply  Agreement,  and shall provide the
Buyer and its accountants, counsel, consultants and other representatives access
during  regular  business  hours and upon  reasonable  notice to the  personnel,
properties,  books and records of the Sky Division as the Buyer may from time to
time reasonably  request;  provided that such access shall not unduly  interfere
with the conduct of the Sky  Division  and the Seller  shall not be obligated to
(i) provide the Buyer with any  information  relating to trade  secrets or which
would  violate any law,  rule or  regulation  or any term of any Contract of the
Seller or which may subject the Seller to risk of liability, or if the provision
thereof  would  adversely  affect  the  ability  of  the  Seller  or  any of its
Affiliates  to assert  attorney-client,  attorney  work product or other similar
privilege or (ii)  provide the Buyer with access to any property or  information
of the Sky Division for purposes of conducting any invasive sampling or testing.
Any  disclosure  whatsoever  during  such  investigation  by the Buyer shall not
constitute an enlargement of or additional  representations or warranties of the
<PAGE>

Seller  or the  Sky  Division  beyond  those  specifically  set  forth  in  this
Agreement.

     5.4  Publicity.  The Seller will not release,  generate or permit any press
release,  public  statement or other publicity  concerning  this Agreement,  the
Supply Agreement,  the Note, the Security  Agreement , the Security Agreement or
the Press Note, or the  transactions  contemplated  hereunder or thereunder  nor
submit this Agreement, the Supply Agreement, the Note, the Security Agreement or
the Press Note or any document  relating  hereto or thereto to any  Governmental
Authority, without first consulting with and obtaining the consent of the Buyer,
except as required by Law or legal authorities.

     5.5 Notices of Certain Events. From the date hereof until the Closing Date,
the  Seller  shall  give  prompt  notice  to the Buyer of any  material  adverse
development  of which the Seller has  Knowledge and which causes a breach of any
of the Seller's representations and warranties in Article III.

     5.6 Exclusivity. The Seller will not, and will not authorize any Officer or
any other Person on its behalf to, solicit,  encourage,  negotiate or accept any
offer from any Person  concerning  (i) the  possible  disposition  of all or any
substantial  portion of the  business or assets of the Sky  Division or (ii) any
other agreement or arrangement that would be inconsistent  with the consummation
of  the   transactions   contemplated  by  this  Agreement  (each  a  "Competing
Transaction"),  nor will they  participate in any  discussions  or  negotiations
regarding,  or furnish any  information  with respect to, or  facilitate  in any
other manner, any Competing Transaction, and they will immediately terminate any
discussions  or  negotiations  regarding  any  Competing  Transaction  that  are
currently underway, if any, with any Person other than the Buyer.

     5.7  Employees.  The Seller  will use  commercially  reasonable  efforts to
encourage all Active Employees of the Sky Division to accept employment with the
Buyer on the Closing Date.

                                   ARTICLE VI.
                             COVENANTS OF THE BUYER

     The Buyer hereby covenants and agrees with the Seller as follows:

     6.1 Action by the Buyer. From the date hereof until the Closing,  the Buyer
will  use  commercially  reasonable  efforts,  and the  Seller  will  reasonably
cooperate with the Buyer, to secure all Consents, from third parties as shall be
required,  on behalf of the  Buyer,  in order to enable  the Buyer to effect the
transactions  contemplated  hereby and by the Supply  Agreement,  the Note,  the
Security  Agreement  and the Press Note,  and the Buyer will  otherwise  use its
commercially  reasonable  efforts to cause the consummation of such transactions
in accordance with the terms and conditions  hereof and thereof.  The Buyer will
use best efforts to satisfy the  conditions  of the  borrowing  set forth in the
Commitment  Letters or, if such  conditions are not satisfied and such borrowing
does not occur,  to obtain,  as promptly as practicable,  alternative  financing
upon substantially similar terms.
<PAGE>

     6.2 Publicity.  Prior to the Closing, the Buyer will not release,  generate
or permit any press release, public statement or other publicity concerning this
Agreement,  the Supply Agreement,  the Note, the Security Agreement or the Press
Note or the  transactions  contemplated  hereunder or thereunder nor submit this
Agreement,  the Supply Agreement,  the Note, the Security Agreement or the Press
Note or any document  relating hereto or thereto to any Governmental  Authority,
without first consulting with and obtaining the consent of the Seller, except as
required by Law or legal  authorities  (provided that the Buyer shall give prior
notice of such  disclosure  to the Seller);  and provided that in no event shall
the Buyer disclose any financial or other results of the Seller (other than with
respect to the Sky Division after the Closing).

     6.3  Confidentiality.   Prior  to  the  Closing,  the  Buyer  may  disclose
non-public  information  relating to the Sky Division and the Seller only (i) to
those  officers,  directors  and  employees  of the  Buyer who need to know such
information for the purpose of evaluating the Sky Division and the  transactions
contemplated  hereby and by the Transition  Services  Agreement and who agree to
keep it confidential;  (ii) to those advisors of the Buyer who need to know such
information for the purpose of evaluating the Sky Division and the  transactions
contemplated  hereby  and  by the  Supply  Agreement,  the  Note,  the  Security
Agreement and the Press Note and who agree to keep it confidential; and (iii) to
the extent  required by any Law  (provided  that the Buyer gives prior notice of
such disclosure to the Seller).  The Buyer shall be prohibited at all times from
disclosing  non-public  information  relating  to the  Seller  (other  than with
respect to the Sky Division as permitted above).  The Buyer shall be responsible
for any failure by any officer, director or employee of the Buyer or any advisor
of the Buyer to maintain the confidentiality of any such information.

     6.4 Notice. From the date hereof until the Closing,  Buyer will give prompt
notice to the Seller of any material adverse  development of which the Buyer has
Knowledge  and which causes a breach of any of the Buyer's  representations  and
warranties in Article IV.

                                  ARTICLE VII.
                              ADDITIONAL COVENANTS

     7.1 Further  Assurances.  The Buyer and the Seller shall each, from time to
time after the  Closing,  at the  reasonable  request  of the other and  without
further   consideration,   execute  and  deliver  such  further   documents  and
instruments of assignment, transfer, license or assumption and take such further
action in order more  effectively  to transfer,  reduce to possession and record
title to any of the  Acquired  Assets,  to permit the Buyer to  operate  the Sky
Division or to implement the assumption of the Assumed Liabilities

     7.2 Books and Records.  The Buyer, on the one hand, and the Seller,  on the
other hand,  shall each,  on the request of the other,  make  available  to such
other Party from time to time on a reasonable  basis records and other documents
substantially  relating to the Acquired  Assets and the Sky Division  (including
records or documents relating to Straddle Taxes or Transfer Taxes). Such records
and other  documents  shall be held by the Party in possession of such documents
for seven years  after the Closing  Date and copies  shall be  delivered  to the
other  Party  upon such  other  Party's  request  at any time and at such  other
party's out-of-pocket expense.
<PAGE>

     7.3  Insurance.  As of the Closing Date,  the coverage  under all insurance
policies  related  to the Sky  Division  shall  continue  in force  only for the
benefit of the Seller, and not for the benefit of the Buyer or the Sky Division.
As of the Closing Date, the Buyer shall arrange for new insurance  policies with
respect to the Sky Division covering all periods and agrees not to seek, through
any means,  to benefit from any of the  Seller's  insurance  policies  which may
provide  coverage for claims relating in any way to the Sky Division on or prior
to the Closing Date.

     7.4 Payments from Third Parties. In the event that, on or after the Closing
Date,  either the Buyer or the Seller shall  receive any payments or other funds
due to another Party  pursuant to the terms hereof or otherwise,  then the Party
receiving such funds shall promptly forward such funds to the proper Party.

     7.5 Tax Matters.  After the Closing Date, the Parties shall  cooperate with
one another in connection with the preparation and filing of tax returns and any
audits or proceedings  relating to Straddle Taxes or Transfer  Taxes,  including
furnishing  or making  available  books and  records  relating to such Taxes and
making   employees   available  on  a  mutually   convenient  basis  to  provide
explanations of any such books and records.

     7.6 Covenant Not to Compete.

          (a) The  Seller has had access to and  become  familiar  with  various
trade  secrets  consisting  of,  but  not  limited  to,  financial   statements,
processes,  computer  programs,  compilations  of  information,  records,  sales
procedures,  customer  requirements,   customer  lists  and  other  confidential
information  (collectively referred to as the "Trade Secrets"),  which have been
used in the  operation  of the business of the Sky  Division.  After the Closing
Date,  the Seller shall not use in any way or disclose any of the Trade Secrets,
directly or indirectly.

          (b) Until two years  following the Closing Date (the  "Non-competition
Period"),  the Seller and its Affiliates shall not,  directly or indirectly,  in
any  capacity,  within the United  States  and  Canada,  invest or engage in any
business  that is in  competition  with that of the Sky  Division as of the date
hereof and the Closing Date.  Notwithstanding  the  foregoing,  no owner of less
than 5% of the  outstanding  capital  stock of any publicly  traded  corporation
shall be  deemed  to engage  solely  by  reason  of such  ownership  in any such
business.  In  addition,  in the event that the Seller or any of its  Affiliates
acquires a business that is in competition  with that of the Sky Division,  then
the Seller  will not be in breach of this  Section  7.6(b) if the Seller or such
Affiliate offers to sell to the Buyer or its Affiliates such competing  business
and negotiates in good faith with the Buyer with respect thereto for a period of
at least  ninety (90) days (it being  agreed that such  acquisition  may involve
assets or businesses  which are not in  competition  with the Sky  Division,  in
which case such assets or  businesses  shall be exempt in all respects from this
Section 7.6). If such transaction with respect to such competing business is not
consummated between the Seller and the Buyer or their Affiliates,  the Seller or
its  Affiliate  shall use  commercially  reasonable  efforts  to dispose of such
competing business within one year from the acquisition  thereof. The Buyer also
acknowledges that Corporacion Durango,  through one or more of its Subsidiaries,
(i) operates paper mills and other  businesses in the United States and that its
engaging in any such activities shall not constitute a violation of this Section
7.6 and (ii) currently ships products to customers in the United States and that
<PAGE>

continuing to ship products to those established  customers shall not constitute
a violation of this Section 7.6.

          (c) During the  Non-competition  Period, the Seller and its Affiliates
shall not, on their own behalf or on behalf of any other Person, hire or solicit
or in any manner attempt to influence or induce any Active Employee to leave the
employment  of the Buyer,  nor use or  disclose  to any  Person any  information
concerning the names and addresses of such employee for such purpose.

          (d) The Seller  agrees that the  agreements  set forth in this Section
each constitute separate agreements independently supported by good and adequate
consideration  and shall be severable  from the other  provisions  of, and shall
survive,  this  Agreement.  The existence of any claim or cause of action of the
Seller  against the Buyer,  whether  predicated on this  Agreement or otherwise,
shall not constitute a defense to the  enforcement by the Buyer of the covenants
and agreements of the Seller contained in this Section.

          (e) The Seller acknowledges and recognizes that the enforcement of the
provisions  of  this  Section  is  necessary  to  ensure  the  preservation  and
continuity of the business and good will of the Sky Division. The Seller further
agrees that due to the nature of such business, the noncompetition  restrictions
set forth in this Section are reasonable as to time and geographic area.

     7.7 Emkay  Assignment.  If the Seller has been unable to obtain the Consent
of Emkay,  Inc. to the  assignment  of the Emkay  Agreement as it relates to the
vehicles included on Schedule 2.1(a) on or prior to the Closing Date, the Seller
will use its commercially  reasonable efforts to obtain such Consent on or prior
to the 30th day following the Closing. If the Seller obtains such Consent within
such time period,  the Seller shall, as soon as practicable after obtaining such
Consent, assign all of Buyer's right, title and interest in and to such vehicles
to the Buyer and the Buyer shall assume the obligations  and  liabilities  under
the Emkay  Agreement with respect to such vehicles set forth in this  Agreement.
If the Seller is unable to obtain such Consent  within such time,  such vehicles
will be deemed to be Excluded  Assets and  Schedule  2.1(a) will be deemed to be
amended as of the date hereof to exclude such vehicles.

                                  ARTICLE VIII.
                      CONDITIONS TO THE BUYER'S OBLIGATIONS

     The  obligations of the Buyer hereunder to purchase the Acquired Assets and
assume the Assumed  Liabilities  shall be subject to the satisfaction (or waiver
by the Buyer) on or prior to the Closing Date of all of following conditions:

     8.1  Representations and Warranties;  Performance.  All representations and
warranties  made by the Seller in this Agreement,  the Supply  Agreement and the
License  Agreement shall be true in all material  respects at and as of the time
when  made,  and  at  and  as  of  the  time  of  the  Closing  as  though  such
representations  and  warranties  were made at and as of said  time.  The Seller
shall have  performed and complied in all material  respects with all the terms,
provisions  and  conditions  of this  Agreement,  the Supply  Agreement  and the
License  Agreement to be complied  with and performed by the Seller at or before
<PAGE>

the Closing.  The Buyer shall have received a certificate  of the President or a
Vice  President  of the  Seller  dated the  Closing  Date in form and  substance
reasonably satisfactory to the Buyer, certifying to such effect.

     8.2  Consents.  All  Consents  specified  in  Schedule  3.4 shall have been
obtained.

     8.3  Absence  of Certain  Proceedings.  No Action in effect  preventing  or
rendering  illegal  consummation  of  the  transactions   contemplated  by  this
Agreement and the Supply Agreement shall be pending.

     8.4  Environmental  Assessment.  The  Buyer  shall  be  satisfied,  in  its
reasonable  discretion,  with the results of a Phase I Environmental  Assessment
relating to any real property  included in the Acquired Assets or subject to any
lease assumed by the Buyer pursuant to this Agreement.

     8.5  Opinion  of  Counsel.  The Buyer  shall  have  received  an opinion of
counsel,  dated as of the Closing  Date,  from White & Case LLP (or  appropriate
local  counsel),  counsel to the  Seller,  as to the  authorization,  execution,
delivery  and  enforceability  of  this  Agreement  and  the  Supply  Agreement,
substantially in the form of Exhibit C.

     8.6 Availability of Funds. The Buyer shall have available funds pursuant to
terms substantially similar to those contained in the Commitment Letters.

     8.7 License Agreement.  The Seller shall have executed and delivered to the
Buyer a License Agreement, dated as of the Closing Date and substantially in the
form of Exhibit D (the "License Agreement"). --------- -----------------

     8.8 Transamerica Lease. The Seller shall,  simultaneously with the Closing,
deliver to  Transamerica  Equipment  Financial  Services  all  amounts  due with
respect to the Press pursuant to the Press Lease.

     8.9 Assignment of Bank Accounts.  The Seller shall  simultaneously with the
Closing,  assign the Bank Accounts to the Buyer or cause the Bank Accounts to be
assigned to the Buyer.

     8.10  Warehouse  Letters.  The Seller shall have  delivered to Buyer a duly
executed assignment from Bank of America, N.A. to Congress Financial Corporation
or one of its Affiliates of the waiver letters received by Bank of America, N.A.
from the operators of the warehouses set forth on Schedule 8.10.

     8.11   Payment  of  Aged   Receivables.   The  Seller  shall  prior  to  or
simultaneously  with the  Closing,  pay all  accounts  payable  of the Seller in
respect of the Sky Division that are over thirty (30) days old as of the Closing
Date.
<PAGE>

                                   ARTICLE IX.
                     CONDITIONS TO THE SELLER'S OBLIGATIONS

     The  obligations of the Seller  hereunder to sell the Acquired Assets shall
be subject  to the  satisfaction  (or  waiver by the  Seller) on or prior to the
Closing Date of all of the following conditions:

     9.1  Representations and Warranties;  Performance.  All representations and
warranties  made by the Buyer in this  Agreement,  the Supply  Agreement and the
License  Agreement shall be true in all material  respects at and as of the time
when  made,  and  at  and  as  of  the  time  of  the  Closing  as  though  such
representations and warranties were made at and as of said time. The Buyer shall
have  performed  and  complied  in all  material  respects  with all the  terms,
provisions  and  conditions  of this  Agreement,  the Supply  Agreement  and the
License  Agreement to be complied  with and  performed by the Buyer at or before
the Closing.  The Seller shall have received a certificate  of an officer of the
Buyer dated the Closing Date in form and substance  reasonably  satisfactory  to
the Seller, certifying to such effect.

     9.2  Absence  of Certain  Proceedings.  No Action in effect  preventing  or
rendering  illegal  consummation  of  the  transactions   contemplated  by  this
Agreement,  the Supply Agreement,  the Note, the Security Agreement or the Press
Note shall be pending.

     9.3  Opinion of  Counsel.  The Seller  shall  have  received  an opinion of
counsel, dated as of the Closing Date, from Gardere Wynne Sewell LLP, counsel to
the Buyer,  in form and  substance  reasonably  satisfactory  to the Seller with
respect to the matters set forth on Exhibit E, with customary qualifications and
exceptions.

     9.4 Security Agreement.  The Buyer shall have executed and delivered to the
Seller the Security Agreement.

     9.5 Supply  Agreement.  The Buyer shall have  executed and delivered to the
Seller a Supply Agreement (the "Supply  Agreement") with respect to the purchase
of paper and boxes, substantially in the form of Exhibit F.

     9.6 License  Agreement.  The Buyer shall have executed and delivered to the
Seller the License Agreement.

     9.7 Intercreditor  Agreement.  Congress Financial Corporation or one of its
Affiliates  shall have  executed and  delivered  to the Seller an  Intercreditor
Agreement   with  respect  to  the  Press  in  form  and  substance   reasonably
satisfactory to the Seller.

                                   ARTICLE X.
                  EMPLOYMENT AND EMPLOYEE BENEFITS ARRANGEMENTS

     10.1 Transferred Employees. The Seller has delivered to the Buyer a list of
all of the Employees as of March 22, 2001.  The Buyer shall offer  employment to
not less than 90% of the Employees whose principal place of employment is at the
Sky  Division  who are  actively  at work on the  Closing  Date (each an "Active
<PAGE>

Employee"). For purposes hereof, any Employee who is not actively at work on the
Closing Date due to a short-term  absence  (including due to vacation,  holiday,
illness or injury of shorter duration than a long-term disability,  jury duty or
death  leave) in  accordance  with  applicable  policies of the Seller  shall be
deemed an Active Employee  herein.  The Buyer shall also offer employment to any
Employee on disability or authorized  leave whose principal place of performance
was at the Sky Division  (as set forth on Schedule  3.19(b)) and who has a right
to become reemployed in the Sky Division under applicable law upon conclusion of
such disability or leave.  Such Employees who are offered and accept  employment
with the Buyer shall be referred to as "Transferred Employees."

     10.2 Employee Benefit Plans.

          (a) On or before the expiration of 30 days following the Closing Date,
the Buyer  shall  have in effect a defined  contribution  plan that  includes  a
qualified cash or deferred  arrangement  within the meaning of Section 401(k) of
the  Code in  which  each  Transferred  Employee  who was  participating  in the
Durango-Georgia  Paper Company  401(k) Plan or the J.D. Sky  Corporation  401(k)
Profit  Sharing  Plan  (collectively,  the  "Seller's  401(k)  Plans") as of the
Closing Date shall be eligible to participate (the "Buyer's 401(k) Plan") on the
later of (i) the effective  date of the Buyer's  401(k) Plan or (ii) the Closing
Date. Transferred Employees shall receive credit for all service with the Seller
and its  Affiliates  for purposes of  eligibility  and vesting under the Buyer's
401(k) Plan. The Seller's  401(k) Plans shall retain all assets and  liabilities
with respect to the accounts of Employees who are not Transferred  Employees and
who are participants in the Seller's 401(k) Plans,  including  retirees or other
former employees of the Sky Division.

          As soon as reasonably  practicable  following the Closing Date, Seller
shall,  unless  prohibited by Law,  provide for  distribution to the Transferred
Employees of their respective  account balances in Seller's 401(k) Plans and the
Durango-Georgia  Paper Company Money Purchase  Pension Plan. In such event,  the
Buyer's 401(k) Plan shall be amended to the extent necessary to accept rollovers
of such  distributed  account  balances by the Transferred  Employees other than
rollovers of notes evidencing loans to Transferred Employees.

          (b) The Buyer  agrees to provide any  required  notice  under the WARN
Act, and any similar statute, and otherwise to comply with any such statute with
respect to any "plant  closing" or "mass layoff" (as defined in the WARN Act) or
similar event affecting  Transferred Employees or former employees and occurring
after the Closing Date.

          (c) If, immediately prior to the Closing, the Seller maintains a group
health  plan  that is  subject  to  continuation  health  coverage  requirements
("Continuation  Coverage") under Section 4980B of the Code, Section 601 et. seq.
of ERISA  ("COBRA") or other  applicable  Law, the Seller  shall  maintain  such
health plan for the purpose of  providing,  or, if the Seller does not  maintain
such a health  plan or desires to  terminate  such  health  plan,  otherwise  to
provide  Continuation  Coverage under COBRA or such other applicable Law for the
benefit of (a) all Employees of the Seller and their eligible  beneficiaries and
dependents  who are receiving  Continuation  Coverage at the time of the Closing
and (b) all Employees and their eligible  beneficiaries and dependents who elect
<PAGE>

Continuation Coverage as the result of termination of employment with the Seller
upon  consummation of the  transactions  contemplated  hereby (such  individuals
identified  in clauses (a) and (b) above,  collectively  referred to as "Covered
Persons").  In the event the  Seller is unable or fails to  maintain  its health
plan or otherwise provide Continuation  Coverage for any Covered Person and as a
result,  the Buyer is required  under COBRA or other  applicable  Law to provide
Continuation  Coverage for such Covered  Person,  the Seller shall reimburse and
fully indemnify the Buyer for any reasonable costs,  expenses or other liability
incurred,  directly  or  indirectly  by the  Buyer as a result  of the  Seller's
failure to provide Continuation Coverage.

     10.3 Worker's  Compensation.  The Buyer shall assume the responsibility for
all worker's  compensation claims made by the Transferred Employees arising from
events occurring after the Closing.  The Seller shall retain the  responsibility
for all worker's  compensation  claims made by its Employees or former Employees
(whether or not  Transferred  Employees)  that arise from  events that  occurred
before the Closing.

                                   ARTICLE XI.
                                   TERMINATION

     11.1 Termination and Abandonment.  This Agreement may be terminated and the
transactions  contemplated  by this Agreement may be abandoned at any time prior
to the Closing:

          (a) by mutual written consent of the Parties; or

          (b) by the Buyer,  on the one hand, or the Seller,  on the other hand,
if the Closing  shall not have  occurred on or before the 30th day following the
date hereof, provided, however, that the right to terminate this Agreement under
this  Section  11.1(b)  shall not be  available  to any Party  whose  failure to
fulfill any obligations  under this Agreement has been the cause of, or resulted
in, the failure of the Closing to occur on or before such date; or

          (c) by the Buyer by giving  notice to the  Seller at any time prior to
the  Closing  in  the  event  that  the  Seller  has   breached   any   material
representation, warranty or covenant contained in this Agreement in any material
respect,  the Buyer has  notified  the Seller of such  breach and the breach has
continued without cure for a period of 30 days after the notice of breach; or

          (d) by the  Seller by giving  notice to the Buyer at any time prior to
the   Closing  in  the  event  that  the  Buyer  has   breached   any   material
representation, warranty or covenant contained in this Agreement in any material
respect,  the Seller has  notified  the Buyer of such  breach and the breach has
continued without cure for a period of 30 days after the notice of breach.

     11.2  Effect  of  Termination.  In the  event  of the  termination  of this
Agreement  pursuant to Section 11.1,  this Agreement shall forthwith cease to be
of any further  force and effect  (except for Section  6.3,  this Article XI and
Article  XII,  which  shall  survive  such  termination),  and there shall be no
liability or obligation on the part of any Party.
<PAGE>

                                  ARTICLE XII.
                          SURVIVAL AND INDEMNIFICATION

     12.1 Survival.  The  representations and warranties of the Seller contained
in Article III of this  Agreement  shall  survive the Closing  until nine months
after the Closing Date and shall  thereupon  expire,  together with any right to
indemnification in respect thereof, provided,  however, that the representations
and  warranties  of the  Seller  set  forth in  Section  3.18  with  respect  to
Environmental Matters shall survive the Closing Date until the third anniversary
of the Closing Date and the  representations  and  warranties  of the Seller set
forth in Section 3.17 with respect to Taxes shall survive  until the  expiration
of the  applicable  statute  of  limitations  period.  The  representations  and
warranties of the Buyer  contained in Article IV of this Agreement shall survive
the Closing until nine months after the Closing Date and shall thereupon expire,
together  with any right to  indemnification  in respect  thereof.  Neither  the
period  of  survival  nor  the   liability  of  a  Party  with  respect  to  its
representations and warranties shall be reduced by any investigation made at any
time by or on behalf of the other Party. The covenants and agreements  contained
herein to be performed or complied with prior to the Closing shall expire at the
Closing.  The  covenants  and  agreements  contained  herein to be  performed or
complied  with at or after the  Closing  shall  survive  the  Closing  until the
expiration of the applicable  statute of  limitations.  If notice of a claim has
been given prior to the expiration of the applicable  survival period by a Party
to the other Party, then the relevant representations,  warranties and covenants
shall survive as to such claim, until such claim has been finally resolved.

     12.2 Indemnification by the Seller.

          (a) From and after the Closing  Date,  the Seller shall  indemnify and
hold  harmless  the  Buyer,  its  Affiliates,  and  their  respective  officers,
directors,  employees,  agents,  consultants,   representatives  and  successors
(collectively,  the "Buyer  Indemnitees")  from and  against  any and all Losses
incurred by any of them arising out of or  resulting  from (i) any breach by the
Seller of the  representations  and  warranties of the Seller  contained in this
Agreement as each such  representation  or warranty (except the  representations
and  warranties  contained  in Sections  3.16,  3.17 and 3.18) would read if all
qualifications as to materiality were deleted therefrom, (ii) any failure by the
Seller  to  perform  any  of its  covenants  or  agreements  contained  in  this
Agreement,  the Supply Agreement or the License Agreement,  (iii) any failure to
pay when due any liabilities not assumed by the Buyer under Section 2.2, or (iv)
any Straddle Tax or Transfer Tax payable by the Seller pursuant to Section 2.6.

          (b)  (i)  In  addition  to  any  other  limitations  on  the  Seller's
indemnification obligations under this Article XII:

          (A) the Seller shall have no indemnification  obligations with respect
     to any Indemnified  Environmental  Losses  resulting,  in whole or in part,
     from any  voluntary  actions  by any of the  Buyer  Indemnitees  (or  their
     agents) to investigate or remediate  Hazardous Materials at or under any of
     the Facility or Acquired  Assets;  provided,  however,  that the limitation
     contained  in this  Section  12.2(b)(i)(A)  shall not apply to  Indemnified
     Environmental  Losses  which  result from (1) the  discovery  of  Hazardous
<PAGE>

     Materials  in the soil or  groundwater  on or under any of the  Facility or
     Acquired  Assets  in  the  ordinary  course  of any  excavation  activities
     conducted  for the  purpose  of  repair,  renovation  or  expansion  of the
     Facility  or  Acquired  Assets;  or (2) the  discovery  by any of the Buyer
     Indemnitees  of Hazardous  Materials in the soil or groundwater on or under
     any of the  Facility or Acquired  Assets in the course of any  Commercially
     Reasonable  voluntary  investigation.   Commercially  Reasonable  voluntary
     investigation shall not include, for example, any investigation of the soil
     or groundwater  performed by any of the Buyer Indemnitees after the Closing
     Date for the  purpose  of  establishing  a  baseline  with  respect  to any
     Hazardous Materials on or under any of the Facility or Acquired Assets;

          (B) the Seller shall have no indemnification  obligations with respect
     to any Indemnified  Environmental  Losses  resulting,  in whole or in part,
     from  any  disclosure,  report  or  other  communication  (whether  oral or
     written)  from  any of the  Buyer  Indemnitees  (or  their  agents)  to any
     Governmental Authority or other third party  ("Notification"),  unless such
     Notification was, in the opinion of Buyer Indemnitees' counsel, required by
     Environmental  Law at the time it was made. The Buyer Indemnitees (or their
     agents)  shall  provide  notice  to the  Seller  seven  days  prior  to any
     Notification; provided, however, that in the event any such Notification is
     necessary  to abate  promptly any  immediate  threat to human health or the
     environment, notice to the Seller shall be by telephone or similar means at
     the earliest possible opportunity and shall be followed by written notice;

          (C) the  Seller's  indemnification  obligations  with  respect  to any
     Indemnified  Environmental  Losses  shall be reduced to the extent that any
     act, omission or negligence of any of the Buyer Indemnitees on or after the
     Closing Date adversely affects such obligations;

          (D) the Seller shall have no indemnification  obligations with respect
     to Indemnified  Environmental Losses, unless such Indemnified Environmental
     Losses are actually expended or incurred by the Buyer  Indemnitees,  or any
     of them,  or are the subject of a Claims  Notice given in  accordance  with
     Section  12.2(b)(ii)  (other than a Claims Notice solely in connection with
     an investigation) within three years of the Closing Date.

          (ii) As a condition to the Seller's indemnification  obligations under
this Section 12.2:

          (A) promptly  after receipt by any of the Buyer  Indemnitees of notice
     of Response  Action by any  Governmental  Authority or third party, in each
     case that may result in Indemnified  Environmental  Losses  ("Environmental
     Claim"),  the Buyer  Indemnitees  promptly  shall  give  notice  thereof (a
     "Claims  Notice") to the  Seller.  The Claims  Notice  shall  describe  the
     Environmental Claim in reasonable detail and shall indicate,  to the extent
     that may be reasonably determined,  the amount (estimated, if necessary) of
     any Indemnified  Environmental  Losses that have been or may be incurred by
     any of the Buyer Indemnitees;

          (B) the Seller may at any time, in its reasonable  discretion,  assume
     the defense  (including  litigation or  negotiation)  of any  Environmental
<PAGE>

     Claim with counsel reasonably acceptable to the Buyer;  provided,  however,
     that for so long as the Seller is assuming  the  defense,  the Seller shall
     have no indemnification  obligation  hereunder to pay any costs or expenses
     of consultants,  experts or legal counsel of the Buyer Indemnitees expended
     or  incurred  by any of the  Buyer  Indemnitees  in  connection  with  such
     defense.  No  compromise or  settlement  with respect to any  Environmental
     Claim may be agreed to by the Seller  without the Buyer  Indemnitees  prior
     written  consent,  which  consent  shall not be  unreasonably  withheld  or
     delayed;

          (C) the Buyer  Indemnitees  and the Seller  shall  cooperate  with and
     render each other  assistance  as may  reasonably  be requested in order to
     ensure the proper and  adequate  defense of any such  Environmental  Claim,
     which  assistance  shall include making  appropriate  personnel  reasonably
     available  for any  discovery,  trial  or the  completion  of any  Response
     Action.  The Buyer shall  provide  access to the Seller  necessary  for the
     performance  of any Response  Action;  provided,  however,  that the Seller
     shall not unreasonably interfere with the normal business operations of the
     Buyer;

          (D) if the  Seller  elects not to defend  any  Environmental  Claim or
     fails to  diligently  pursue the defense of any  Environmental  Claim,  the
     Buyer  Indemnitees  shall  assume  the  defense  (including  litigation  or
     negotiation) of any such Environmental  Claim, with counsel selected by the
     Buyer Indemnitees reasonably acceptable to the Seller, and the Seller shall
     pay all  reasonable  costs and expenses  thereof.  The Seller shall have no
     indemnification  obligation  hereunder with respect to any defense effected
     without the Seller's prior consent, which consent shall not be unreasonably
     withheld; and

          (E) with respect to any Claims Notice that is given in accordance with
     Section 12.2(b)(ii),  the Seller or the Buyer Indemnitees,  as the case may
     be, having undertaken to defend such  Environmental  Claim, shall undertake
     such defense (including  litigation,  negotiation or the performance of any
     Response Action) in a manner that is Commercially Reasonable. "Commercially
     Reasonable"  shall be  determined  from  the  perspective  of a  reasonable
     business   person   acting   (without   regard  to  the   availability   of
     indemnification  hereunder)  to  achieve  compliance  (based on  reasonable
     reliance on the advice of expert  third-party  consultants or counsel) with
     Environmental  Law or avoid or mitigate a loss or  liability  or  potential
     loss or  liability  with  respect  to  Environmental  Law or  Environmental
     Matters.   The  Buyer  Indemnitees'  rights  with  respect  to  Indemnified
     Environmental  Losses under this Article XII shall be reduced to the extent
     that actions  undertaken by them are not  Commercially  Reasonable and such
     actions (1) increase the amount of Indemnified Environmental Losses, or (2)
     result in  Indemnified  Environmental  Losses,  which but for such  actions
     would not have been expended or incurred.

     12.3  Indemnification  by the Buyer.  From and after the Closing Date,  the
Buyer shall indemnify and hold harmless the Seller,  its  Affiliates,  and their
respective officers, directors, employees, agents, consultants,  representatives
and successors (collectively, the "Seller Indemnitees") from and against any and
all Losses  incurred  by any of them  arising out of or  resulting  from (i) any
breach by the Buyer of the representations and warranties of the Buyer contained
in this  Agreement  as each such  representation  or warranty  would read if all
qualifications as to materiality were deleted therefrom, (ii) any failure by the
Buyer to perform any of its covenants or agreements contained in this Agreement,
<PAGE>

the Supply Agreement or the License Agreement, (iii) any failure to pay when due
the Assumed  Liabilities,  (iv) any  Straddle Tax or Transfer Tax payable by the
Buyer pursuant to Section 2.6, or (v) any illegal hiring  practices  utilized by
the Buyer with respect to offering employment to Active Employees.

     12.4 Procedure for Indemnification.  In the event that any Indemnitee shall
incur or suffer any Losses in respect of which  indemnification  (other  than by
the Seller pursuant to Section  12.2(b)) may be sought  hereunder by the Seller,
on the one hand,  or Buyer,  on the other hand,  the  Indemnitee  shall assert a
claim for indemnification by notice (the "Notice") to the Indemnitor stating the
nature and basis of such  claim.  Promptly  after  receipt by an  Indemnitee  of
Notice of the assertion of a claim or the commencement of any action, litigation
or  proceeding  by any third party (a  "Third-Party  Claim")  with  respect to a
matter for which  indemnification is or may be owing pursuant to Section 12.2 or
12.3,  the Indemnitee  shall give Notice to the Indemnitor and shall  thereafter
keep the Indemnitor  informed of all other  information it receives with respect
thereto;  provided,  however,  that  failure  of  the  Indemnitee  to  give  the
Indemnitor prompt Notice and such other information as provided herein shall not
relieve the Indemnitor of any of its obligations  hereunder unless and then only
to the extent that the Indemnitor shall have been actually  prejudiced  thereby.
The Indemnitor  shall have the right,  at its option and at its own expense,  to
participate  in or, by giving  written  notice to the  Indemnitee  no later than
thirty (30) days after delivery of the Notice, to take exclusive control of, the
defense,  negotiations  and/or  settlement of any such Third-Party  Claim,  with
counsel chosen by the Indemnitor and reasonably  satisfactory to the Indemnitee.
After the Indemnitor takes exclusive control of the defense,  negotiation and/or
settlement of any such Third-Party Claim, the Indemnitee shall have the right to
participate  therein,  at its own expense and with counsel of its own  choosing;
provided,  however,  that the Indemnitor shall pay for the costs and expenses of
such separate  counsel if the  Indemnitor's  counsel  determines  that it cannot
represent  both the  Indemnitor  and the  Indemnitee.  The  Parties  each  shall
cooperate  and shall cause each  Indemnitor  to  cooperate  with and render such
assistance  as may  reasonably  be  requested  in order to insure the proper and
adequate defense of any such Third-Party  Claim or proceeding,  which assistance
shall include,  without  limitation,  making  appropriate  personnel  reasonably
available  for any  discovery or trial.  If the  Indemnitor  fails or refuses to
undertake  the defense of any such  Third-Party  Claim  within  thirty (30) days
after  delivery  of the  Notice,  the  Indemnitee  shall  have the right to take
exclusive  control  of  the  defense,  negotiation  and/or  settlement  of  such
Third-Party  Claim at the Indemnitor's  expense.  Neither the Indemnitor nor the
Indemnitee shall settle or compromise any Third-Party  Claim without the consent
of the other,  which  consent  shall not be  unreasonably  withheld  or delayed;
provided,  however,  that any settlement or compromise includes an unconditional
release of the Indemnitee  from all  liabilities or obligations  relating to the
Third-Party Claim.

     12.5 Payment.  With respect to Third-Party Claims for which indemnification
is  payable  under this  Agreement,  such  indemnification  shall be paid by the
Indemnitor  promptly  upon  (i)  the  entry  of a  final  judgment  against  the
Indemnitee and the expiration of any applicable appeal period; (ii) the entry of
a  non-appealable  judgment or final appellate  decision against the Indemnitee;
provided that the Indemnitor  shall be required to post any bond required by law
in connection with any appeal of a final judgment (iii) the entering into of any
settlement  agreement in accordance  with the provisions of this Article XII; or
(iv) the entry of any consent order or decree binding upon the Indemnitee.
<PAGE>

     12.6 Adjustment Amounts. Notwithstanding anything to the contrary set forth
herein,  the Buyer shall not be deemed to have  suffered or incurred any Loss to
the extent  such Loss was  included in the  computation  of the  Purchase  Price
Adjustment  or any  subsequent  adjustment  provided  for in Section 2.4 and the
payment in respect thereof was made by the Seller to the Buyer.

     12.7  Indemnification.  Notwithstanding any other provision of this Article
XII, (i) the  aggregate  liability of the Seller under  Section 12.2 shall in no
event exceed the aggregate  amount of the Purchase Price,  as adjusted,  paid to
the Seller  hereunder  and (ii) no amount  shall be payable for  indemnification
pursuant to Section 12.2 except to the extent the aggregate amount payable under
Section 12.2 exceeds $350,000.

     12.8  Exclusivity.  Except as  specifically  set  forth in this  Agreement,
effective as of the Closing,  the Buyer waives any rights and claims it may have
against  the  Seller  and any of its  Affiliates,  whether  in law or in equity,
relating  to  the  Sky  Division  or the  Acquired  Assets  or the  transactions
contemplated  hereby,  other  than the Supply  Agreement.  The rights and claims
waived by the Buyer include,  without  limitation,  claims for  contribution  or
other rights of recovery  arising out of or relating to any  Environmental  Law,
claims for breach of contract,  breach of representation or warranty,  negligent
misrepresentation  and all other  claims for breach of duty.  After the Closing,
the  indemnification  provisions of this  Agreement  shall provide the exclusive
remedy to the Buyer for any misrepresentation,  breach of warranty,  covenant or
other agreement or other claim arising out of this Agreement or the transactions
contemplated hereby (other than the Supply Agreement) in the absence of fraud.

     12.9 Tax Treatment.  The Parties shall treat all  indemnification  payments
made pursuant to this Agreement as adjustments to the Purchase Price for all Tax
purposes;  provided,  however,  that any  indemnification  payment made pursuant
solely to Section 12.2(a)(iii) shall not result in an adjustment to the Purchase
Price.

                                  ARTICLE XIII.
                                  MISCELLANEOUS

     13.1 Fees and Expenses . Except as otherwise  provided herein,  each of the
Parties shall pay its own expenses  incurred in connection with the transactions
contemplated  hereby,  including legal,  accounting and other fee; provided that
the Seller shall  reimburse the Buyer for one-half of its title  insurance costs
not exceeding an aggregate of $4,200 relating to the  transactions  contemplated
hereby.

     13.2 Amendments.  This Agreement shall not be modified or otherwise amended
except pursuant to an ---------- instrument in writing executed and delivered by
each of the Parties.

     13.3 Entire Agreement.  This Agreement  (including the Schedules,  Exhibits
and other documents  referred to herein),  the Supply  Agreement,  the Note, the
Security  Agreement and the Press Note constitute the entire  understanding  and
agreement  between the Parties  with  respect to the subject  matter  hereof and
thereof and supersede any and all prior agreements and  understandings,  whether
<PAGE>

oral or written, between the Parties, with respect to the subject matter, all of
which are merged herein. The Parties  acknowledge that in deciding to enter into
this Agreement and to consummate the transactions  contemplated hereby they have
not relied upon any statements,  promises or  representations,  written or oral,
express or implied, other than those explicitly set forth in this Agreement, the
Supply  Agreement,  the Note,  the  Security  Agreement  and the Press Note.  In
furtherance and not in limitation of the foregoing,  the Buyer acknowledges that
the Seller has not made any  representations or warranties,  of any kind, either
express  or  implied,  except  as  expressly  set forth in  Article  III of this
Agreement. THE BUYER AGREES THAT THE REPRESENTATIONS AND WARRANTIES GIVEN HEREIN
BY THE SELLER ARE IN LIEU OF, AND THE BUYER HEREBY  EXPRESSLY  WAIVES ALL RIGHTS
TO, ANY IMPLIED  WARRANTIES  WHICH MAY  OTHERWISE BE  APPLICABLE  BECAUSE OF THE
PROVISIONS  OF THE  UNIFORM  COMMERCIAL  CODE OR ANY OTHER  STATUTE,  INCLUDING,
WITHOUT  LIMITATION,  THE  WARRANTIES  OF  MERCHANTABILITY  AND  FITNESS  FOR  A
PARTICULAR PURPOSE.

     13.4 Assignment, Binding Effect; Benefit. Neither this Agreement nor any of
the rights,  interests or obligations  hereunder  shall be assigned by any Party
(whether by operation of law or otherwise)  without the prior written consent of
the other Party (other than by the Buyer to a wholly-owned Subsidiary).  Subject
to the preceding sentence,  this Agreement shall be binding upon and shall inure
to the benefit of the  Parties  and their  respective  successors  and  assigns.
Notwithstanding anything contained in this Agreement to the contrary, nothing in
this  Agreement,  express or implied,  is intended to confer on any Person other
than  the   Parties   or  their   respective   heirs,   successors,   executors,
administrators  and assigns any rights,  remedies,  obligations  or  liabilities
under or by reason of this Agreement.

     13.5 Headings. Headings of the Articles,  Sections,  Schedules and Exhibits
of this  Agreement are for the  convenience  of the parties  only,  and shall be
given no substantive or interpretive effect whatsoever.

     13.6 Governing Law; Arbitration.

          (a) This Agreement shall be governed in all respects,  including as to
validity,  interpretation  and effect,  by the internal laws of the State of New
York,  without  giving effect to its principles or rules of conflict of laws (to
the extent that such  principles or rules would require the  application  of the
laws of another  jurisdiction to the  interpretation  of the Parties' rights and
obligations hereunder).

               (i) Except as otherwise provided herein, any dispute, controversy
          or claim  arising out of,  relating to, or in  connection  with,  this
          Agreement,  or the breach,  termination or validity thereof,  shall be
          finally settled by arbitration.  The arbitration shall be conducted in
          accordance  with the  Commercial  Arbitration  Rules  of the  American
          Arbitration  Association  in  effect  at the time of the  arbitration,
          except as they may be modified  herein or by mutual  agreement  of the
          Parties.  The seat of the arbitration  shall be Dallas,  Texas, and it
          shall be conducted in the English language, provided that either Party
          may submit testimony or documentary  evidence in Spanish and shall, on
          the   request  of  the  other   Party,   furnish  a   translation   or
          interpretation  into  the  other  language  of any such  testimony  or
          documentary evidence. Notwithstanding Section 13.6(a), the arbitration
          and this clause shall be governed by the U.S. Federal Arbitration Act,
          9 U.S.C. Sections 1 et seq.

               (ii) The arbitration shall be conducted by three arbitrators. The
          Party  initiating   arbitration  (the  "Claimant")  shall  appoint  an
          arbitrator in its request for arbitration (the  "Request").  The other
          Party (the "Respondent") shall appoint an arbitrator within 10 days of
          receipt  of  the  Request  and  shall  notify  the  Claimant  of  such
          appointment in writing. If within 10 days of receipt of the Request by
          the Respondent, either Party has not appointed an arbitrator, then the
          arbitrator shall be appointed by the American Arbitration Association.
          The first two arbitrators  appointed in accordance with this provision
          shall appoint a third  arbitrator  within 10 days after the Respondent
          has  notified   Claimant  of  the  appointment  of  the   Respondent's
          arbitrator or, in the event of a failure by a Party to appoint, within
          10 days after the American  Arbitration  Association  has notified the
          Parties and any arbitrator  already appointed of its appointment of an
          arbitrator on behalf of the Party  failing to appoint.  When the third
          arbitrator has accepted the  appointment,  the two arbitrators  making
          the appointment  shall promptly notify the Parties of the appointment.
          If the  first  two  arbitrators  appointed  fail  to  appoint  a third
          arbitrator  or so to  notify  the  Parties  of  the  appointment,  the
          American  Arbitration  Association  shall appoint the third arbitrator
          and shall promptly  notify the Parties of the  appointment.  The third
          arbitrator shall act as Chair of the tribunal.

               (iii) The arbitral  award shall be in writing,  state the reasons
          for the award, and be final and binding on the Parties.  The award may
          include an award of costs,  including  reasonable  attorneys' fees and
          disbursements  and the expenses of any  witnesses,  to the  prevailing
          Party.  Judgment  upon the award may be  entered  by any court  having
          jurisdiction thereof or having jurisdiction over the relevant Party or
          its assets. A request for interim measures by a Party to a court shall
          not be deemed  incompatible  with,  or a waiver of, this  agreement to
          arbitrate.

     13.7 Notices. Any notice, request, claim,  instruction or other document to
be given  hereunder  by any party  hereto to any other party shall be in writing
and delivered  personally,  by telecopy or sent by registered or certified  mail
(postage prepaid return receipt requested),
<PAGE>

                  If to the Seller, to:

                  Durango Georgia Converting LLC
                  c/o Corporacion Durango
                  Potasio No. 150
                  Ciudad Industrial
                  Durango, Durango
                  Mexico CP  34220
                  Attention:  C.P. Mayela Rincon de Velasco
                  Telecopier:  011-521-814-0048

                  with a copy to:

                  White & Case LLP
                  200 S. Biscayne Boulevard
                  Suite 4900 Miami, Florida 33131
                  Attention: Emilio J. Alvarez-Farre
                  Telecopier:  (305) 358-5744

                  If to the Buyer, to:

                  TST Impreso, Inc.
                  652 Southwestern Blvd.
                  Coppell, Texas   75019
                  Attention:  Marshall Sorokwasz and Tammy Yahiel
                  Telecopier:  (972) 462-7764

                  with a copy to:

                  Gardere Wynne Sewell LLP
                  1601 Elm Street, Suite 3000
                  Dallas, Texas  75201-4761
                  Attention:  David R. Earhart
                  Telecopier:  (214) 999-3645

or at such other  address for a party as shall be specified by like notice.  Any
notice which is delivered in the manner  provided herein shall be deemed to have
been duly given to the party to whom it is directed upon actual  receipt by such
party  (evidenced,  in the case of a  telecopy,  by the  receipt of the  correct
answer back).

     13.8  Counterparts.  This  Agreement  may  be  executed  in any  number  of
counterparts,  each of which,  when executed,  shall be deemed to be an original
and all of which together shall be deemed to be one and the same instrument.
<PAGE>

     13.9 Severability. If any provision of this Agreement or the application of
any such provision to a person or circumstances  shall be held invalid,  illegal
or  unenforceable  in any  respect by a court of  competent  jurisdiction,  such
invalidity,  illegality or unenforceability shall not affect any other provision
hereof and this  Agreement  shall remain in force and be  effectuated as if such
illegal, invalid or unenforceable provision is not a part of this Agreement.

                            [SIGNATURES ON NEXT PAGE]
<PAGE>

     IN WITNESS WHEREOF,  the Parties have entered into this Agreement as of the
date first above written.

                                          DURANGO GEORGIA CONVERTING LLC,
                                            a Delaware limited liability company

                                          By:
                                             -----------------------------------
                                             Name:______________________________
                                             Title:_____________________________

                                          TST IMPRESO, INC.,
                                            a Delaware corporation

                                          By:
                                             -----------------------------------
                                             Name:______________________________
                                             Title:_____________________________

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